In 2011, a significant slowdown in demand from end users and the anticipated stagnation of electronics manufacturing service (EMS) industry forced some companies to re-evaluate the business strategies. Besides with the global economy recovery still in the slowdown mode, EMS providers also faced the threats from electronic material supply shortage in Japan, the damage on the hard disk supply chain in Thailand, and so on.
Cost continues to remain the prime focus for original equipment manufacturer (OEM) selection in China, for example, material prices have risen, labor wages have increased 20.0 percent in the Pearl River Delta, and supply chain costs are also going up. Over the past five years, employment costs in south China have risen by about 187.0 percent. Furthermore, growing popularity of other cost competitive countries such as Vietnam, Malaysia, India, Indonesia, Singapore, and Mexico have decreased the attractiveness for contract manufacturing in China. These countries are also benefited from skilled labor pool and the labor wages in these regions are raising slower compared to China.
Despite the challenges in the Chinese EMS market, China is still the first choice for most of the international OEMs. China has already become the largest domestic sales and production market in the world and the manufacturing technology has reached the medium level. The development of the Chinese economy and impressive domestic demand are expected to support increasing revenue trend for Chinese EMS market.