In the past decade, China's electronic information industry has witnessed rapid development, with its operating income accounting for the largest proportion in the industrial sector. At the same time, under the impact of various factors such as the pandemic and malicious suppression by Western countries, China's electronic information industry still faces many problems including outward relocation of enterprises, unstable supply chains, and technological constraints.
In the face of complex and changing international environments, domestic epidemics, and other multiple challenges, the sustained and stable development of China's electronic information industry requires the full cooperation of various enterprises upstream and downstream the industrial chain. As a provider of one-stop integrated services, electronic manufacturing service enterprises play a crucial role in the development of China's electronic information industry.
Overview of Electronic Manufacturing Services
Electronic manufacturing service providers offer a range of integrated services to electronic product brands, including design, procurement, manufacturing, testing, logistics, etc. Due to considerations in competition, division of labor, and cost, electronic product brands have gradually shifted their focus on developing new products, brand management, and marketing as their core competencies, while outsourcing the manufacturing part of the value chain to electronic manufacturing service providers.
With the continuous deepening of cooperation between electronic manufacturing service providers and electronic product brands, these service providers are gradually penetrating into all dimensions of the brand's product supply chain. The relationship between the two parties has evolved from the initial OEM relationship to a long-term stable strategic partnership. Currently, electronic manufacturing service providers can offer a variety of comprehensive services to brands, including product design, engineering development, production manufacturing, testing, warehousing logistics, after-sales service, etc.
In recent years, with the continuous improvement of China's macroeconomic development level, China has gradually developed from a major electronics manufacturing country into an important consumer market for electronic products and a brand-exporting country, providing broad development opportunities for China's electronic manufacturing service market.
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Electronic Manufacturing Service Market Industry Chain
The upstream of the industrial chain consists of electronic component suppliers, the midstream includes electronic manufacturing service providers, and the downstream is made up of electronic product brands.
The electronic manufacturing service market is the core link of the entire industrial chain, where electronic manufacturing service providers can offer a wide range of services according to the different needs of downstream customers. The electronic component manufacturing industry is the upstream sector of the electronic manufacturing service market, and the supply capacity and technical level of component manufacturers affect the product quality, unit cost, and delivery cycle of electronic manufacturing service providers. For downstream customers, electronic manufacturing service providers can provide comprehensive services including procurement, design, manufacturing, warehousing logistics, after-sales service, etc., helping brand owners focus on product development, design, channel marketing and promotion, improving supply chain efficiency, and shortening the time to release new products.
Since the service scope of EMS mode covers the entire production chain, the business models adopted by electronic manufacturing service providers can include OEM mode, ODM mode, and EMS mode. Under the OEM mode, electronic manufacturing service providers mainly manufacture products according to customer requirements; under the ODM mode, they mainly design and manufacture products for customers; whereas under the EMS mode, electronic manufacturing service providers provide comprehensive services at all stages of the supply chain management cycle.
Source: Analysis by Frost & Sullivan
Current Development Status of China's Electronic Manufacturing Service Market
In recent years, China's electronic product manufacturing industry has maintained a stable development momentum, driving the continuous growth of China's electronic manufacturing service market. Since 2015, China's total electronic product sales have surpassed those of the United States, making it the world's largest electronic product manufacturing market. From 2016 to 2021, the total sales of China's electronic product manufacturing market increased from $438.8 billion to $535.2 billion, with an annual compound growth rate of 4.1%. In the future, with further popularization of electronic products, it is expected that by 2026, the total sales of China's electronic product manufacturing market will reach $627.7 billion, with an annual compound growth rate of 3.2% from 2021 to 2026.
Source: Analysis by Frost & Sullivan
With the development of China's electronic product manufacturing industry, in recent years, the demand for various participants in the electronics manufacturing service market industry chain has been continuously growing. The penetration rate of electronic manufacturing services has been steadily increasing, further driving the growth of the scale of China's electronic manufacturing service market.
In 2021, the total sales of China's electronic manufacturing service market reached approximately 1.8 trillion yuan, with an annual compound growth rate of 8.2% from 2016 to 2021. The market size of China's electronic manufacturing service market is expected to maintain stable growth in the coming years, reaching approximately 2.5 trillion yuan in 2026, with an annual compound growth rate of 6.8% from 2021 to 2026. This is mainly due to strong domestic demand for electronic products, productivity improvements brought about by manufacturing technology progress, and the promotion of various favorable policies such as 'Made in China 2025'. In addition, electronic manufacturing service providers will offer more value-added services in the future, such as logistics services, advertising services, and e-commerce services, which will further improve convenience for electronic product brands and expand distribution channels. Therefore, it is expected that the market size of China's electronic manufacturing service market will continue to grow in the future.
Source: Analysis by Frost & Sullivan
The downstream application areas of the electronic manufacturing service market mainly include computers and storage, consumer electronics, network communication, medical electronics, automotive electronics, industrial electronics, and other electronic products. In 2021, the main downstream applications of China's electronic manufacturing service market included network communication products, computers and storage products, automotive electronics, etc., accounting for 24.1%, 16.2%, and 15.8% of the total sales of China's electronic manufacturing service market respectively. In the future, with the rapid development of the automotive electronics industry, medical electronics industry, and consumer electronics industry, China's electronic manufacturing service is expected to have a higher penetration rate in these downstream industries.
Source: Analysis by Frost & Sullivan
driving factors
Against the backdrop of rapid upgrades in electronic products, the electronics manufacturing industry will continue to face challenges such as short product life cycles, fluctuating demand cycles, increased product quality pressure, and production line conversions. To reduce costs, ensure product quality, and maintain competitiveness in product innovation, brand owners will rely more on electronic manufacturing service providers for design, procurement, manufacturing, and supply chain management. Therefore, the electronic manufacturing service market will maintain a strong growth trend, and the penetration rate of the EMS model will continue to increase.
In order to provide high-quality products and comprehensive services to brand owners, electronic manufacturing service providers continuously enhance their manufacturing capabilities, strengthen procurement capabilities, and expand their global resource network. In addition, electronic manufacturing service providers have also strengthened their design capabilities to obtain more design service contracts, which helps to improve profit margins. The growth in the capabilities of electronic manufacturing service providers will make brand owners more dependent on the services provided by these providers, thereby promoting the growth of the electronic manufacturing service market.
As OEMs focus on enhancing their core competitiveness in the manufacturing field, they increasingly outsource supply chain management to electronic manufacturing service providers. Through effective supply chain management and logistics, electronic manufacturing service providers can charge higher service fees from OEMs. In addition, electronic manufacturing service providers can also offer other value-added services such as maintenance, thereby continuously enriching their revenue sources.
Development trend
Currently, China's electronic manufacturing service providers are mainly distributed in the Yangtze River Delta region, the Pearl River Delta region, and the Bohai Rim region. The investment in professional talents, substantial capital, and the huge consumption of electronic products have driven the formation of industrial clusters in these regions for the electronic manufacturing service market. In addition, the industrial agglomeration effects of various industries such as consumer electronics, network communications, industrial control, and computers can further strengthen information exchange among electronic manufacturing service providers, thereby bringing cost advantages and regional brand advantages.
China has gradually transformed from a major electronics product manufacturing country into an important electronics product consumer market and a brand exporter. The rise of domestic brands such as Huawei, Xiaomi, and ZTE has laid a solid foundation for the development of the domestic electronics manufacturing service market. To ensure product quality, domestic brand owners will put forward standardized management requirements for electronics manufacturing service providers and help them upgrade their manufacturing processes and equipment through technical and financial support. This will provide huge opportunities for the further development of the electronics manufacturing service market.
The continuous improvement of intelligent manufacturing technology is conducive to enhancing the production efficiency and the stability of product quality of electronic manufacturing service providers. In recent years, electronic manufacturing service providers have been committed to developing intelligent manufacturing systems using new technologies. The popularization and application of technologies such as artificial intelligence, cloud computing, machine vision, and motion control in the electronic manufacturing service market can effectively reduce raw material waste and rework, thereby lowering operating costs, shortening production cycles, and improving production efficiency.
