Worldwide electronics industry survey reveals trends and strategic priorities

Our worldwide industry survey, Eyes on Electronics Outsourcing Industry Survey 2006, was sponsored in part by Underwriters Laboratories, Universal Instruments, and TES Electronic Solutions. Surveys can quite possibly be the only tool that can generate specific numerical data in a repeatable and statistically valid format. However, in virtually every survey Venture Outsource has conducted over the years, traditional telephone and regular-mail surveys have been found to sometimes be costly and frankly, just too slow. The data may also be skewed in some instances. Someone may behave or respond differently over the telephone during conversation if the individual knows his or her activities and / or responses are being evaluated. Of the various survey types available, we've found online surveys to be quite effective because they encourage survey respondents to feel comfortable while enabling them to be privately polled at their convenience.

Note: Do you want VentureOutsource.com to include particular industry topics, subjects, or concerns in other surveys? E-mail comments or suggestions to insight@ventureoutsource.com Companies wanting to sponsor a survey can inquire using the above email address.

      Electronics outsourcing survey development and delivery When developing our most recent survey, candid talks were held with more than 60 influential industry executives from various OEM companies and electronics contract manufacturing and original design manufacturing (ODM) and supply chain vendor companies, worldwide...focused on finding out what's important to executives and their organizations. This time-intensive, upfront work resulted in a large reservoir of industry concerns on the minds of executives across all five continents. The guidance of several survey development professionals was enlisted to refine this information into effective survey questions. For example, in questions where ranking was to be achieved or a weighted value on a particular statement or subject, the order of responses for survey participants to select from was randomly generated to not influence a particular response. Furthermore, in questions where it was appropriate to do so, the number of responses presented to survey participants to select from was intentionally limited to an ‘even' number of options so that participants were encouraged to not ‘sit on the fence'. The final survey questions presented to survey participants generated single select; multiple-choice, analysis of variance, ranking, and open-text responses. In addition to open-text responses, many questions allowed respondents to provide clarification, or bestow ‘comments', resulting in a high percentage of respondents (from all sectors in industry) choosing to offer additional, valuable commentary, in more detail for many survey topics / questions. Various software applications were evaluated for delivering the survey to industry. Applications selected used decision-logic to direct, and redirect, survey respondents to subsequent questions based on responses to a previous question. For example, an OEM respondent not currently engaged in electronics contract manufacturing was directed along a different pathway of questions than, say, an electronics contract manufacturing company respondent.   Electronics outsourcing survey respondents More than 500 survey participants from industry helped to formulate the findings that follow. The majority of survey participants were managers and executives in electronics OEM companies actively involved in helping to formulate industry best practices; supplier performance evaluation and selection, as well as supplier disengagement decisions. The second largest group of contributors to the survey was comprised of managers and executives in electronics contract manufacturing and original design manufacturing (ODM) companies. The remainder of the survey respondent base was represented by vendors and suppliers and distributors to industry; government agencies, industry leaders in academia, major consulting firms, and other related and interested circles - each providing noteworthy thought and opinion. Venture Outsource was able to collect; efficiently organize, and cross-tabulate a large volume of data because of the nature of Enterprise Feedback Management (EFM) systems employed by innovative Internet survey technology. The following definitions applied to the survey and were re-communicated to survey participants at appropriate intervals throughout the survey:

Electronics industry OEM: (original equipment manufacturers) provide OEM-branded electronics and related products to customer end-markets Electronics industry contract manufacturers: offer supply chain services to OEMs but, in most instances, the electronics contract manufacturer does not own the intellectual property of the products it produces for the OEM Electronics industry original design manufacturers (ODM): ODMs offer supply chain services to OEMs but, in most instances, the ODM company does own the intellectual property of the products it produces for the OEM. Electronics industry prototype house: offers services to OEMs; electronics contract manufacturers, and ODM customers but does not typically own the intellectual property of the products it produces. (Noteworthy mention: for purposes of the survey, Prototype House was not always mentioned in each survey question but, the term and definition was clearly communicated in a manner in which it was easily perceived to be included in questions noting Electronics Contract Manufacturers and Original Design Manufacturers.

Electronics outsourcing survey respondent categories Survey respondents from nearly 24 countries took part in the survey. For the purposes of this particular report, survey respondents completing the survey were categorized into one of four different categories:

I. Electronics industry original equipment manufacturing (OEM) companies currently outsourcing II. Electronics industry original equipment manufacturing (OEM) companies not / yet outsourcing III. Electronics industry contract manufacturers, original design manufacturers (ODM), prototype houses, and related

IV. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related, and ‘other'

The survey, in total, presented more than 140 questions to the worldwide electronics outsourcing and contract manufacturing industry. Outsourcing industry survey respondents completing the survey answered, on average 18 questions each -- with some questions in multi-format. Approximately one-half of all survey respondents reported being employed by organizations reporting annual revenues of greater than US$5 billion. Survey respondents represented a wide cross-section of electronics product and services end-markets. I. Electronics industry OEM companies currently outsourcing Electronics industry OEM company respondents were segmented into OEMs currently outsourcing and those OEMs not / yet outsourcing electronics, at 63.7% and 36.3%, respectively. A. The majority of electronics OEM respondents already outsourcing with a contract manufacturer indicated they outsource the following functions and services:

• Front-end design, engineering, prototyping
• Printed circuit board assembly (PCBA) and surface mount technology (SMT) work
• Box-build or, systems integration
• Direct fulfillment and after-market services (repair, warranty, installation, customer invoicing)

B. When asked what functions or services these electronics OEMs currently do not outsource today but plan to do so within the next twelve months, the majority of respondents indicated direct fulfillment and after-market services and front-end design, engineering, prototyping as the leading functions and services. This was followed to a lesser extent, but on an equal basis, by box-build / systems integration. C. The majority of electronics OEM respondents currently outsourcing contract manufacturing or product design work indicated they have engagements with the following electronics industry companies:

• Solectron
• Flextronics
• Compal
• Foxconn
• Celestica
• Jabil Circuit
• Benchmark Electronics
• Plexus
• Nam Tai Electronics
• Asustek
• Sanmina-SCI
• Elcoteq
• Wistron

D. Electronics OEM survey respondents currently outsourcing contract manufacturing or product design were asked to rate the following organizations: Solectron, Flextronics, Compal, Foxconn, Celestica, Jabil Circuit, Benchmark Electronics, Plexus, Nam Tai Electronics, Asustek, Sanmina-SCI, Elcoteq, Wistron for best people. Responses were rated 1 through 6 with 6 indicating the highest rating.

• Jabil Circuit rated the highest for best people by electronics OEM survey respondents currently outsourcing contract manufacturing or product design.

• Rated lowest: We received a lot of interest regarding disclosing the name of the company. (It was decided to remain quiet about the name of the winner)

E. Electronics OEM survey respondents currently outsourcing contract manufacturing or product design were asked to rate the following organizations: Solectron, Flextronics, Compal, Foxconn, Celestica, Jabil Circuit, Benchmark Electronics, Plexus, Nam Tai Electronics, Asustek, Sanmina-SCI, Elcoteq, Wistron for best internal processes. Responses were rated 1 through 6 with 6 indicating the highest rating.

• Foxconn rated the highest for best internal processes by electronics OEM survey respondents currently outsourcing contract manufacturing or product design.

• Rated lowest: see above

F. Electronics OEM survey respondents currently outsourcing contract manufacturing or product design were asked to rate the following organizations: Solectron, Flextronics, Compal, Foxconn, Celestica, Jabil Circuit, Benchmark Electronics, Plexus, Nam Tai Electronics, Asustek, Sanmina-SCI, Elcoteq, Wistron for the best reputation in industry. Responses were rated 1 through 6 with 6 indicating the highest rating.

• Flextronics rated the highest for best reputation in industry by electronics OEM survey respondents currently outsourcing contract manufacturing or product design.

• Rated lowest: see above

G. Electronics OEM survey respondents with experience outsourcing contract manufacturing or product design were asked to rate the importance of the following criteria when selecting a contract manufacturing or product design company for engagement:

• Accountability - does what it says, when it says (highest importance rating)
• Quality certifications and facility approvals (second)
• Relative business experience (third)
• Financial stability
• Product design capabilities

H. Electronics OEM survey respondents with experience outsourcing contract manufacturing or product design program were asked what they felt electronics contract manufacturing and design companies could do or, should do, so that OEMs would likely place more trust in working relationships with contract manufacturing and product design companies.

Below is a sampling of some of the responses as they were received:

"Deliver on promises."

"During the initial business reviews, the contract manufacturer or ODM should provide a matrix of how my business fits into their market strategy. I do not want to find out one year later that I have no weight and I am being moved out of their business focus."

"Accountability (does what it says, when it says), stability of their own processes and less turnover on ‘key' headcount."

"Ensure financial stability, understand the customer's business, competitiveness throughout various industries and market segments."

"Be accountable and be able to share real-time data."

"Meet all commitments."

"Deliver on their promises (quality, delivery, and price)."

"From experience, if you don't have in excess of $20 million annual turnover to outsource, the relationship will not develop. Improving transparency of costs would go a long way in establishing trust."

"Provide examples of long-term relationships and case studies."

"Willingness in taking some business risk."

"More open in their true cost structure."

I. Electronics OEM survey respondents currently outsourcing contract manufacturing and design were asked to estimate the percentage (%) of their company's Total Product Volume (e.g., total number of fully-built electronics product/units branded with the OEM company's logo) currently being outsourced.

The majority of responses came in as:

• 27.3% of respondents indicated less than 20% of Total Product Volume is currently outsourced

• 18.2% of respondents indicated 20% to 29%

• 9.1% of respondents indicated 30% to 39%

J. Electronics OEM survey respondents currently outsourcing contract manufacturing and design were asked to estimate the percentage (%) value of their company's total Materials Cost of Goods sold - MCOGs (estimated total dollar value ($US) of the total number of fully-built electronics product/units branded with the OEM company's logo) currently being outsourced.

The majority of responses came in as:

• 24.1% of respondents indicated less than 20% of Materials Cost of Goods sold (MCOGs) is currently outsourced

• 19.7% of respondents indicated 20% to 29%

• 9.1% of respondents indicated 50% to 59%

K. Electronics OEM survey respondents currently outsourcing manufacturing were asked to estimate at what percentage (%) level of outsourcing Total Product Volume they feel their OEM company will achieve (relative point of saturation) when the OEM decides it will stop outsourcing additional manufacturing.

The majority of responses came in as:

• 21.2% of respondents indicated 40% to 49%

• 19.1% of respondents indicated 50% to 59%

• 14.7% of respondents indicated 60% to 69%

L. Electronics OEM survey respondents currently outsourcing contract manufacturing were asked to estimate how long they felt it would take for their OEM company to reach their saturation level of outsourcing (where they will no longer outsource manufacturing).

The average number of years OEMs indicated it would take to reach saturation = 6.5 years.

M. Electronics OEM survey respondents currently outsourcing contract manufacturing were asked to estimate the average percentage (%) ‘increase' they felt their electronics contract manufacturing partner ‘adds' to the OEM's Bill of Materials (BOM) when the contract manufacturer purchases materials and components for the OEM.

The majority of responses came in as:

• 12.2% of respondents indicated 8% to 10%

• 11.4%.of respondents indicated 18% to 20%

• 10.9% of respondents indicated 12% to 14%

• 9.2% of respondents indicated 24% to 26%

• 8.1% of respondents indicated "don't know"

N. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked which of the following activities or services OEMs felt generated the most profit for electronics outsourcing contract manufacturing or product design companies.

The percentage break-down for OEMs indicating their responses came in as:

• 27.2% of respondents indicated box-build or, systems integration, generated the most profit

• 24.5% of respondents indicated direct fulfillment and after-market services (repair, warranty, installation, customer invoicing)

• 21.2% of respondents indicated it was printed circuit board assembly (PCBA) and surface mount technology (SMT) work

• 14.7% of respondents indicated it was front-end design, engineering, prototyping

• 12.4% of respondents indicated "don't know"

O. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked which statement best matches their company's viewpoint.

• 38% indicated the outsource providers they tend to use, or prefer to use, offer both electronics contract manufacturing and ODM services.

• 36.4% indicated the outsourcing providers they tend to use, or prefer to use, strictly offer electronics contract manufacturing services, only.

• 17.1% indicated the outsource providers they tend to use, or prefer to use, strictly offer ODM services, only.

• 8.5% indicated "don't know"

P. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked to indicate to what degree certain items ‘troubled' them or, caused the OEM to ‘hesitate' when engaging an electronics contract manufacturer or ODM company for a business relationship.

The top concern was shared equally by:

• The contract manufacturer is unable to respond quickly enough to OEM design changes' and ‘Component risk - contract manufacturer does not accept liability.

followed by:

• Concerns we lose control over intellectual property.

then:

• Lack of upside capacity commitment. Contract manufacturer not willing to dedicate factory space to OEM program.

  Q. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked which months of the year their company engages in a higher number of request-for-quote (RFQ) and request-for-proposal (RFP) activity with a supply chain vendor.

Findings came in as follows:

• 11.7% indicated November
• 11% October
• 10.1% September
• 9.3% January
• 7.9% April
• 7.9% July
• 7.1% August
• 6.2% December
• 4.2% February
• 4% June
• 3.9% March
• 3.2% indicated "don't know"
• 3.1% May

Comments were also submitted. A few of the many comments collected:

"Believe it or not, we don't have peaks and valleys in our demand. Our customers do not have seasonal demand...Rather, the cycles are in years, not months."

"No seasonality or trend."

"RFQ activity is spread throughout the year."

R. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked about specific objectives that were presented as these relate to their company's business strategic priorities.

The top three business strategic objectives ranked in the order of importance are as follows:

1. Reduce order-to-delivery time
2. Manage inventory more effectively
3. Reduce manufacturing costs

S. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked how well they feel their electronics contract manufacturing and ODM business partners ‘understand' their company's ‘different product market cycles'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

A near majority, 45% of survey respondents rated their contract manufacturing and ODM business partners' understanding of their company's ‘different product market cycles' a weighted value of 4.

T. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked how well they feel their electronics contract manufacturing and ODM business partners ‘understand' their company's ‘product technologies'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

• 38% of survey respondents rated their contract manufacturing and ODM business partners' understanding of their company's ‘technology' a weighted value of 5.

• 27% of survey respondents rated their contract manufacturing and ODM business partners' understanding of their company's ‘technology' a weighted value of 3.

U. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked to estimate the percentage number of companies in their supply chain that are Chinese-owned.

The majority of responses came in as:

• 28% of respondents estimated 10% of the companies in their supply chain are Chinese-owned

• 12.2% estimated 0%

• 9.2% estimated 20%

• 9.1% indicated "no opinion"

• 8.7% estimated 40%

V. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked to rate how cooperative their Chinese-owned suppliers are when the OEM requests important information about the Chinese-owned suppliers' business that is needed to help the OEM make better decisions when managing the OEM's business. Responses to select from ranged 1 to 6, with 6 most cooperative.

The majority of responses came in as:

• 45% of responses rated the cooperation of Chinese-owned suppliers a value of 4.

• 18.2% rated cooperation a value of 5.

W. Electronics OEM survey respondents currently outsourcing contract manufacturing and product design were asked ‘besides China', which other geographies did they see as cost-effective locations for off-shore manufacture and design. Countries to select from included Thailand, Vietnam, Mexico, India, Russia, Ukraine.

Electronics manufacturing: the majority of survey respondents selected Mexico, followed by Vietnam, with Ukraine and Thailand tied for third. Electronics design: the majority of survey respondents selected India.

II. Electronics industry OEM companies not / yet outsourcing A. Electronics OEM survey respondents not / yet outsourcing contract manufacturing or product design were asked at what stage their company is in the decision process of outsourcing electronics.

The majority of responses came in as:

• 38.6% indicated they were in the process of contract negotiations.

• 8.2% indicated they were in the request for quote (RFQ) process.

• 7.1% indicated "no opinion"

B. Electronics OEM survey respondents not / yet outsourcing contract manufacturing or product design were asked to rate the importance of the following criteria when selecting a contract manufacturing or product design company for engagement:

• Accountability - does what it says, when it says (highest importance rating)
• Quality certifications and facility approvals (second)
• Relative business experience (third)
• Financial stability
• Product design capabilities

C. Electronics OEM survey respondents not / yet outsourcing contract manufacturing or product design were asked what they felt a contract manufacturing or product design company could do so the OEM could place more trust in the contract manufacturer or product design company.

Some of the responses collected include:

"Less sales vice president and more specialists during discussions and meetings."

"Openness and trust as well as proof of better supply chain management."

"Provide a stable history of healthy ‘working' relationships."

"Open book costing."

"No sneaking PPV (purchase price variance) for extra margins."

D. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked which of the following activities or services OEMs felt generated the most profit for electronics outsourcing contract manufacturing or product design companies.

The majority of responding OEMs indicated:

• 29.7% of respondents felt it was front-end design, engineering, prototyping that generated the most profit

• 27.4% of respondents felt it was printed circuit board assembly (PCBA) and surface mount technology (SMT) work

• 19.8% of respondents indicated "don't know"

E. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked which statement best matches their company's viewpoint.

• 47.8% indicated the outsource providers we might use would likely offer both electronics contract manufacturing and ODM services.

• 23% indicated "don't know"

• 16.3% indicated the outsourcing providers we might use would likely strictly offer electronics contract manufacturing services, only.

• 12.9% indicated the outsource providers we might use would likely strictly offer ODM services, only.

F. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked to indicate to what degree certain items ‘troubled' the OEM or, caused the OEM to ‘hesitate' when considering an engagement with an electronics contract manufacturer or ODM company for a business relationship. Responses were provided for respondents to select from.

The number one concern:

"Concerns we lose control over intellectual property."

this was followed by:

"Contract manufacturer is unable to respond quickly enough to OEM design changes."

followed by:

"Lack of upside capacity commitment. Contract manufacturer not willing to dedicate factory space to OEM program."

then:

"Component risk. Contract manufacturer does not accept liability."

G. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked how well they felt a potential electronics contract manufacturing and ODM business partner ‘might understand' their company's ‘different product market cycles'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

• 27.1% of respondents rated a potential contract manufacturing and ODM business partners' understanding of their company's ‘different product market cycles' a value of 3.

• 29% of respondents rated a potential contract manufacturing and ODM business partners' understanding of their company's ‘different product market cycles' a value of 6.

H. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked how well they felt a potential electronics contract manufacturing and ODM business partner ‘might understand' their company's ‘product technologies'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

• 31.8% of respondents rated a potential contract manufacturing and ODM business partners' understanding of their company's ‘product technologies' a value of 6.

• 19.2% of respondents rated a potential contract manufacturing and ODM business partners' understanding of their company's ‘product technologies' a value of 2.

I. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked which months they felt their company would be likely to engage in more request-for-quote (RFQ) and request-for-proposal (RFP) activity processes with a potential contract manufacturing and ODM business partner.

The months of January, February, and June each equally rated the lowest. The months of September, October equally rated the second-highest. The month of November rated the highest.

J. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked about specific objectives presented as these relate to their Company's business strategic priorities.

The top three strategic business objectives ranked in the order of importance are as follows:

1. Reduce manufacturing costs
2. Manage inventory more effectively
3. Reduce order-to-delivery time

K. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked how well they feel an electronics contract manufacturing or ODM business partner might ‘understand' their company's ‘different product market cycles'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

• 27% of survey respondents anticipated the level of understanding by a potential electronics contract manufacturing or ODM business partner a value of 2.

• 17% of survey respondents rated a potential partner's understanding value a 4.

L. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked how well they feel an electronics contract manufacturing or ODM business partner might ‘understand' their company's ‘product technologies'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

• 19.4% of survey respondents anticipated the rating of understanding by a potential electronics contract manufacturing or ODM business partner a value of 3.

• 7.9% of survey respondents rated a potential partner's understanding a value of 5.

M. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked to estimate the percentage number of companies in their supply chain that are Chinese-owned.

• 36.9% of respondents estimated 0% of the companies in their supply chain is Chinese-owned

• 29.1% of respondents estimated 50%

N. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked to rate how cooperative their Chinese-owned suppliers are when the OEM requests important information about the Chinese-owned suppliers' business that is needed to help the OEM make better decisions when managing the OEM's business. Responses to select from ranged from 1 to 6, with 6 being most cooperative.

The majority of responses came in as:

• Nearly 40% of responses indicated the question "does not apply"

• 16% rated cooperation a value of 6.

O. Electronics OEM survey respondents not / yet outsourcing contract manufacturing and product design were asked ‘besides China', which other geographies did they see as cost-effective locations for off-shore manufacture and design. Countries to select from included Thailand, Vietnam, Mexico, India, Russia, Ukraine.

Electronics manufacturing: the majority of survey respondents selected Thailand and Vietnam, equally, as the top alternatives for manufacturing. Ukraine placed second, followed by India.

Electronics design: India was selected as the top location followed by Russia.

III. Electronics industry contract manufacturers, original design manufacturers (ODM), prototype houses, and related A. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked the most recent annual revenues ($US) of their organization.

The results came in as follows:

• 4.7% indicated ‘no opinion
• 6.6% said startup (less than $5 million)
• 16.2% said $5 million to $50 million
• 21.9% said $50 million to $250 million
• 8.3% said $250 million to $500 million
• 13% said $500 million to $1 billion
• 17.9% said $1 billion to $5 billion
• 11.4% said greater than $5 billion

B. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked which organization type best fits their company's business model.

• 45.7% of survey respondents indicated a combined electronics contract manufacturing company business + an original design manufacturing company (ODM) as their business model type where they offer supply chain services to OEMs and, in many instances, their company owns the intellectual property of the products it produces for the OEM.

• 17.8% of survey respondents indicated an electronics original design manufacturing (ODM) company business model, only, where their company offers supply chain services to OEMs and their company owns the intellectual property of the products it produces for the OEM.

• 14.3% of survey respondents indicated an electronics contract manufacturing company, only, as their business model type where supply chain services are offered to OEMs but their company does not own the intellectual property of the products it produces for the OEM

• 9.3% of survey respondents indicated a prototype house as their business model type where services are offered to OEMs; electronics contract manufacturers, and ODM companies / customers but the prototype house does not typically own the intellectual property of the products they produce.

• The remainder of respondents was comprised of ‘other' and, ODMs offering electronics contract manufacturing' services.

C. 22.8% of survey respondents employed with electronics industry contract manufacturers, original design manufacturers, prototype houses, and related held managerial-level positions with their employer. D. 25.6% of survey respondents employed with electronics industry contract manufacturers, original design manufacturers, prototype houses, and related held director-level positions with their employer. E. 31.9% of survey respondents employed with electronics industry contract manufacturers, original design manufacturers, prototype houses, and related held vice president, senior vice president, or an executive vice president-level position with their employer. F. 10.9% of survey respondents employed with electronics industry contract manufacturers, original design manufacturers, prototype houses, and related indicated they held an officer-level position with their employer. G. 2.7% of survey respondents employed with electronics industry contract manufacturers, original design manufacturers, prototype houses, and related indicated they held a supervisor-level position with their employer. H. 6.1% of survey respondents select ‘other'. I. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked which end-market sectors their organization provides products or services for.

End-markets selected include:

• Networking infrastructure equipment
• Handsets (cell phones)
• Wireless telecom infrastructure equipment
• Wireline telecom infrastructure equipment
• Personal computing / peripheral devices
• Data storage equipment
• Workstations and servers
• Consumer electronics
• Automotive electronics
• Medical electronics
• Industrial electronics
• Military electronics
• Avionics and aerospace electronics

J. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked which ‘service area' they felt requires the most 'internal costs' to support. (i.e., cost of man-hours and time)

The largest percentage response indicated design / prototyping / new product introduction (NPI). Dozens of comments came in with this question, as well. One noteworthy response said "Front-end support is labor-intensive but immediate returns are low - however costs are absorbed through volume build. It is a necessary and differentiating part of our service."

The second largest percentage response indicated materials procurement and related activities.  

K. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked to select from a pre-determined list of responses, how important a particular improvement opportunity was to their organization - right now.

Number 1 improvement opportunity: Increase the ability to identify new customers / new business.

2: Improve how we market our services in industry.

3: Improve how differentiate our company from competitors.

4: Work on encouraging customers to trust us.

5: Improve our ability to increase operating financial profits and margins.

A few of the many comments respondents also included with this question were:

"Overcoming component supply issues." "Improve overall performance, including quality and delivery lead-time." "Work on encouraging customers to trust is market segment specific. For industries ‘new' to outsourcing, there is a higher need to ‘establish' trust." "Implementation of lean manufacturing methodologies, six sigma and general manufacturing excellence practices." "Retaining human resources in a Silicon Valley-type setting."

L. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked what they felt their company needs to do so their customers place more trust in them. This question generated more than 100 points of commentary. The list below is in now way exhaustive. While some comments may appear redundant, they are included to provide additional insight.

"Deliver on expectations and deal openly when problems arise."

"Increase transparency while at the same time indicating that the company must be a profit-seeking enterprise if it is to serve its customers' long-term best interests."

"Improve our efforts on continuous improvement activities in order to differentiate ourselves and increase long-term bookings."

"Have more warm bodies in chairs for customers to see. Rock and roll with the customer more often."

"More open-book sharing on material cost and procurement activities."

"We have a consistent track record of meeting customer satisfaction in terms of delivery, quality, and responsiveness. This is reflected in the fact that we have been the recipients of global awards for quality and delivery from our customers."

"Generate better customer service tools such as inventory, quality, and scheduling reporting systems."

"Meet commitments and communicate information openly."

"Perform to promise. Most lack of trust by OEM is from previous bad experience with other contract manufacturers, not with us."

"Provide more proactive solutions to impending or existing problems."

"Enhance partnerships by connecting in all ways including daily operations - sitting in the same meetings such as planning, forecasting, and marketing."

"Manage the customer's expectations and perform to those set expectations."

"We already enjoy mutual trust."

"IP (intellectual property) protection assurance embedded in contracts."

"Deliver to spec and on time: a.) offer a continuous relationship with identified and reliable interlocutors b.) Educate them on our success stories."

"Continue building quality products at a reasonable price."

"Shipping high quality product on-time should continue to grow this level of trust."

"Talk with customers and suppliers."

"Perform and execute and improve customer communication and customer management. Close and honest communications both at executive and project team levels; direct interaction with customer's engineering and procurement organizations; key contacts at executive level."

"True partnership = share cost savings and PPV (purchase price variance) with customer."

"Flexibility - eliminate the red tape."

"Consistently support customers in their needs, be flexible and agile, open and honest in dealings. It is important to make smaller customers feel as 'loved' as larger OEMs."

"Service the main, big customers in / close to their markets."

"When we commit to do something, we must deliver upon that commitment."

"Sales relations are growing. We have the brand name. We need to market the brand more aggressively. We have to increase our delivery schedule efficiency and be very professional."

"Be more upfront with customers about potential, future problems to build closer relationships."

M. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked what percentage (%) of their OEM customers do they estimate want ODM services, only.

• 60.3% estimated that 20% to 29% of their customers want ODM services, only.

• This was followed by 15.9% estimating that 40% to 49% of their customers want ODM services, only.

N. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked what percentage (%) of their OEM customers do they estimate want electronics contract manufacturing services, only.

• 30.1% estimated that 60% to 69% of their customers want electronics contract manufacturing services, only.

• This was followed by 18.2% estimating that 70% to 79% of their customers want electronics contract manufacturing services, only.

O. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked what percentage (%) of their OEM customers do they estimate want ‘both' electronics contract manufacturing services and ODM services.

65.9% estimated that 80% to 89% of their customers want both electronics contract manufacturing services and ODM services.

P. OEMs frequently indicate they are reluctant to 'fully-share' and / or ‘discuss' their entire product program outsourcing 'roadmaps' (i.e. product supply chain strategy, vendor pricing) with their electronics contract manufacturing and / or ODM partners for fear the partner may disclose portions of this information with other OEM customers the provider has engagements with and, more importantly, other companies the OEM may compete against. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked which statement below best reflects their company's opinion, or position, on the above situation.

• 10.9% of respondents indicate this is a very sensitive topic they have not been able to resolve.

• 21.9% indicate this is a sensitive topic they have been able to resolve.

• 14.1% indicate this is a somewhat sensitive topic they have not been able to resolve.

• 23.4% indicate this is a somewhat sensitive topic they have been able to resolve.

• 29.7% indicate this is not an issue for them.

Q. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked how well they feel they ‘understand' their OEM customers' ‘different product market cycles'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

• 32.8% of respondents rated their company's level of ‘different product market cycles' understanding a value of 4.

• 23.4% of survey respondents rated their understanding a value of 3.

R. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked how well they feel they ‘understand' their OEM customers' ‘product technologies'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

The majority of responses were as follows:

• 32% of respondents rated their company's level of ‘product technology' understanding a value of 4.

• 23.4% of respondents rated their understanding a value of 3.

• 21.9% of respondents rated their understanding a value of 5.

S. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked how well they feel they ‘understand' their OEM customers' ‘product technologies'. Responses were weighted 1 through 6 with 6 indicating the highest level of understanding.

The majority of responses were as follows:

• 29.7% of respondents rated their company's level of product technology understanding a value of 5.

• 21.3% of respondents rated their understanding a value of 4.

• 18.8% of respondents rated their understanding a value of 6.

T. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked to select from a list of technology management applications their company is currently using.

Enterprise resources planning (ERP) and manufacturing floor management systems equally ranked the highest. Next came security hardware and software applications followed by Internet portals, then customer relationship management (CRM) applications, then product life-cycle management (PLM) applications.

U. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked which technology management applications they were not using today but plan to do so in the next 12 months.

Customer relationship management (CRM) applications ranked highest. Next came product life-cycle management (PLM) applications followed by Internet portals; then manufacturing floor management systems and enterprise resources planning (ERP) applications. Security hardware and software applications ranked last.

V. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked to select from a list of responses which best describes the degree to which they know who the ultimate OEM decision-maker ‘is' inside the OEM when engaged in signing a potential business contract (i.e., closing the deal)

The majority of responses came in as follows:

• 26.6% of respondents indicated it was not always apparent who the ultimate decision-maker is.

• 25% of respondents indicated they always know who the ultimate decision-maker is.

• 23.4% of respondents indicated they sometimes have an idea

W. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked about specific objectives presented as these relate to their company's business strategic priorities.

The top four strategic business objectives ranked in the order of importance are as follows:

1. Manage inventory more effectively
2. Improve effectiveness of sales and marketing efforts and activities
3. Improve demand forecasting
4. Reduce time to introduce new products

X. Electronics industry contract manufacturers, original design manufacturers, prototype houses, and related outsourcing survey respondents were asked ‘besides China', which other geographies did they see as cost-effective locations for off-shore manufacture and design? Countries to select from included Thailand, Vietnam, Mexico, India, Russia, Ukraine.

Electronics manufacturing: the majority of survey respondents selected Vietnam and Mexico, equally, as the top alternatives for manufacturing. Thailand placed second, followed by India.

Electronics design: India was selected as the top location followed by Russia.  

IV. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related, and ‘other' A. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were reminded during the survey the ODM business market has grown consistently faster than the electronics contract manufacturing business market. Survey respondents were then asked if they felt the ODM solution offers a ‘more attractive solution' in the eyes of OEM executives than the pure electronics contract manufacturing solution.

• 58.4% of respondents indicated ‘yes'

B. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked to select, from a list of responses, how important a particular improvement opportunity was to their organization - right now.

Number 1 improvement opportunity: Improve how we differentiate our company from competitors

2: Increase the ability to identify new customers / new business.

3: Improve customer relationships.

4: Improve our ability to market our services.

C. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked, based on their experiences in industry, which electronics contract manufacturer or ODM company they think has the best people.

Electronics contract manufacturing and ODM companies presented included Solectron, Flextronics, Compal, Foxconn, Celestica, Jabil Circuit, Benchmark Electronics, Plexus, Nam Tai Electronics, Asustek, Sanmina-SCI, Elcoteq, Wistron.

Responses were rated 1 through 6 with 6 indicating the highest rating.

Jabil Circuit rated the highest best people by electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related

D. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked, based on their experiences in industry, which electronics contract manufacturer or ODM company they think has the best internal processes.

Electronics contract manufacturing and ODM companies presented included Solectron, Flextronics, Compal, Foxconn, Celestica, Jabil Circuit, Benchmark Electronics, Plexus, Nam Tai Electronics, Asustek, Sanmina-SCI, Elcoteq, Wistron. Responses were rated 1 through 6 with 6 indicating the highest rating.

Flextronics rated the highest for best internal processes by electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related

E. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked, based on their experiences in industry, which electronics contract manufacturer or ODM company they think has the best reputation.

Electronics contract manufacturing and ODM companies presented included Solectron, Flextronics, Compal, Foxconn, Celestica, Jabil Circuit, Benchmark Electronics, Plexus, Nam Tai Electronics, Asustek, Sanmina-SCI, Elcoteq, Wistron.

Responses were rated 1 through 6 with 6 indicating the highest rating.

Flextronics rated the highest for best reputation by electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related

F. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked what they thought electronics contract manufacturing and ODM companies could do so that OEMs might place more trust in the relationship. This question generated a high number of responses. The following are just a few of the comments survey respondents collected:

"Stop hiding the PPV." (purchase price variance)

"Provide more dynamic design solutions. Push the envelope."

"Provide more transparency in component pricing."

"Profit share???"

"Deliver the correct product, on-time, at the correct price, with minimum intervention required by the OEM."

"Clearly communicate their approach to IP." (Intellectual property)

"Sell what the OEM wants not what the contract manufacturer / ODM wants to sell."

"Real-time access to MES (manufacturing execution systems) and SCM (supply chain management)."

"Be more transparent in admitting they make most of their money from supply chain management."

"Improve project management and transparency of project information."

"Have a clear, well-constructed and approved ‘user requirement specification' at the start of a contract so that expectations are clearly defined and understood by both parties."

G. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked to select from a list of responses which best describes the degree to which they know who the ultimate decision-maker ‘is' inside the contract manufacturer / ODM company when engaged in signing a business contract (i.e., closing the deal)

• 52.9% of respondents indicated it was not always apparent who the ultimate decision-maker is.

H. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked which months of the year their company engaged in a higher number of request-for-quote (RFQ) and request-for-proposal (RFP) activities with an electronics contract manufacturer or ODM.

September was indicated as the month with the highest activity. This was followed by October, then March.

I. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked how often electronics company customers inquire about changing their ‘contractual terms' (i.e. payment schedule, purchase price, cost reductions) for their company's goods and services?

• 27% of respondents indicated ‘does not apply'

• 21.9 indicated once per year

• 14.4% indicated a couple of times per year

J. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were then asked to review the past 12 months and determine whether the frequency of their electronics company customers inquiring about changing their ‘contractual terms' has increased or decreased.

• 57.2% of respondents this applied to indicated an increase

K. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked to select from a list of technology management applications their company is currently using.

Internet portals ranked the highest. Next came enterprise resources planning (ERP) systems followed by security hardware and software applications. Customer relationship management (CRM) and supply chain management applications tied for third. This was followed by product life-cycle management (PLM) applications then manufacturing floor management systems as last.

L. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked to select from the same list of technology management applications their company is not currently using but is planning to do so in the next 12 months.

Customer relationship management (CRM) applications rated the highest. This was followed by security hardware and software applications.

M. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked to indicate how important a particular business objective is to their company's strategic priorities

The top four strategic business objectives ranked in the order of importance are as follows:

1. Improve effectiveness of sale and marketing efforts and activities
2. Manage inventory more effectively
3. Improve demand forecasting
4. Reduce time to introduce new products

N. Electronics industry materials and components and equipment manufacturers, vendors, suppliers, distributors and related and ‘other' outsourcing survey respondents were asked ‘besides China', which other geographies did they see as cost-effective locations for off-shore manufacture and design. Countries to select from included Thailand, Vietnam, Mexico, India, Russia, Ukraine.

Electronics manufacturing: the majority of survey respondents selected Mexico as the top alternative for manufacturing. Thailand placed second, followed by Vietnam.

Electronics design: India was selected as the top location followed by Russia.

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