Evolve and prosper
23 February 2009
Whatever business you are in you can’t stand still – progress is essential. Well, maybe not in the antiques business, but that apart and certainly in the technology sectors, evolution is a must for survival.
I was recently putting together the March issue of Electronics Manufacture & Test, our UK-based magazine, which, for 25 years was our ‘core’ product. We evolved as well of course. This newsletter and its sister website, EMTWorldWide, was launched in 2007 as we responded to the increasing globalisation of the electronics industry.
However, we have made our evolutionary changes along the way and one of the more significant was the launch in 1999 of Electronics Outsourcing (not to be confused with a magazine in the UK that was launched in the past few years and has adopted a similar title!), our quarterly review of the UK and Ireland EMS sector. The March issue is therefore our ten-year anniversary and although my editorial introduction for this is firmly aimed at the UK, I believe it still has relevance across the world.
The whole industry has been transformed in the ten years since we first launched Electronics Outsourcing. Back in 1999 all the global CEMs had major facilities across Scotland and Ireland, while a raft of indigenous ‘Tier 2s’ gorged themselves on the booming telecoms industry. The crash at the beginning of this decade wiped out many of these companies, the global companies moving east, or even Far East, while the indigenous companies were casualties of the necessary worldwide reduction in capacity. The survivors were the companies working across a number of sectors where flexibility, complexity and quality were far more important than volume and price.
CEMs were superseded by EMS (Electronics Manufacturing Service) providers as customers expected more services from their contractors than just board assembly, sometimes to the extent of taking a product from concept to delivery to end customer and every stage in between. This model as a true partner to the OEM has flourished over the last decade.
Equally the march offshore, particularly to China, has continued, sometimes driven by price and occasionally, I believe, by fashion, so that there is little volume manufacturing left in the UK. The small to mid-size companies that remain have sometimes become a conduit to low-cost manufacturers overseas when production ramps-up, but more often specialise in industries where high volume manufacture is unlikely to be necessary.
There have been signs of late that the value of having a local manufacturing partner has been underestimated in the past and the migration eastwards has not only slowed, but may in fact be reversing. A recent survey by the IPC indicated just this effect (see LinkCode 22506 for the full story) with a variety of concerns driving OEMs (42% according to this survey) to switch their outsourcing strategy back from Asia to North American or European companies. Admittedly the survey sample was too small to quantify this trend properly but it should come as no surprise. While issues such as quality, transport costs, logistics etc play their part, the bottom line is that China in particular is not as low-cost geography as it once was – a trend to middle class that is only going to continue.
Which makes it an exciting time for EMS companies in the UK and Ireland (and other traditional manufacturing bases). Despite having to cope with the immediate pressures of the economic situation, these companies should now be jostling for position for the future as the likelihood is that more OEMs will be looking locally. The UK will never be a high-volume manufacturing centre again, but the chances are that EMS providers will have the opportunity for bidding for higher volumes in the future if they can offer a cost model that complements the undoubted engineering expertise. I suspect the inherent invention and durability within our EMS sector will start to pay dividends over the coming years.
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