How OEM & EMS Businesses Save More by Working Together
The global EMS (Electronics Manufacturing Services) market is transforming primarily due to the adoption of new technologies by EMS providers, unprecedented commoditization of electronics, and the ever-increasing rate of outsourcing.
On the other hand, OEMs are facing challenges such as conceptualization of innovative and marketable products and cost management throughout the life of these products. These factors are responsible for the current trends of OEMs turning towards EMS providers in far greater numbers.
Recent market research shows that the global EMS market is expected to reach $734 billion by 2026. The signs are clear: OEMs and EMS providers financially benefit from working together. But how exactly does this happen?
Outsourcing to EMS Providers: Key to Cost Reduction for OEMs
When OEMs choose to outsource manufacturing to EMS providers, they can achieve cost reductions by leveraging their EMS partners’ specialized supply chain services. OEMs make outsourcing decisions based on many factors, but cost reduction is almost always top of the list.
EMS providers offer cost efficiency to OEMs by virtue of working with them. For instance, larger volumes increase capacity utilization and reduce material costs simply through the supply chain efficiencies.
Furthermore, working with EMS providers means that the OEM’s sales staff isn’t restricted by the internal capacity and doesn’t have to worry about not delivering on their promises. The increase in sales leads to more revenue for the OEM and larger volumes for EMS providers.
EMS Provider: More Than Just An EMS Manufacturing Partner
OEMs mainly evaluate their EMS partners based on the manufacturing capabilities, but that is rapidly changing. OEMs are now also taking into account the purchasing expertise of their EMS partners.
Two decades ago, OEMs would only consider EMS contract manufacturing when they couldn’t fulfill the market demand in-house. This was followed by outsourcing board assembly, and later on, system assembly manufacturing and aftermarket services were also outsourced.
Today, OEMs are also relying on the purchasing prowess of their EMS providers. In some cases, EMS partners also tackle production materials sourcing.
At any given time, EMS providers are working with multiple OEMs, and therefore, have invested in purchasing and supply chain software and personnel. Furthermore, EMS providers have access to numerous suppliers and can leverage this capability for cost reduction.
A good example is the world’s largest EMS contract manufacturer Foxconn Technology. Foxconn is commonly known as Apple’s manufacturing partner, but it also manufactures consumer electronics for Dell, Amazon, HP, and Sony.
Foxconn saw its revenue increase from $38.11bn in 2007 to $178.16bn in 2019. Similarly, Apple’s revenue also quadrupled in the same period. The Apple and Foxconn partnership is an excellent example of how an OEM and EMS provider can work together cost-effectively by leveraging each other’s strengths.
Conclusion: The OEM-EMS Partnership is a Win-Win
The OEM and EMS provider partnering presents a mutually beneficial opportunity that allows both parties to save more and improve cost-effectiveness.
OEMs save by leveraging the manufacturing capabilities, supply chain efficiencies, and purchasing expertise of the EMS provider. Similarly, EMS providers benefit by leveraging OEM’s innovative design development, sales and marketing capabilities, and large order volumes.
However, OEMs often struggle with finding a compatible EMS provider. This is where Find an EMS comes in. We provide a digital platform that makes OEM and EMS connections easier, simpler, and more convenient.