Outsourcing will continue to be a viable alternative for more and more organizations as technology OEM companies continually looking for ways to become more competitive in their respective markets.
Meanwhile, outsourcing provider companies should always be gaining insight to help them determine whether or not their current service capabilities will meet the market demands relative to certain product segments.
Leading technology research firm IDC and VentureOutsource.com share with readers opportunities for electronics manufacturing services (EMS) and original design manufacturing (ODM) sector companies as identified by product segments.
In lieu of the industrial and medical electronics segments for the ODM sector both having expected 2008 market sizes of less than $500M, they were dropped as outliers.
Product segments are expected to achieve the following compound annual growth rates (CAGRs) between 2007 and 2012:
| Computers | 10% |
| Peripherals | 2% |
| Consumer Devices | 6% |
| Servers / Storage | 5% |
| Networking | 8% |
| Telecom | 5% |
| Automotive | 12% |
| Medical Devices | 18% |
| Industrial Products | 12% |
Its important to note when viewing the bubble chart (below) that market share concentration was quantified based on the percentage of segment revenues generated by the top three firms in the respective segments, for the last four quarters (Q3 2007 through Q2 2008).
The traditionally strong contract manufacturing segments, with the largest market sizes, are clustered in the lower right hand corner, showing moderate growth and significant levels of concentration…with a few leaders in each segment.
ODM segments tend to have slightly higher expected CAGR than EMS segments, in most cases this is due to the small initial sizes of these segments and the rapid growth a limited number of contracts and modest future expansion into the segments represents. ODMs also tend to show a greater level of concentration in these smaller segments.
The computer and consumer segments have the largest opportunity and are expected to grow at a pace within the mid-range of the industry, 5% to 10%. ODMs, with their focus on mobile computers, should grow faster than their EMS competitors, but the two leading firms are pursing mobile computing opportunities.
For the consumer segment, on the other hand, EMS firms hold a larger opportunity, though both will likely grow at a similar rate.
The EMS consumer segment is nearly 20% more concentrated than the ODM segment. Although the three emerging segments for the EMS sector (automotive electronics, medical electronics, and industrial electronics) are smaller in terms of current market size, these three segments are expected to grow faster and currently are less concentrated than the rest of the EMS segment, representing a good opportunity for firms to expand.
VentureOutsource.com, February 2009
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