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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector -- Ignore unavailable to you. Want to Upgrade?

To: patroller who wrote (1180)	1/26/1998 10:24:00 PM
From: Larry Unger	Read Replies (3) \| Respond to of 2542

Distributor-Contract Manufacturers: A New Breed of Electronics Manufacturer By Matthew T. Saltz Business is booming for contract manufacturers. With revenues forecast to exceed $28 billion in 1998, the contract manufacturing industry continues to attract new market entrants. One of the primary challenges for new entrants is to offer a product or service that can differentiate itself from its numerous competitors. One type of contract manufacturer that has been able to distinguish itself from others has been the distributor-contract manufacturer, which in 1998 is expected to account for 2.1 percent of total market revenues. A distributor-contract manufacturer is first and foremost a distributor of electronic components, and that will remain its core competency and primary source of revenues. However, as components' margins continue to shrink, some distributors have entered into contract manufacturing in an attempt to generate greater revenues. Contract manufacturers that are primarily distributorships have several advantages over other companies that strictly manufacture: - A readily available source of capital - A guaranteed supply of components - An existing customer list Contract manufacturing in the electronics industry, although potentially quite lucrative, requires a large amount of capital investment during the initial stages of entry into the market. Whereas most new entrants into the contract manufacturing industry must seek large investments from private investors and/or venture capitalists, distributor-contract manufacturers generally have a source of available capital in the form of the distributorship. The distributorship has a vested interest in financially assisting the contract manufacturing segment until it becomes profitable. Venture capitalists may not have the patience or the resources to wait for an independent contract manufacturer to become self-sustaining. One of the major problems facing medium-sized and small contract manufacturers presently is the lack of available components needed to produce electronic assemblies and the price they must pay for those components that are available. Large contract manufacturers can often obtain deep discounts on the components that they purchase. Thus, even if small manufacturers can get the components, it is very hard for them to price their products competitively if they are in direct competition with a large manufacturer's products. Contract manufacturers that are also distributors avoid the difficulties involved with the components. They always have an ample supply of components because of their established supply channels, and the components are competitively priced since the contract manufacturer does not have to pay the added expense of the distributor's margin Possibly the greatest advantage a distributor-contract manufacturer holds over other entrants into the market is an established customer list. A distributor generally specializes in one or two industries, such as the medical market or the computer market. Since the distributor has contacts and knows current trends in a particular industry, it can direct potential clients to the contract manufacturer. A new entrant into the contract manufacturing industry may initially have one or two potential clients, but a distributor-contract manufacturer's potential clients include every manufacturer that currently purchases components from the distributor. The distributor-contract manufacturing market, although growing, is only one small segment of the entire contract manufacturing industry. The entire market is discussed in detail in Frost & Sullivan's new Report # 5586-28, U.S. Electronic Contract Manufacturing Markets. Can anyone provide a list of these companies?