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Japanese EMS providers finding their place in Asia

Insight for Japanese / Asian EMS providers and OEMs with an Asia EMS strategy

By Mark Zetter

Japan_EMS_ProvidersMany small and mid-size Japanese EMS providers are struggling to expand their businesses outside of Japan.

For years Japanese EMS providers relied on Keiretsu to help differentiate their services. But as more EMS and ODM providers become vertically integrated and operational and supply chain experts Japanese EMS provider differentiation becomes more diluted as a competitive operational strategy.

Japanese OEMs have long been a coveted customer sought by most EMS providers. Japanese EMS providers have been successful at serving this huge market because Japanese EMS provider business practices, cultural nuances and folkways are aligned with those inside Japanese OEMs. Sure, many non-Japanese EMS providers have won Japanese OEM business but the Japanese OEM remains a coveted win for most Western and European EMS firms.

 

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The challenge for many non-Japanese EMS providers is difficulty aligning their business practices with practices internal Japanese OEMs. Whereas the challenge for Japanese EMS providers is difficulty aligning their marketing and business development techniques with non-Japanese OEMs.

Knowledge does not equal wisdom
知恵のない知識はお尻の背面にある本の負荷です

Dozens of books have been written on the EMS industry and what EMS providers can do to help their chances for prospecting and winning OEM programs. There are also numerous research papers published that speak to EMS and ODM business models.

You can find papers written from a market positioning perspective but fewer written from an EMS operations perspective.

One paper speaks specifically to the primary Japanese EMS model. The authors discuss three things they believe can help mid-sized Japanese EMS providers:

1. Re-structure manufacturing supply chains to reduce Keiretsu obligations

2. Embrace economies of scale through acquisitions to leverage negotiations; and

3. Use IT technology to achieve lean and increase responsiveness to market changes

 

The paper is well written but still it leaves too many questions unanswered. And even if the above are performed collectively, its unlikely the desired outcome Japanese EMS providers want will materialize: differentiation, sales growth with increasing margins and increased market share.

IDC_EMS_ODM_Forecasts

Malaysia, Vietnam, Thailand, Philippines, India and other Asian countries have long been improving manufacturing efficiencies and cutting into the world’s factory (China) for years as Japan relied on Keiretsu. But no competitive advantage is sustainable forever.

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Additionally, since Japan’s financial crisis in the 90s, the Japanese economy (and competitors in economies outside Japan) have put relentless pressures on Japanese OEMs.

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