Military/Aerospace Sector for Electronics Contract Manufacturing Offers Unique Hurdles, Timely Opportunities, Says TFI


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Alameda, Calif. — At the June 9 Quarterly Forum for Electronics Manufacturing Outsourcing and Supply Chain event, Technology Forecasters Inc. (TFI) will release a study detailing special challenges experienced by military and aerospace electronics manufacturers, and how outsourcing manufacturing is presenting new advantages.

Technology Forecasters projects global revenues for aerospace/defense electronics contract manufacturing to grow from $4 billion in 2001 to $7.7 billion in 2006, for an average annual growth rate of 14 percent. During this period, TFI predicts manufacturing-outsourcing market penetration of aerospace/defense (defined as the percentage of cost of goods sold outsourced) will increase from 11 percent to 16 percent.

For the study, TFI interviewed aerospace/defense contractors and electronics contract manufacturers to gain insight into the market. One VP of R&D from a prime contractor reported using manufacturing services in Eastern Europe to obtain lower-cost production than was offered in North America.

Outsourcing elements of manufacturing is affording the military and aerospace electronics sector cost savings, owing to contract manufacturers' expertise in design for manufacturing and ability to spread fixed costs over numerous customer projects. Price has become a bigger issue in this market during the last 18 months, probably because more EMS companies began to get their feet in the door of this market sector.

EMS companies that for years have served the defense sector, such as General Technology Corp. (Albuquerque, N.M.) and Sparton Electronics (Jackson, Miss.), know that hurdles to serve this market abound, including additional paperwork, capital equipment and verification processes.

These issues will be presented in more detail at the upcoming Technology Forecasters Quarterly Forum in Needham, Mass., at Parametric Technology Corp.'s (PTC's) headquarters facility. Members of the Quarterly Forum who cannot attend this event will access a full report entitled "The Military/Aerospace Electronics Market: Unique Hurdles and Timely Opportunities, and Implications for Other Sectors" on the members-only Web site.

Other studies to be released June 9 include "International Logistics for Electronic Products, and Carriers' Entrée into Contract Manufacturing Management," "Outsourcing Opportunities Throughout The Product Lifecycle," "Annual Productivity Benchmarking of EMS Companies by Tiers" (includes Investment Analyst perspectives), and "Global Pricing Model: True Costs for Contract Manufacturing in Countries Around the World" (a summary of the new Global Pricing Model workshop for individual clients, by TFI Senior Consultant Charlie Barnhart). A networking dinner that night will be hosted by member DHL and Danzas Air and Ocean.

TFI is a strategic-consulting firm helping electronic-product executives to improve supply-chain, outsourcing, and environmental strategies for cost benefits. For more information, visit www.techforecasters.com.

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