THE WORLDWIDE PCB ASSEMBLY MARKETAuthors: Randall Sherman
Company: New Venture Consulting
Date Published: 2/2/1999 Conference: Pan Pacific Symposium
Outsourcing exists in two forms within the OEM industry today. The first is the traditional kind that involves an OEM outsourcing the assembly of PCBs or final products to a CEM. The second involves the OEM outsourcing standard PCBs from other OEMs for integration into final products. Examples of these assemblies include motherboards, video cards, modem cards, and interface devices that are purchased pre-assembled. The market for this second kind of outsourcing is quite large—estimated to be approximately $59 billion in 1997—as compared to the traditional CEM outsourcing market of approximately $28 billion. Microprocessors and memory devices make up the bulk of that $59 billion.
Outsourcing is not a panacea for all OEMs. Many firms will continue to successfully manufacture all of their product line, but this will succeed as a strategy only in certain situations. For example, it appears that for many high-volume consumer electronics products (televisions, VCRs, camcorders) that maintain a number of electromechanical parts and absolutely rock-bottom end-user costs, vertical integration may prevail as the most cost-effective model (although an increasing proportion of the PCB assemblies are being outsourced). In products in which the PCB is a high percentage of the total cost (50 percent of greater), it is frequently more cost effective to outsource assembly to a competent CEM or OEM supplier. As many new products are increasing the percentage of PCBs relative to other components, outsourcing will emerge as a key industry for OEMs in the future.
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