Wall Street on EMS vs. ODM market share and market segments

Research from IDC, and Deutsche Bank Equity Research, paint a good picture of the electronics outsource manufacturing and design landscape and the end-market segment opportunities aggressively sought after by electronics manufacturing services (EMS) providers and original design manufacturing (ODM) companies across the globe.

An excerpt from these findings follows.

Deutsche Bank believes the combined EMS and ODM market can be divided into seven segments:

1. Computers
2. Consumer devices
3. Servers and storage
4. Networking
5. Telecom
6. Peripherals, and
7. Emerging (which includes automotive, medical, and industrial electronics)

The largest of these seven end-market segments is computers, which accounted for just over a third of the $238B market in 2006. Next largest by size is consumer devices at 27% of the overall EMS and ODM market.

As seen in Figure 1, these two segments represented more than 60% of combined EMS and ODM revenue in 2006. While the computer segment accounts for a large portion of the total EMS and ODM market, a significant portion of the revenue comes from the ODM side, with ODMs earning roughly 64% of the market revenue in 2006. As a result, the computers segment accounts for a smaller portion of EMS revenue, with only 19% of EMS revenue in 2006.

Figure 1: Combined EMS and ODM share by market segment

As seen in Figure 2, consumer devices is the largest segment for the EMS market, with roughly a third of the $153B market coming from consumer devices in 2006. Computers rank as the second largest segment for EMS, followed by networking at 10% of revenue.

Figure 2: EMS revenue share by market segment

The fastest growing segments are computers and consumer devices. Consumer devices has seen the fastest growth, with combined ODM and EMS revenue growing 40% and 33% in 2005 and 2006, respectively. The second fastest growing segment has been computers, with combined ODM and EMS revenue growing 21% and 18% in 2005 and 2006, respectively. Deutsche Bank believes this growth is being driven by the notebook market, however due to market saturation, this segment is expected to slow over the next five years.

Figure 3: Combined EMS and ODM revenue growth by market segment

As seen in Figure 3, emerging segments like automotive electronics, medical electronics, and industrial electronics are expected to see the fastest growth over the next five years, driven by further penetration of these relatively untapped markets, and growth from a small base.

    

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