The global trend for electronics production to move away from US and Europe to Asia continues. For how long will this trend go on? Till 2010, some analysts say, when rising costs in Asia will conspire with social unrest in US and Europe to stop it.
EA, however, believes no end in sight to this trend. In spite of rising costs in Asia, this region scores well over US and Europe not only in terms of market size but also on low labor and tax rates, which are among the major factors pulling CEM to Asia. (
Figs. 1 and
2.) The difference between labor rates in Asia and the West is still so high that the cost advantage of manufacturing in Asia will be very significant for years to come. Social unrest in the West, which has already begun, will not be able to prevail over economic advantages.
While China is the biggest beneficiary of this trend and is set to rapidly increase its share in global electronics production, Asia-Pacific excluding Japan is also seeing a growth in its share. (
Fig. 3.) Thus, Asia’s share in global CEM market is rising. (
Fig. 4.) Of the projected global CEM revenue of $252 billion in 2007, Asia will contribute 57.54% at $145 billion. (
Table 1.)
Asian CEM is primarily based in China and Taiwan. (
Fig. 5.) While China’s share will grow because of its continued low-cost advantage and large market, Taiwan’s share is gradually declining with Taiwan’s CEM shifting to China.
The next three years should see the emergence of Southeast Asia as a significant CEM player. iSuppli projects that CEM revenue of Southeast Asia, namely, Singapore, Malaysia, Thailand, and Vietnam, will rise from $16.2 billion in 2006 to $24.9 billion by 2011, when this region will account for 7% of global CEM revenue, up from 6.3% in 2006. (
Table 2.) India is yet another important CEM destination, with leading MNCs investing in setting up manufacturing plants. iSuppli notes that “several factors are triggering this resurgent growth among Southeast Asia contract manufacturers, including a backlash against China. OEMs are transforming their strategies given end-market demand and total landed costs. . . Other factors include shifts in the competencies of EMS/ODM providers. For example, Singapore is no longer a low-mix, high-volume manufacturing hub. Rather, EMS providers have migrated up the value chain to offer higher margin services. Government incentives also are playing a role in encouraging the migration of manufacturing to Vietnam and other regions. The Thai government wants to extend its position in the global electronics market. That said, government initiatives are stimulating research and development activities by contract manufacturers in Thailand. As for Vietnam, recent investments by leading OEMs, EMS, and ODMs into Vietnam’s industrial parks suggest that Vietnam will ramp quickly as an emerging manufacturing market in Southeast Asia.”
Of the two CEM segments—EMS and ODM—ODM is almost entirely dominated by Taiwan. In 2006 Asian EMS contributed 45% to global EMS revenue. Asia’s share is projected to rise to 55.1% in 2011. (
Fig. 6.) Last year Asian ODM contributed 70% to the global ODM revenue. This contribution is projected to grow to 76.8% in 2011. (
Fig. 7.)
The list of top 10 EMS and ODM companies show the commanding lead of Asia over the West in CEM. (
Tables 3 and 4.)
With CEM in Asia rapidly growing beyond traditional locations, assembly capacities (manufacturing area in square footage) are increasing in Asian CEM destinations. In 2009 CEM capacity in Asia is projected to be 65% of the global capacity. (
Fig. 8.)
While China leads in assembly capacity rise, other destinations such as India, Malaysia, Thailand, Indonesia, Philippines, and Vietnam are also significantly adding capacity. (
Figs. 9 and 10.)
The trend for electronic equipment to migrate from OEM to EMS/ODM manufacturing is projected to continue. This will give greater share in global electronics production to Asia-Pacific EMS/ODM industry in various segments. (
Fig. 11.)
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Figure 1, Figure 2, Figure 3, Figure 4, Figure 5, Figure 6, Figure 7, Figure 8, Figure 9, Figure 10, Figure 11, Table 1, Table 2, Table 3, Table 4
