-
- News
- Books
Featured Books
- smt007 Magazine
Latest Issues
Current IssueThe Butterfly Effect
The basis of chaos theory is a key concept known as the “butterfly effect.” It’s the idea that a small event in one place creates a cascading set of events elsewhere. So, how is the EMS landscape changing? We’re tracking the concerns and dynamics of this landscape, and there’s a lot to learn.
Coming to Terms With AI
In this issue, we examine the profound effect artificial intelligence and machine learning are having on manufacturing and business processes. We follow technology, innovation, and money as automation becomes the new key indicator of growth in our industry.
Box Build
One trend is to add box build and final assembly to your product offering. In this issue, we explore the opportunities and risks of adding system assembly to your service portfolio.
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - smt007 Magazine
An Alternative Approach to Vertical Integration in Manufacturing
July 13, 2017 | Richard Kelly, MC AssemblyEstimated reading time: 5 minutes
![](https://iconnect007.com/application/files/4016/3123/6953/RichardKelly_MCAssembly-Jul2017.jpg)
The past 50 years have seen the emergence of the EMS industry as OEMs outsourced increasingly more of their product to various global contract manufacturers. Originally concentrated in the United States, the industry has blossomed into nearly $600 billion in sales and their growth shows no indication of slowing in the near future.
The EMS industry was fed by acquisitions of manufacturing concerns from OEMs in the 1990s, followed by mergers of many EMS players in the 2000s. The worldwide manufacturing landscape has changed forever. The days of OEMs owning large vertically integrated manufacturing assets are gone and will probably never return. Oddly, the large vertically integrated manufacturing capability of the OEMs started to be dismantled by the emergence of the EMS companies. Now, some of these same EMS companies are adopting the same, vertically integrated solutions themselves.
Changes in EMS—ODM & Vertical Integration
Even within the EMS world, the past 10 years have witnessed two significant changes. First, there was the emergence of the original design manufacturer (ODM) as third parties participated more in the design and engineering of product on behalf of the OEMs, and then the merger of the ODM capability into the EMS players either through acquisitions or in-house development of the capability. Second, there was the broadening of manufacturing capability within EMS through vertical integration. Again, the vertical integration originated from the EMS’ acquisition of existing technology manufacturers (such as metal fabrication and plastic injection molding) or the in-house development of the capability.
ODM
The ODM factor immediately draws in the unwanted complication of intellectual property (IP) rights and protection of them. The fear of losing IP to competitors through undisciplined or unscrupulous ODMs is sufficient to justify customers’ staying clear of EMS partners who rely heavily on this capability for revenue. The larger Tier 1 EMS players are heavily invested in customers with consumer products where small design developments can be a differentiation, but the life cycle of their product is so short, the need to maintain intellectual property security is less critical. However, these same Tier-1 players have some customers who are not part of the consumer market yet the financial support of the ODM infrastructure within the Tier 1’s corporate structure is still burdened over the broader base of their corporate costs. MC Assembly prefers to invest in engineering resources dedicated specifically to processes like design for manufacturability (DFM) and design for excellence (DFX) where the output is not directly sold to its customer, but rather their customer benefits from the associated cost reductions gained from the improved efficiencies in the manufacturing processes.
Vertical Integration in EMS
The vertical integration factor is a little less straightforward. Initially, the movement towards vertical integration of manufacturing capability was limited to the exceptionally large EMS companies and, at first, was usually the result of them acquiring an auxiliary manufacturing capability as part of the acquisition of circuit board assembly and surface mount technology (SMT) from an OEM.
Figure 1: MC Assembly process lines demonstrating high-complexity mechatronics assemblies. Note the metal fabrication and cables that are fed from MC integrated partners.
Page 1 of 3
Suggested Items
Material Insight: Diversifying PCB Manufacturing Through Nearshoring
06/26/2024 | Dr. Preeya Kuray -- Column: Material InsightIn recent years, there has been a notable shift in the electronics manufacturing supply chain landscape. However, the global supply chain for the domestic PCB industry has been steadily shifting since the 1980s, when the United States began offshoring PCB manufacturing to other countries. But because of the quality control issues, rising international tariffs, and unclear intellectual property protection involved in offshoring, reshoring has become a particularly hot topic.
Wilya Secures $4M in Seed Funding Led by Ironspring Ventures to Bring Flexibility to the Manufacturing and Supply Chain Workforce
06/24/2024 | PRNewswireWilya, formerly known as Gig and Take, an innovative B2B SaaS company transforming traditional HR practices in the manufacturing and supply chain sectors, announced today the successful close of a $4 million seed funding round.
KIC Honored with IPC Recognition for 25 Years of Membership and Contributions to Electronics Manufacturing Industry
06/24/2024 | KICKIC, a renowned pioneer in thermal process and temperature measurement solutions for electronics manufacturing, is proud to announce that it has been recognized by IPC for 25 years of membership and significant contributions to electronics manufacturing.
Vision Miner Strengthens Position as Global Leader in Additive Manufacturing with Acquisition of AddWise
06/21/2024 | PRNewswireVision Miner, a leading global provider of high-quality industrial 3D printing solutions, today announced the acquisition of AddWise, a prominent industrial manufacturer of 3D printing machines and related products valued at $14 million.
HANZA CEO Erik Stenfors Participated at Stora Aktiedagarna
06/21/2024 | HANZAErik Stenfors, CEO of HANZA, gave a presentation at Aktiespararnas event Stora Aktiedagarna.