Pan Pacific Symposium Conference Proceedings


THE WORLDWIDE PCB ASSEMBLY MARKET

Authors: Randall Sherman
Company: New Venture Consulting
Date Published: 2/2/1999   Conference: Pan Pacific Symposium


Abstract: The printed circuit board (PCB) assembly industry is undergoing tremendous change today, equivalent in some respects to the innovations and productivity found in the integrated circuit (IC) semiconductor industry. Two significant trends have gradually emerged: First, integration has lowered component costs and board size requirements; second, automation has improved throughput and yield and dramatically reduced assembly costs. Run-away advances have led many OEMs to question whether manufacturing should be considered a core competency, spawning the emergence of a new class of outsource manufacturing specialists—the contract electronics manufacturer (CEM).

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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