Business | Technology
India's gains in tech outsourcing
The world's electronics industry is poised to increase sharply the work it gives to outsourcing companies, with India taking a much bigger share of the total, even though it will remain well behind China.
- By Peter Marsh, Financial Times
- Published: 13:31 October 29, 2008
The world's electronics industry is poised to increase sharply the work it gives to outsourcing companies, with India taking a much bigger share of the total, even though it will remain well behind China.
According to a study by Technology Forecasters, a California-based consultancy, by 2010 more than a quarter of all the manufacturing output of the world's electronics industry will be done by specialist contractors operating most frequently in low-wage economies, up from less than a fifth two years ago.
Within this total outsourcing work, India is likely to be the big gainer, accounting for a projected 10 per cent of the total in 2010, up from two per cent in 2005.
China, which in the past 10 years has become the most important country for electronics manufacturing, will in 2010 account for 46 per cent of outsourcing work in this industry, down from 48 per cent two years ago.
Outsourcing has become the dominant manufacturing process in electronics production, an industry covering fields from computers to medical electronics, and with combined annual sales of about $2,000 billion.
About 10 specialist electronics outsourcers do most of the work on behalf of large electronics groups such as Hewlett-Packard, Cisco, Nokia and Sony, which sell to the final customer under their brand name but frequently do little of the physical manufacturing.
Specialist outsourcers include Hon Hai of Taiwan, Singapore-based Flextronics, Sanmina-SCI and Solectron of the US and Finland's Elcoteq.
A bigger role for the outsourcing companies would fit in with branded electronics businesses' desire to keep downward pressure on costs, according to Matt Chanoff, chief economist at Technology Forecasters.
Rising demand
The large increase in the work going to India is partly because electronics businesses are keen to increase sales in the country - demand is rising as India's economy expands - and because they are interested in exploring the potential of the country as a low-wage manufacturing base.
According to the projections, annual output in India of electronics outsourcing groups is likely to rise to $38.8 billion in 2010, compared with $5 billion in 2005.
Technology Forecasters's study says total global electronics outsourced production is likely to expand to $377.7 billion in 2010, from $208.9 billion in 2005.
The figures are expected to climb to 26 per cent of the total expected production of the electronics industry in 2010 of $1,451 billion, up from 19.5 per cent of the $1,068 billion total two years ago.
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