Electronic Contract Manufacturing

Electronics manufacturing services (EMS) is a term used for companies that design, manufacture, test, distribute, and provide return/repair services for electronic components and assemblies for original equipment manufacturers (OEMs). The concept is also referred to as electronics contract manufacturing (ECM).

Many consumer electronics are built in China, due to maintenance cost, availability of materials, quality, and speed as opposed to other countries such as the United States. Cities such as Shenzhen have become important production centres for the industry, attracting many consumer electronics companies such as Apple Inc.

The EMS industry took off after the late 1970s when Solectron was established. At the time, most electronics manufacturing for large-scale product runs was handled by in-house assembly. These new companies offered flexibility and eased human resources issues for smaller companies doing limited runs. The business model for the EMS industry is to specialize in large economies of scale in manufacturing, raw materials procurement and pooling together resources, industrial design expertises as well as create added value services such as warranty and repairs. This frees up the customer who does not need to manufacture and keep huge inventories of products. Therefore they can respond to sudden spikes in demand more quickly and efficiently.

The development of Surface Mount Technology (SMT) on printed circuit boards (PCB) allowed for the rapid assembly of electronics. The early 1990s saw OEM's rapidly installing SMT lines. EMS players like SCI and Avex struggled to exist as OEMs would pull contract or change vendors constantly. By the mid-1990s the advantages of the EMS concept became compelling and OEMs began outsourcing pcb assembly (PCBA) in large scale. By the end of the 1990s and early 2000s many OEMs sold their assembly plants to EMS aggressively vying for market share. A wave of consolidation followed, as the more cash-flush firms were able to buy up quickly both existing plants as well as smaller EMS companies.

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