Electronic manufacturing capacity to see global rebalancing

Electronics-contract manufacturers will begin focusing on other factors beyond labor cost when it comes to selecting a location for production in the coming years, according to iSuppli Corp. According to the company, in the early part of this decade, manufacturing capacity shifted from the high-cost regions in North America and Western Europe to the low-cost region of mainland China. However, in the second half of the decade, contract manufacturing will undergo a global rebalancing that will lead to a more distributed market. You can attribute electronics manufacturers’ regional diversification to other China-centric factors, including a mobile work force, inflation, taxes, and the rising costs of transportation due to soaring oil prices, according to Adam Pick, a principal analyst at iSuppli. “Ultimately, the emphasis has greatly shifted from labor costs only to the total cost of ownership, which considers managerial resources, organizational structuring, manufacturing competencies, intellectual property, and logistics,” he says.

Leading EMS (electronic-manufacturing-service) providers, ODMs (original-design manufacturers), and OEMs (original-equipment manufacturers) have recently undergone capacity expansions, revealing a number of new trends affecting global electronics manufacturing. These trends include the rising penetration of emerging regional economies; proximity to large, local markets with fast-growing product segments as ODMs’ local presence in some regions helps minimize tariff costs; and OEMs’ need to diversify manufacturing profiles to other locations, such as Vietnam.