Contract Manufacturers Will Put Added Pressure on Handset Makers
The increasing demand of operators to customise and brand their own handsets will benefit contract manufacturers in the mobile handset industry according to a report from visiongain. The handset manufacturing outsourcing market is considerable in size and growing. Visiongain estimates that outsourced handsets will account for 36% of total shipments in 2006, a figure that will rise to 47% of all mobile devices by 2009.
Flextronics, the leading contract manufacturer, produced 47 million handsets in 2005, putting it close behind the world's fourth largest handset maker, LG, which made 53 million phones that year, and ahead of Sony Ericsson.
The recent announcement by Vodafone of a five-year deal with Huawei for the supply of own-brand 3G phones in 21 countries reinforces the trend of operators looking beyond the Tier 1 manufacturers. OEMs such as Nokia are reluctant to dilute their own branding on handsets, and will need to become more flexible in working with operators to become competitive in the customisation market.
"Own-brand handsets are one way for operators to increase data usage, and the trend towards greater customisation will have an impact upon the manufacturing side of the industry," says visiongain analyst and the report's lead author Adam Walkden. "OEMs need to re-assess their relationships with operators and become more accommodating in terms of cross branding and customisation. Only by doing so can they compete with the ODMs and EMS providers who are willing to work closely to meet all the operators' needs."
The study also found that the burgeoning low-cost handset market is a major opportunity for ODMs and EMS providers. Ultra low-cost and low cost handsets can be made more cheaply by contract manufacturing, leading more OEMs to outsource the production of such handsets as emerging market growth continues.
"We are also seeing moves towards increasing handset production in India as a result of more favourable government initiatives. Once the dark horse of handset manufacturing, India will experience a dramatic increase in the number of handsets shipped from the region," concludes Walkden."
Posted to the site on 27th March 2006
