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Many OEMs to cut volume of contract services, says analyst

Posted: 08 Nov 2012 ?? ?Print Version ?Bookmark and Share

Keywords:contract manufacturer? OEM? outsourced manufacturing service? ODM? JDM?

According to the latest survey from IHS, more than half of all electronic original equipment manufacturers (OEM) worldwide sees the reduction of contract manufacturers next year as a means to remain profitable and to streamline operations.

"The IHS survey reveals that most OEMs want to trim their outsourced manufacturing supply base in order to bring down cost, with the consolidation of suppliers serving as the next biggest reason," said Thomas J. Dinges, CFA, senior principal analyst for EMS & ODM research at IHS. "While the impact of this trend is still to be determined, such a move by OEMs potentially could result in a reduction in the number of electronics manufacturing services (EMS), original design manufacturers (ODM) and joint design manufacturers (JDM) competing in the outsourced manufacturing business during the next 12 months."

On average, each OEM now works with eight outsourced manufacturing partners spanning EMS-, ODM- and/or JDM-type engagements, according to the survey.

In another major finding from the survey, most OEMs said they believe that outsourced manufacturers can help reduce costsbut the vast majority of respondents said they have no visibility into the cost structure of their EMS, ODM and JDM partners.

Overall, the two most commonly cited changes that OEMs say they want to make with their outsourced manufacturing services providers during the next six months are lead-time reduction and price negotiation.

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