Global OEMs, EMS Firms Looking to Relocate Production to Offset Higher Costs in China

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The global electronics industry output is forecast to reach $1.861 trillion in 2015, according to a new report by Reed Electronics Research. This compares to $1.047 trillion about 30 years earlier. Over the period, the dynamics of the industry has changed. Production has migrated from high-cost to low-cost locations, and China has emerged as the focal point for electronics equipment production for high volume products in the computing, consumer and communications—or the 3C segment—of the market.

In 2015, China is forecast to account for 38% of electronics equipment production, up from 2.6% two decades ago, while low-cost geographies overall accounted for 69% of the total in 2015, up from 25% in 1995. In the same period, production in the mature geographies has fallen to 31% from 75% in 1995.

However, China is coming under increasing pressure as the major global OEMs and electronics manufacturing services (EMS) providers look to relocate production to offset higher costs. India and Indonesia, with large domestic markets and the recent move by their respective governments to introduce requirements for "local" manufacture, and the benefits of lower costs in Vietnam, will be attractive alternatives to manufacturing in China.

Meanwhile, a significant proportion of equipment production, where the focus is on lower volume higher mix products, has remained in Western Europe and the United States. These sectors, primarily in the industrial, medical and communications (including defense) sectors of the market, will continue to offer significant opportunities for a wide range of companies. Both regions will also benefit from their leading position in design and R&D. The requirement for lower cost manufacturing within closer proximity of the end market has benefited both Mexico and Central and Eastern Europe.



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