Top Five EMS Providers Who Could Takeover Using Artificial Intelligence
In this article, we will discuss some of the logic behind the statement and also a more detailed understanding how we derive these results.
Electronic Manufacturing is a young industry, starting in 1977. Growth came from the outsourcing movement to take advantage of lower cost labor markets as well as the technical requirements or complexity of new products. These demands help push the young industry to where it is today.
Always there is a fork in the road and some firms climb above the others. This could be because of exceptional service, first mover advantage, growth by acquisition through to vertical integration which can help smooth the supply chain processes and boost profit margins.
The contract electronics industry, like Automotive suppliers, has Tier 1, 2, 3, and 4. Tiers are categorized by Annual Revenue and no other metric.
Like all service providers important traits for their customers are:
Service or "Problem" Reaction Time.
Making (Allowing) Your OEM to sleep at night.
And Ability To Be Agile (Shift With The Forecast).
You could argue its cost, quality and time, however, unless you’re a cash strapped NPI (Startup) you would prefer Reliability and Communication.
These 3 companies stand apart from the others though manpower (headcount) and buy power. When they show up in the bid process you have to question your ability if smaller to compete. They can take risks, make more mistakes and eat the losses when they have to. If they have to.
Foxconn, Flextronics (Flex) and Jabil. The nearest Tier 2 is separated by N billion in annual revenue
Each company has its set of capabilities. Often these become vague as you overlap very closely with one another in the space. They strive to disrupt and try and innovate while taking on more programs and work.
Sizable but further away from the top 3. These players have unique backgrounds and can largely do the same as the Tier 1s. One typical issue is only the buy power in some cases for raw materials. While the notable variations is these firms have in some cases higher tech staff breadth who are operational and working directly with clients. They have a deeper experience "bench" and can ramp up the same.
Sanmina, Celestica, Benchmark, Plexus, Scanfil, Kytron
Their only difference is end market experience or pure size (number of lines/operators).
However, in our scenario we have to play "What If?" and consider a situation where they could compete or nullify (aka Disrupt) the larger differentiation.
At NEURAL we call it a Superpower.
Where a client of ours, silently becomes a superpower and uses its new strength to bypass and circumvent common growth issues.
What is the criteria:
Materials transactions, spend, and risk. Costly components Vs commodity.
Payroll (Indirect Labor) costs as a portion of the higher cost labor markets
Human network complexity. Complex organizational structures, Wide market small footprint, Title-Creep (N VPs for that sized firm) where ROE/ROA may be imbalanced
Verifiable Public Records. Private firms are not a part of this analysis do in part to our data purity ethics.
Disclaimer: With all research there comes a point where it is easy to perform fuzzy-mathn wrap up, and close the task. However, to be concise, we performed due diligence on each, and, over time, will reveal more data which is noteworthy.
Other variables: Firm had an Innovation Center or Incubator, Attempted product launches in HW or SW, An open culture of allowed failure.