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Why Focus Matters
December 31, 1969 |Estimated reading time: 4 minutes
By Carsten Barth, Elcoteq
The communications technology industry and the use of communications devices, like mobile phones, have changed the world in the last decade. A large mobile phone OEM will require different services and will approach the EMS provider with different skills and perspective than a company entering the mobile phone market from another discipline.
The communications technology industry and the use of communications devices, like mobile phones, have changed the world in the last decade. Would you have guessed 10 years ago that in 2007 there would be 115% penetration for mobile phones in Europe? Where is this leading?
Market Dynamics
The communications industry has developed varied devices for this market, from the basic mobile phone to complex smartphones. Mobile phones can access the Internet, connect to a company’s information technology (IT) environment, play music, capture and send images, and communicate via IR, W-Lan, Bluetooth, etc.
As technical capabilities of mobile devices evolved, the ways in which consumers use mobile phones changed dramatically. Perhaps 10 years ago we bought a mobile phone to have a mobile phone number - to use for phone calls only. Today, almost every consumer wants a digital camera in the phone and text messaging is a standard feature. Listening to music, doing e-mails, surfing the Web, playing games, and organizing the next meeting are common mobile applications.
As a result of mobile phones’ increasing features and functionalities, new players are entering the market. Companies like Apple, Google, Skype, and Vodafone are starting to build their own phones. This will influence the way we use these devices and how we buy and pay for them, and, therefore, new business models are created. The model for the original equipment manufacturer/electronics manufacturing service (OEM/EMS) relationship must be augmented. A large mobile phone OEM that has been in business for years and is familiar with mobile phone design and manufacturing will require different services and will approach EMS companies with an entirely different skill set and perspective than a company tapping into the mobile phone market from another discipline.
Multiple functionalities in handhelds, such as the iPhone and Blackberry, create more complex devices. In manufacturing, these trends need to be monitored carefully; outsourcing service companies, like EMS providers, must adapt to and accommodate these trends.
Demands on EMS
Foremost, reducing complexity for a mobile phone OEM is critical. This means taking responsibility for sourcing and providing electrical and mechanical phone parts and components. Manufacturing speed and accuracy need to stay at a high level, although the original model of high-volume/low-mix now also includes low-volume/high-mix due to the proliferation of a broader range of models and features and shorter life cycles for each model. EMS providers must integrate subsystems to reduce overall assembly complexity and at the same time provide more flexibility. To deliver this, EMS companies should use design capabilities, lower the total cost of ownership (TCO) for the OEM, and possess a thorough understanding of the market dynamics affecting their customer.
Accompanying technology- and consumer-driven changes are those encountered with new markets. The demand in these areas is increasing; establishing local manufacturing and presence are requirements. Local manufacturing in these countries is needed, as well as a greater intellectual capacity of the local workforce, for EMS providers to increase design and development capabilities there.
Figure 1. Inspection at an Elcoteq China facility.
The life cycle of a mobile phone can be as short as eight months; managing product life cycles is a priority. Speed and flexibility are paramount. EMS companies must work with the OEM to plan for a product from concept to end of life (EOL). This involves design for sourcing, logistics, assembly, test, manufacturing, repair, and environment.
Having global manufacturing competence facilitates adapting to these changes and provides flexibility during market fluctuations and in handling unforeseen circumstances throughout the supply chain. Having design and/or manufacturing sites in proximity to customers, as well as in key global manufacturing locations, offers options to the OEM and reduces TCO.
Advances on the Infrastructure Side
Emerging technologies and ideas also influence the infrastructure side of the communications technology market. WiMax, WiFi, LTE, and Femtocel are the new buzz words. These developments help change the market and business models. Will we use the Internet for mobile telephoning? Will we have a W-Lan equivalent for mobile phone access? Who will provide phones and services? New players are arriving and new technologies require sound understanding from manufacturing and design.
EMS providers have to manage, master, and supply manufacturing for these new technologies on a global basis. They must integrate subsystems when possible. One way to acheive this is by adding engineering and design services to manufacturing offerings.
EMS for Communications Technology
If they want to provide manufacturing and additional services successfully to communications customers, EMS providers must prepare for future challenges; grasping the speed and complexity of technological development and investing in needed equipment and capacity. Closely linking with customers and their technology developments, and being involved integrally in their markets, will be a differentiator.
As EMS providers take on different and augmented roles and responsibilities, their customers have to alter their ways of thinking and functioning. Relying more on outsourcing can help OEMs focus more on their core competencies, but it also places their brand reputation partly in the hands of outsiders. The more partners that are involved, the more vigilant the company must be in selectively outsourcing. Partners should provide an ethical, commercial approach to business based on a mix of corporate responsibility (CR) best practice and a deep understanding of the OEM’s business objectives with an emphasis on protecting brand and intellectual property (IP).
Conclusion
When an EMS company specializes in the industry of its OEM partner, such as communications technology, it provides a more robust environment to deal with evolving markets, technology, dynamics, and demands faced by the OEM, making that OEM more efficient and effective.
Carsten Barth, director, marketing and communications, Elcoteq, may be contacted at carsten.barth@elcoteq.com.