Contract manufacturers accepting outsourcing jobs or taking on production duties for manufacturers will account for 90 percent of the world's shipments of mobile PCs in 2011, with the competitive landscape shifting slightly between the two major contract manufacturing groups, according to new research from IHS. Among the three main sectors in the electronics manufacturing industry, contract manufacturers represented by the group of original design manufacturers (ODMs) will make up 82 percent of mobile PC shipments in 2011, while a second group of contract manufacturers known as providers of electronic manufacturing services (EMS) will be responsible for an additional 8 percent. A third group, comprising, in-house production by original equipment manufacturers (OEM), will account for just 10 percent of the overall mobile PC market. The share splits within the industry will remain largely unchanged in the years to come, but EMS providers will make slight headway, gradually solidifying their foothold in the space at the expense of ODMs. Nonetheless, ODMs will continue to dominate in the contract manufacturing of mobile PCs, IHS research shows. For their part, OEMS-with a few exceptions, such as Samsungwill continue to slash in-house production and outsource jobs to both groups to realize greater cost savings. For EMS entity Flextronics, the company recently indicated it might not participate in new mobile PC programs next year, citing significantly reduced operating margins of approximately 1.5 percent, down from 3 percent when the it entered the mobile PC a couple of years ago. But Hon Hai, the other major EMS player, will remain formidable in the mobile PC industry given the company's cost leadership and the alternative sourcing options it provides to mobile PC OEMs, IHS believes. Participation deconstructed: Who does what
While definitions vary on the actual role of each group in the electronics manufacturing industry, it is widely agreed that both ODMs and EMS providers undertake contract manufacturing responsibilities in order to design or produce equipment that is made by OEMs. Increasingly, OEMs have farmed out an extensive range of production chores to outside firms in order to conserve internal resources. But despite their shrinking share of global manufacturing activity, OEMs are still considered the primary movers and shakers, owning the intellectual property and original designs behind the outsourced products. Nonetheless, barriers to mobile PC design and manufacturing have lowered over time with the standardization and modularization of mobile PCs. As part of their appeal, contract manufacturers enjoy advantages of cost, speed, integration capabilities and economies of scale in production. Overall, the mobile PC market will continue to remain a significant source of revenue for the global electronics manufacturing industry, despite the rising popularity of tablet devices such as Apple Inc's iPad. But with competition tightening and margins shrinking, the mobile PC manufacturing industry may move toward consolidation further down the line, and only the strong will survive. www.ihs.com | 
