ODMs design expertise fuels growth.

PALO ALTO, CA -- Current market dynamics point to further outsourcing by OEMs, and as a result, both EMS providers and ODMs will enjoy steady growth during the forecast period, says Frost & Sullivan.

Compared to the EMS market, ODMs have witnessed higher growth over the last five years, the research firm states.

In a study released today, the research firm finds that the global EMS market earned revenues of $190 billion in 2006 and will grow to $387.4 billion in 2013. The global ODM market earned revenues of $100.7 billion in 2006 and is on track to reach $219 billion in 2013.

"Increased outsourcing from automotive and communication industries along with new outsourcing opportunities from the aerospace and defense, medical and industrial applications industries will likely drive the future growth of the EMS market," notes Frost research analyst Lavanya Ram Mohan.

Design expertise represents a primary growth factor for ODMs, especially in markets such as consumer electronics, computing, PC and servers, says the researcher.

Frost adds that OEMs often seek ODMs as strategic design partners; ODMs' ability to offer design solutions with high quality and low-cost options will maintain the market's high growth rate during the forecast period.

However, ASPs in traditional markets have declined, and EMS providers often find themselves squeezed to provide the lowest cost. EMS providers can no longer remain complacent based on their manufacturing, engineering, design, or supply chain expertise, the company continues.

EMS providers need to offer differentiated services to OEMs, while simultaneously retaining the current level of services. In particular, EMS providers offering design services can increase revenues and profits substantially, says Frost. EMS providers will likely benefit from the considerable growth potential within supply chain-related operations.