Challenges and Opportunities for Smaller EMS for Onshoring


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The onshoring trend has been speculated and talked about for a few years now, and is certainly a reality with greater opportunities and challenges. Responsivity, time to market, wage normalization, and intellectual property are driving OEMs to look for suppliers that are closer and smaller.

Pirating

If you attended this year’s Consumer Electronics Show (CES) in Las Vegas, you might have seen that some foreign companies got in trouble for pirating new designs of U.S. companies that were manufacturing in Asia. This is a big concern for smaller companies that have new products but don’t have the staff to combat this. As a result, they are sticking closer to home where they know the laws and have more control.

Automation: the Great Normalizer

As automation goes up, the impact of cheaper labor goes down. Automation also takes out the variability and human error. However, if you’re not careful, you can create a lot of rework fast with high-speed equipment. A few highly skilled people running automated equipment is more efficient than lots of low pay manual assembly people making errors.

Multifunctional

In the past, the lead companies were vertically integrated, and then the trend for the smaller companies was to become more focused. Now, we are trending more multifunctional to eliminate the multiple mark-ups that drive up price.

Engineering, CCA, cables, and system integration is an attractive mix for the OEM in seeking a supply partner with deeper relationships. Partitioning sub-systems with multiple suppliers can lead to sub-optimization and system level inefficiencies.

Labor Wages

We have seen the average wage for Asian workers trending up as money has been pouring into the system, particularly in the larger manufacturing centers. This is taking some of the edge off their competitiveness and opening up opportunities for regional markets around the world. Logistics, travel, politics, shipping inventory, taxation, and the value of the U.S. dollar around the world have a larger impact than lower labor rates.

The shops that are agile and efficient are busy. The others are waiting for a time gone by.

Editor's Note: This article originally appeared in the February 2016 issue of SMT Magazine.

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