Computers Drive Contract Manufacturing's 26
Percent Growth
(12/09/97; 11:00 a.m. EST)
By Patrick Waurzyniak, Electronic Buyers' News
Continuing with its explosive growth pace in
computers and other key end-user markets, U.S.
contract manufacturing will reach $21.8 billion this
year, according to a new study released Monday by
Mountain View, Calif.-based market researcher Frost
& Sullivan.
Driven by end-user markets, contract manufacturing
actually is outpacing growth of most end markets it
serves, according to F&S. Although computers are
the largest market for contract manufacturing,
telecommunications and data communications are
projected to take over that lead by 2004.
Contract manufacturing will grow at a 26.1 percent
compound annual growth rate between 1997 and
2004 to reach a $110 billion market by 2004,
according to the F&S study. "OEMs are increasingly
seeing contract manufacturing as a sound strategy to
take care of their manufacturing needs," said F&S
analyst Jouni Forsman.
Among the key trends identified by the study is that
though the average size of a contract manufacturer is
growing, the biggest companies are growing at the
fastest rate. Acquisitions are a common strategy used
to grow a company because it lets the company gain
extra capacity and new skills quickly, the F&S report
said, and technologically, customers are demanding
more box-build or system assembly and more
comprehensive services.
"Box-build and system assembly are gaining more
importance," said F&S analyst Matt Saltz. Demand is
rising also for more advanced attachment technologies,
such as chip on board and ball grid array.
Four market segments studied in the report are:
first-tier, second-tier, and third tier dedicated contract
manufacturers as well as distributor contract
manufacturers. The first-tier consists of the four largest
manufacturers that generate more than 46 percent of
the total U.S. market revenue, according to F&S.
These companies must have large international
manufacturing capacity, otherwise the largest OEMs
will not do business with them.
To gain a competitive advantage, contract
manufacturers must excel at managing growth and at
managing the risk involved in increased asset
investments, the study concludes. Manufacturers need
to be flexible to customers' needs, offer services other
than manufacturing, and remain cost-effective.
Globalization and global regionalization are important,
the study said, and price competitiveness based
strategies are necessary to survive. |
