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Many industry analysts and suppliers say that consolidation in the electronics industry will result in a smaller, but stronger supply base that is better able to develop new technologies and products for OEM customers.
However, consolidation will also mean fewer supplier choices and more product obsolescence as merged companies eliminate redundancies in their product portfolios by ceasing production of similar parts. Fewer parts and fewer sources mean more risk in the supply base.
For EMS provider Creation Technologies, based in Burnaby, British Columbia, consolidation is both a challenge and an opportunity. Creation builds boards, subsystems, and systems for OEM customers in the communications, medical equipment, computer, defense and aerospace, and energy industries. It also offers new product introduction and rapid prototyping services to OEM customers.
“Consolidation goes hand-in-hand with technological and economic shifts and has been part of this industry for decades,” said Charles Tonna, vice president of supply chain and operational excellence for Creation. “It will remain that way for the foreseeable future, whether with raw-material suppliers, brand-owning suppliers, contract manufacturers, OEMs, etc.”
Steve McEuen, vice president of procurement for Creation, said while consolidation is not new to the electronics industry, in recent years there has been a “massive number of semiconductor mergers and acquisitions.” On the positive side, consolidation will result in “accelerated technology improvements” with certain semiconductors such as wireless ICs, power management chips, and processors used in Internet of Things applications, said McEuen. However, consolidation will also cause “shifts in pricing, distribution channel realignment, and product portfolio rationalization, which will drive an increased level of end-of-life (EOL) notices,” he said.
To mitigate risk caused by consolidation, Creation has expanded its value analysis and value engineering (VAVE) services for OEM customers. With value analysis and value engineering, each component of a board in a subsystem or system is evaluated to determine its total cost of acquisition for its maintenance and usage and if it is possible to replace the parts with a more cost-effective, alternative component. Click Here to read the full article written by James Carbone on GlobalPurchasing.com
About Creation Technologies –
- Their mission is to provide the solution of choice for OEMs who need a focused and responsive design and manufacturing partner for medium-volume, complex electronic products.
- Their purpose is to enrich lives by sustaining strong profitable growth in an enjoyable and caring culture.
- Their culture and business model enable us to be at our best in a constantly changing environment. Ask us about it any time! We’d love to tell you what it means to us, and more importantly, how we believe it helps us deliver the best solution possible.