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Decades ago, executives in the Tier One segment of the electronics manufacturing services industry were predicting that the industry would consolidate into two or three big players. While merger and acquisition activity helps keep names changing in the top 10 EMS providers, the consolidation down to a handful of companies hasn’t happened.
There are two big reasons. First, market entry and business growth is still primarily controlled by original equipment manufacturers (OEMs). That severe an industry consolidation would limit their options and ultimately increase pricing, so they source business in ways that always keeps diversity in Tier One and options in the lower tiers. Second, the range of support needs varies widely within the market in terms of capabilities, response speed, demand frequency, product size and preferred lot size. This opens the door to multiple tiers of service providers specializing in different regional and industry market segments. This diversity of business models also drives diversity in sales and marketing strategy.
To better illustrate some of the differences, this article looks at four different EMS companies in the global and regional space. I’ve consciously focused on companies outside of Tier One, because while Tier One reflects the largest share of the market in terms of total revenue, the sheer size of these players drives their sales and marketing strategies in ways different from what is typically found in the far larger number of companies in the lower tiers.
Generally, every EMS companies’ core marketing value propositions aligns in some way with one or more of the bullets on the list below:
- Access to shared manufacturing capacity at a fraction of the cost of in-house capacity
- Ability to level load internal production capability
- Improved financial inventory turns as product may be generating revenue before invoice is paid
- Access to wider range of expertise
- Access to lower cost labor markets
- Access to specific manufacturing technology
- Solution for companies divesting operations no longer in line with core competencies
- Reduced time to market
- Cost reduction
- Offload of higher mix product
- Access to new markets
- End-of-life product support
- Improved logistics support
- Reduction in capital investment requirements
- Convenience/proximity to an OEM team’s location.
The way most EMS companies differentiate themselves is typically through business model focus. Typically, EMS providers focus their capabilities on one or more of four key areas:
- Lifecycle expert
- Service expert
- Systems/infrastructure expert
- Manufacturing expert
Marketing strategy may be further differentiated by focusing on specific industry segments with specialized needs. However, even when this is done, the value propositions and business model focus tend to align with lists provided earlier.
So how does this translate to actual sales and marketing strategy? These four examples illustrate different approaches to differentiation and addressing the needs of target customers.
To read this entire article, which appeared in the December 2016 issue of SMT Magazine, click here.