Big manufacturers are hitting a speed bump
It’ll be no surprise to manufacturers that things change rapidly in this market and the world of blogging is no exception. This will be the last blog I’ll be posting on the Manufacturing Line for the foreseeable future—although readers should continue to look to my colleague Mike Stevens and the rest of the contributors at Allbusiness.com for unparalleled information and advice.
Interestingly, just today I received a release from market researcher iSuppli headlined “EMS-ODM Industry Set to Undergo Slowdown.” iSuppli downgraded its forecast for the industry citing “the large combined size of the $305 billion Electronics Manufacturing Services (EMS) and Original Design Manufacturing (ODM) businesses, which make it difficult to achieve significant percentage growth in revenue,” says Adam Pick, principal analyst for EMS/ODM at iSuppli. “Furthermore, leading EMS provider Foxconn, which has driven much of the growth in the EMS segment of the contract manufacturing market, is beginning to undergo a deceleration. Finally, many EMS/ODM players are rethinking their strategy of pursuing market share expansion and are focusing on their competitive positioning and financial performance.”
This is actually good news for small manufacturers and niche players that have been focusing on just those two issues for some time. Market share expansion is one of the primary reasons so much manufacturing has moved overseas even if it didn’t make financial sense to do so—many companies simply went offshore because their customers and competitors were doing so. This, in turn, drove down already razor-thin profit margins in the EMS industry to the point it’s facing now. Apparently, even the 800-pound gorilla of the EMS industry, Foxconn, is having trouble squeezing costs out of its operations.
I don’t know if this means a reversal in the offshoring trend. More likely, big companies will continue to follow low-cost labor around the world. Manufacturers already ensconced in the domestic market should stay put and do their best to weather out the current economic storm. If fuel costs continue to rise, close proximity to your customers will continue to be an advantage. Continue to emphasize total cost of ownership—in other words, the value of your relationship rather than the per-piece price. And keep turning to Allbusiness.com for advice.
