Production rises in Southeast Asia as contract manufacturers head to Vietnam
For years, electronics contract manufacturers have flocked to Chinese cities including Shenzhen, Guangzhou, Suzhou, Wuxi and Beijing to maximize their revenues and minimize their costs.
Accordingly, iSuppli Corp. projects that 52.4 percent of all contract-manufacturing revenues were generated by companies operating in China, including Foxconn, Flextronics, Quanta and Compal.
However, a new hot spot has emerged in electronics manufacturing: Southeast Asia, namely Singapore, Malaysia, Thailand and—most prominently—Vietnam. The Southeast Asian contract-manufacturing market, consisting of Electronics Manufacturing Services (EMS) and Original Design Manufacturing (ODM) providers, will rise to $24.9 billion by 2011, a nearly $9 billion increase from $16.2 billion in 2006, according to iSuppli. By 2011, Southeast Asia will rise to account for 7 percent of global electronics contract-manufacturing revenue, up from 6.3 percent in 2006.
Figure1 presents iSuppli’s forecast of electronics contract manufacturing in Southeast Asia.
“iSuppli believes that several factors are triggering this resurgent growth among Southeast Asia contract manufacturers, including a backlash against China,” said Adam Pick, principal analyst for EMS and ODM at iSuppli. “OEMs are transforming their strategies given end-market demand and total landed costs. Needless to say, contract manufacturers are doing their best to manage those stated and latent needs.”
Other factors include shifts in the competencies of EMS/ODM providers. For example, Singapore is no longer a low-mix, high-volume manufacturing hub. Rather, EMS providers have migrated up the value chain to offer higher margin services and builds.
Government incentives also are playing a role in encouraging the migration of manufacturing to Vietnam and other regions.
The Thai government wants to extend its position in the global electronics market. That said, government initiatives are stimulating research and development activities by contract manufacturers in Thailand.
As for Vietnam, recent investments by leading OEMs, EMS and ODMs into Vietnam’s industrial parks suggest that Vietnam will ramp quickly as an emerging manufacturing market in Southeast Asia.
