Abstract

Flextronics' basic positioning as an EMS provider has remained unchanged ever since the company was first established. For much of this time, the majority of leading international vendors were somewhat resistant to the EMS model, preferring to implement production in-house. The last few years have seen a series of layoffs and a wave of M&A activity that has gradually transformed Flextronics, which in turn has led to higher revenue growth and improved profitability.

In the past, Flextronics was mainly involved in providing assembly service for mobile communications systems. Although Flextronics has gradually expanded into other product categories, the share of total revenue deriving from these other products remained low. Flextronics therefore began to collaborate with ODM makers in the PC sector ?such as Quanta, Compal, Asustek, and Mitac ?on component purchasing and final assembly. Flextronics anticipates that, by leveraging these ODM makers' PC design and manufacturing capabilities, it can begin to secure more contracts from the leading international PC vendors and gradually establish itself as an important player in the global PC manufacturing business.

Originally, the main shipment destinations for Flextronics' key customers were Europe and the United States. Recently, however, shipment to the Asia region has come to account for an increasingly large share of European and US vendors' total shipment. As a result, Flextronics' shipment to the Asian market is now on a par with that to Europe, leading Flextronics to close several of its European production facilities and establish new factories in Asia. This strategy has helped Flextronics to reduce production costs, while at the same time enabling the company to provide its customers with more timely delivery.

In the future, the competition between the world's leading EMS providers will focus not only on the companies' scale of operations, but also on the level of supply chain integration that they have achieved, and on their global logistics capabilities. It can be anticipated that Flextronics will continue to collaborate with ODM makers, while at the same time working to expand its product line.

Faced with the challenges outlined above, EMS providers have normally opted for either upward integration, with the establishment of new R&D facilities to strengthen R&D and design capabilities, or collaboration with ODM makers or design houses. With the "ODM+EMS" model that Flextronics is currently adopting, Flextronics will be looking to collaborate with small but flexible R&D and design firms to supply leading international vendors with customized products intended for  specific market segments, in a bid to address the ongoing diversification of consumer needs.