| Southeast Asia turns into
prime EMS hub Source: www.eetasia.com |
| The electronics manufacturing services (EMS) market in Southeast Asia is
undergoing a metamorphosis. Many OEM and EMS companies traditionally
viewed the region as the low-cost answer for high-volume, low-complexity
products, such as computers and mobile phones. It is different today. Southeast Asia's engineering and supply chain talent – as well as its modern
infrastructure – is drawing companies like Solectron Corp., which is capitalizing
on the region's evolution to service its customers. Solectron, which has agreed to be bought by Singapore-based Flextronics International Ltd, is transforming its Southeast Asian presence into a sophisticated electronics services destination for more-complex, highervalue electronics manufacturing services not typically associated with the Asia-Pacific region as a whole. In varying degrees throughout Southeast Asia, the region is becoming a prime location for design and engineering services, highly sophisticated supply chains and complex product manufacturing, including build-to-order / configure-to-order and complete systems integration. These were not capabilities initially associated with many parts of Southeast Asia, such as Singapore, Malaysia, Thailand and Indonesia. |
| EMS hub |
| For nearly 40 years, Southeast Asia has been an established base for
multinational OEM. As the needs of OEMs changed, and as many U.S. electronics
companies moved manufacturing operations offshore in the 1990s, the region
evolved into a major EMS hub. Southeast Asia's popularity resulted from its skilled workforce and its strong transportation logistics and energy infrastructure.
Singapore, Malaysia and Thailand, for example, are often more attractive locations
for manufacturing products with higher intellectual-property requirements such
as medical devices because of stronger laws and regulations governing IP protection.
Other factors driving Southeast Asia's EMS evolution include: ♦ Access to a high-quality, lower-cost supply base; ♦ Proximity to consumers in fast-growing, emerging markets; ♦ A service-oriented workforce with a strong work ethic, mature technical and management skills, deep product knowledge and understanding of complex business processes; ♦ English as a common language; ♦ Greater political stability; ♦ Rising labor costs in other Asia-Pacific countries; ♦ Dynamic end-customer requirements dictating the need for manufacturing and supply chain speed, flexibility, competitive cost and quality. According to a recent report from iSuppli Corp., EMS providers generate the overwhelming portion of contract manufacturing revenue in Southeast Asia. The report also notes, however, that the ODM business model may be on the horizon as some Southeast Asia countries increasingly promote higher-level R&D activities among electronics companies through tax incentives and subsidies. Today, Southeast Asia's EMS landscape includes a broad range of very sophisticated capabilities, offering manufacturers greater flexibility, enhanced customer service, faster turnaround times and deep product knowledge. Furthermore, while some products are destined for export, a growing number are now developed for Southeast Asia as an end market-making the region all the more advantageous when the total landed cost of a product is considered. Looking ahead, iSuppli predicts Southeast Asia's contract manufacturing revenue will grow from $16 billion in 2006 to nearly $25 billion by 2011, in part because of increased production in Vietnam. |