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Industry Trends

EMS & the Future

EMS companies have always been interested in setting up manufacturing units in ‘low-cost’ countries with a strong labour support, and this trend has attracted some of the most lucrative business to India, which can be beneficial to both the economy and the people of our country.

Why we need EMS Industry in India?

Asian Tiger nations like China, Singapore, Malaysia, Taiwan, Thailand etc. have built the success stories on the foundation of Electronics Hardware Industry.

As software Industry can employ only white collar labour force, what about the huge blue collar workforce who forms the backbone of the industrial landscape of India?

In the background of fears of indiscriminate globalization of trade and commerce, there are genuine concerns of employment retention and well being of a large work force whose skill sets are valuable assets to the nation.

India is not an island nation like Singapore, Taiwan or Mauritius where the entire work force can aspire to have only white collar jobs.

Additional facts on the EMS industry

Growth on EMS industry is because a growing number of brand owners are outsourcing their manufacturing needs based on the following criteria-

Increased flexibility in production

Substantial reduction in time to market as product life cycles shorten

Sharp reduction in manufacturing costs

Reduced need for capital resulting in higher returns on invested capital

Ability to focus capital and IP on core competencies

Ability to start a new product company without competencies or investment in manufacturing

Recent trends show that an increasing number of engineering and design activities are also being outsourced to EMS companies and they are becoming ODMs (Original Design manufacturers) and also provide final system integration and logistical support

E&Y have projected that India can target a share of 1% in North America, 2% in Western Europe, 4% of Asia and 5% of Rest of the World of the Electronics Manufacturing Services market.

India can target 2.2% of the world-wide electronics EMS market of US$497 Billion by 2010 which works out to a potential of US$11 Billion.

The recent acceleration in EMS activity is mainly due to rapid growth in the electronic Hardware market in all segments particularly rapid growth has taken place in Telecom Infrastructure Equipment, computers, Consumer & Hand held devices.

The Growth drivers are:-

Strong and growing domestic demand for mobile phones, personal computers, consumer and automotive electronics.

Increasing demand for telecom infrastructure equipment -teledensity to increase from the present 9 per 1000 to 22 by 2007.

Highly talented workforce, especially for design and engineering services with good communication skills.

Rising labor costs in China.

Presence of global EMS majors in India and their plans for increased investments in India.

More outsourcing of manufacturing by both Indian and global OEMs

Apart from this, the Growth drivers are, robust and consistent growth in Electronic Hardware market of approximately 25% due to a stable economy & large middle class of 350 million people.

The fastest growing segments are demand for telecom services particularly cell phones, internet subscribers & growth in demand for it products with increasing penetration of computers, falling prices & Government support to rapidly encourage usage of IT in all sectors.

Within next 5 years penetration of telephone users (both landline & mobile) is projected to increase from 100 to 500 per thousand while PC's increase from 10 to 30 plus per thousand.

Telecommunication, Computing & Consumer sectors would grow the fastest.

India a global manufacturing hub

Currently, the EMS sector in India is catering to the needs of the growing Indian market.

According to a report by iSupply, a research firm tracks the EMS space closely, the Indian electronics manufacturing sector is at $935 million at the end of 2005 and is expected to grow at the rate of 21% per annum and reach $2 billion by 2009.

In contrast the global market is estimated at around $147 billion in 2006 and is expected to grow to $183 billion by 2009.