Automotive industry targeted by largest contract manufacturers
Nov 02, 2005
Technology Forecasters Inc. (TFI), analyst Charlie Wade reports that the EMS penetration of the automotive electronics industry currently stands at approximately 9%.
"Driven by the explosion of growth in the electronics content of automobiles in all price categories, and the increasing acceptance of outsourcing as a viable option, that capture rate will increase to 13%," he predicted.
TFI analysts surveyed top automotive manufacturers and their suppliers to determine the key challenges affecting their decision to outsource electronics manufacturing. In most cases the major auto manufacturers concentrate on engine production, metal stamping, welding, painting, and final product integration.
Accordingly they see electronic modules as black boxes and will typically outsource nearly all aspects of the electronic systems design and manufacturing. Therefore the center of mass for auto electronics industry lies with the auto supply companies. Within TFI's listing of auto industry participants in the Fortune Global 500, six companies (Delphi, Denso, Johnson Controls, Visteon, Siemens VDO, and Continental) would be considered mainly auto component and supply vendors. These are the companies selecting outsourcing partners today.
In order to win this business, contract manufacturers have to convince these OEM suppliers that they can produce quality products at a competitive price, however. "Quality ranked the number one concern of automotive manufacturers," Wade noted. "These companies do not have confidence in the EMS industry's ability to deliver on promises. They are concerned about issues of corporate culture alignment. They struggle with choosing vendors. Yet capacity problems drive the necessity of seeking outsourcing partners. Our sample of OEMs is projecting a doubling of PCB assembly outsourcing in the near future. Likewise the OEMs anticipate an increase in prototype build, tooling, testing, and test equipment outsourcing."
It is important to note that this sample group did very little outsourcing of product design and system integration activities and foresees no change in this pattern through 2008.
The report tracks the major shifts in manufacturing locations and end markets that are occurring in the increasingly global automotive electronics industry.
To download the complete report by joining TFI's Quarterly Forum for Electronics Manufacturing Outsourcing and Supply Chain, go to: http://www.emsnow.com/spps2/sitepage2.cfm?catid=49