Big Changes coming to EMS Industry

Author: Travis Thoman (3 Articles)

Travis’ expertise stems from his service in the U.S. Navy aboard the USS Nebraska 739, a Trident Submarine. During multiple tours, Travis performed duties in supply, quality assurance, and maintenance for the ship’s mechanical systems. It takes team work and a critical sense of urgency to keep a naval vessel humming at operational perfection, and Travis carries those skills into his work as the lead of all Military and Aerospace material fulfillment at Bluefin. After his military service he worked in technical sales and purchasing for the Allegheny York Company, a manufacturer, and Parker Hannifin distributor, where he traveled around the United States and South Africa helping clients solve technical issues. In 2001, he launched his own consulting firm, which he sold when he joined Bluefin. As a member of our team, he has helped take the entire Military/Aerospace materials campaign within our company to a whole new level. His goals are simple: “to establish and grow a successful client and vendor base that becomes the premier source for attaining hard to find hardware and components in the industry.”

As the market rebounds from this historic economic downturn, expect to see some major changes in the EMS industry as companies and their shareholders try to recoup serious losses and position themselves for the future.

Look for smaller companies that focus on narrow niche specialties like medical, industrial or aerospace. By specializing, they can concentrate all their time and resources more efficiently, keeping margins down and profits up. Larger EMS providers, which dominated the market in the past, will be left to fight over the less specialized consumer, computer and communications business. Those areas make up a large core of the market, but also have lower margins.

Some larger OEMs may turn to insourcing more of their manufacturing, taking a page out of playbooks that have been very successful for both Nokia and Intel. Keeping more manufacturing in-house puts the OEM in control and reduces the costs and headaches that can come from dealing with an EMS provider.

Finally, expect the explosive growth of Original Design Manufacturers to slow as OEMs respond to concerns over design innovation and product differentiation – the driving factor in many industries, especially consumer electronics. Outsourcing the design of specific components helped cut costs. Outsourcing the design of entire products has made some OEM’s fear they are losing their competitive edge. Now more of them are talking about recapturing control of conceptualization and master design from their ODMs.

Experts predict the next five to ten years will bring big changes to the EMS industry – specialization, insourcing, and a return to in-house product design. Will you be ready?