EMS providers need to get smart

Players in the electronics manufacturing service (EMS) market need to get smart and equip themselves with intimate knowledge of their customers’ work processes, in response to growing competition levels in the market.

EMS is and has always been a dynamic market highly dependent on the consumer electronics industry, but market research specialists Frost and Sullivan have seen a twist in this relationship.

According to the study, growing demand for consumer electronics will increase the outsourcing trend in the EMS industry. This is due primarily to the availability of cost savings, flexible solutions, quality and operational speed provided by EMS providers, which will lead to the increase in dependence of Original Equipment Manufacturers (OEMs) on EMS providers for design services.

“The dependence of OEMs on EMS providers is more predominant in the consumer electronic, communication technology and the computer, storage and peripheral sectors while the consumer electronics sector generates maximum revenues and drives the need for outsourcing,” notes technical insights research analyst Kasthuri Jagadeesan.

“These apart, the automotive electronics market also provide growth opportunities for EMS providers to improve on their market revenues,” he adds.

In spite of these, EMS providers continue to face intense competition, as well as threat by original design manufacturers (ODMs).

In order for EMS providers to retain their attractiveness to buyers and sustain their presence in the industry, they must provide value-added services, an effective supply chain management and create global footprints, the study showed.

“The intense competition faced by the EMS providers is forcing them to enhance their value proposition and to offer integrated and end-to-end solutions,” says Jagadeesan. “A strategic partnership with OEMs during the course of their business deal will enable the EMS providers as well as the OEMs to contribute effectively to the success of the end-product and also achieve high profitability and good market share.”

The report further suggests EMS providers to focus on maintaining long-term relationships with their OEM customers, as the latter are typically selective in choosing their EMS partners. EMS providers are able to do this through enhanced value-added services, strategic partnership and alliances, as well as through diversification.

“EMS providers should also focus on maintaining scalable business solutions, customer centric models, effective supply chain management strategies, penetration into niche markets and effective information technology tools,” the report said.