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OEMs Will Use Fewer Electronics Contract Manufacturers

More than half of all OEMs say they will reduce the number of electronics manufacturing services (EMS) providers that they use, according to a survey by researcher IHS.

Fifty-one percent of OEMs said they will cut their number of EMS providers because of increased pressure to reduce costs and streamline operations.

“The IHS survey reveals that most OEMs want to trim their outsourced manufacturing supply base in order to bring down cost, with the consolidation of suppliers serving as the next biggest reason,” said Thomas Dinges, senior principal analyst for EMS and ODM research at IHS.

He added that such a move may result in a reduction in the number of EMS, original design manufacturers (ODM), and joint design manufacturers (JDM) competing in the electronics supply chain over the next 12 months.

On average, each OEM now works with eight outsourced manufacturing partners spanning EMS- , ODM- and/or JDM-type engagements, according to the survey.

The survey also revealed that most OEMs said while they believe that outsourced manufacturers can help reduce costs, OEMS do not have visibility into the cost structure of their EMS, ODM, and JDM partners.

Another survey finding reported that almost half of OEMs in China still do not require third-party audits of their outsourced manufacturing providers in order to ensure compliance with local labor laws.