As it transitions from mechanical to electronic controls and components, the automotive industry is emerging as a high-growth market for electronic manufacturing service (EMS) providers. EMS providers are also benefiting from a continuing trend toward outsourcing, as automotive manufacturers strive to capitalize on other companies' technical expertise and cost effectiveness.
Ultimately, according to a recent study by Frost & Sullivan titled "EMS Opportunities in the North American Automotive Industry," revenues in the market are expected to grow from $1 billion in 2005 to $3.1 billion in 2012.
"The increasing amount of electronic content and continuous technological advancements are acting as major incentives for OEMs and Tier 1 suppliers to outsource to EMS providers," says Frost & Sullivan research analyst Lavanya Ram Mohan. "The automotive industry, which was once a niche segment, has developed into a full-blown profitable market offering largely untapped opportunities to these providers."
In terms of annual growth, North American EMS providers are expected to see demand from the automotive industry increase by 16.8 percent per year.
Of the three major categories of automotive electronics-entertainment and communications; powertrain, body, chassis and navigation technology; and safety-entertainment is currently experiencing the highest demand, with growth of nearly 17.8 percent per year. However, safety electronics is expected to experience increasing demand as governments pass new mandates in this area.
On the down side, EMS providers face considerable challenges in penetrating the highly demanding automotive industry. In particular, OEMs place great emphasis on exceptional quality and zero-defect production, compelling EMS providers to achieve the same. The study warns that EMS providers often underestimate the exacting nature of the automotive industry, which is considered one of the most difficult areas to break into. They often fail to realize the complexity and responsibility that comes with contracts to manufacture automotive electronics.
"If EMS providers learn the strategies and techniques that will help them penetrate the automotive industry, they can look forward to plentiful opportunities to capitalize on," says Ram Mohan. "Growth in this industry is a continuous journey and successful EMS providers are likely to enjoy long-term contracts, with a fairly stable demand from consumers."
For additional information or to order a complete text of the study, visit www.frost.com.