Caution! International Speed Bump Ahead

ABSTRACT Outsourcing, the strategic use of outside resources to perform activities traditionally handled in-house, is revolutionizing the electronics industry. Contract electronics manufacturing (CEM) is involved in producing almost 20 percent of all the electronics on the market today, with revenues projected to grow 25 percent annually to an estimated $178 billion in 2001. 1 Within 10 years, 50 percent of electronics manufacturing is predicted to be outsourced, 2 with surface mount technology (SMT) generating more than $8.41 billion by 2006. 3 Most contract electronics manufacturing is going offshore to Asia Pacific. Reasons include low prices, superb quality and large pools of skilled, educated workers. Government-supported policies, strong financial subsidies, special incentive programs, national economic development plans supporting technology improvements, and across-the-board upgrades of production capabilities are yielding facilities that can handle everything from the simplest to the most advanced SMT processes. Cisco, Motorola, Dell, Compaq Computers, IBM, Toshiba and NEC Corp. are just a few of the big name electronics OEMs that are outsourcing in Southeast Asia. But smallto medium-sized companies can also tap all the region has to offer. This paper investigates the opportunities and critical challenges to successfully outsourcing electronics assembly work in the Far East, the world's electronics powerhouse.