Contract electronics manufacturers are here to stay. (View from the Middle).(Brief Article)

Like many of you, I grew up in this business. I cut my teeth (and more than a few appendages) in this industry working for my dad in the family business. This was well before the advent of CNC machines and automatic plating equipment. I have been proud to see this business grow into the professional industry it has become. At least once a week I'm asked by an aspiring supplier "What do you look for in a PCB manufacturer?" I am honored that the good folks at CircuiTree have asked me to attempt to answer this through a series of bi-monthly columns. There are many topics close to my heart such as technology, quality, pricing, lean manufacturing, and SPC; I relish the opportunity to present my perspective (and I emphasize the "my"). I thought it was appropriate to kick off the series discussing who we (the EMS provider) are, and how we fit into the supply chain.

Who Are We?

We are known by many names; "contract electronics manufacturer," "electronics manufacturing services provider," or just plain "assembler," but what we really want to be called is the "customer." If you take a look at your top-ten customer list five to seven years ago, we probably weren't on your radar screen. Looking at that same list today. I would venture to say that we are well represented. As major OEMs continue to outsource, you are probably building the same programs, only for us now. We are sensitive to the fact that this puts the PCB manufacturer in a difficult position, one that is also shared by the EMS provider. Many times we complicate things by adding our own unique specifications and idiosyncrasies on top of the OEMs, so whom do you please? In short, the EMS provider. Ultimately we must all support and delight the OEM, but if it's our PO, we are the customer. A world-class EMS provider should be able to manage this successfully by developing strategic relationships with the PCB fabricator and th e OEM.

Outsourcing Trend Escalates

The EMS industry was a $100 billion business during 2001. A quick look at Figure 1 reveals a couple of salient points. First, the trend of outsourcing by OEMs is predicted to continue at an escalated rate. "Although this has been a down year for some sectors of the electronics equipment market, nearly all of our OEM clients are aggressively increasing their outsourcing strategy," states Pamela Gordon, president of Technology Forecasters, Inc.

The second point is that the EMS industry is just now beginning to tap into the total available market (TAM) of OEM outsourcing. Contract electronics manufacturers began to gain momentum during the mid-1980s by being a simple assembly extension for OEMs. The last decade has seen phenomenal growth as EMS providers have transitioned into virtual design and manufacturing partners providing significant value-added services.

Growth Drivers