We estimate the total world electrical/electronics market may have reached $2 trillion, or more, in 2005. This number is based on total company revenues reported, which includes electrical and electronic sales and non-hardware revenues such as software and services.

The total connector market was $35.4 billion, or approximately 1.8% of this total.

Of the industry total, 34% was from the top 10, 66% from the top 100 OEMs, and 84% from the top 300.

There were several thousand companies making electronic products at the system and sub-system level last year. All are customers for connector products. These ”customers” wax and wane each year, with new ones popping up all the time. The benefit and potential of working with some of these start-ups is that getting in on the ground floor may produce big future sales returns. This is true in the dynamic home entertainment, computer peripheral, and wireless communications markets, where digital convergence is spawning many new applications. It is also true where electrical and electronic markets are converging (example: LED lighting), where broadband Internet communications will revolutionize many applications and create new ones, and where the global energy crunch is ripe for further electrical/electronic developments.

The tables below show an analysis of the Top 30 Global Electronic OEMs and Top 30 Contract Manufacturers.

Many of these OEM companies use subcontractors to do their manufacturing. These subcontractors have evolved into a model of efficiency for the electronics industry, allowing OEMs to focus on their markets, while subcontractors focus on manufacturing facilities and technology, which often creates economies of scale. In some ways this has complicated life in the connector industry, because there is now a whole new tier of customers in the marketplace who don’t automatically adhere to past OEM print positions or OEM loyalties.

These subcontractors fall into four loosely defined categories:

• OEMs that also do private label manufacturing for others. This is probably less common now because of industry consolidation and globalization.
• Sub-system assembly shops that are typically small, local, and regional suppliers, or component suppliers seeking value-added business.
• Larger and even huge subcontract manufacturers (CMs) who offer a wide range of supply-chain services on (sometimes) thin margins.
• Original Design Manufacturers (ODMs) who focus on specific market segments where they have expertise, such as mobile phones, laptop computers, or motherboards.

These suppliers are defined as being part of the Electronic Manufacturing Services industry (EMS), which has grown rapidly, though not without its struggles, to a level approaching $200 billion. Interestingly, this is still less than 10% of the total electronics industry. In other words, the actual dollar value of manufacturing is rather small—and getting smaller as software and firmware become more and more important.

The top 30 EMS suppliers totaled approximately $150 billion in assembly business (see Table 3 below). What is interesting is the geographical mix. We do not have historical data for this article, but we are certain this mix has changed over the past decade as the center of gravity for electronic manufacturing has shifted to Asia. Here are the numbers:

In the EMS category spanning CMs and ODMs, one-third of the suppliers are headquartered in North America, less than 5% in Europe, and 1% are in Japan and China. More than 60% are based in Asia-Pacific, mainly Taiwan and Singapore. The actual mix of manufacturing locations is different. These data are not readily available but, would show China coming of age as the prime assembly location, with Thailand, Malaysia, Philippines, Taiwan, Eastern Europe, and Mexico in the mix.

Conclusions:

• The marketplace is huge and growing, with many new opportunities on the horizon.
• The connector market represents between 1 and 2% of the total, depending on how you account for non-hardware sales.
• Contract manufacturers are here to stay, taking an increasing amount of formerly OEM production and procurement.
  
• One CM, Hon Hai, started as connector manufacturer Foxconn. It has achieved over $27 billion in sales over the past year, doubling and redoubling its CM sales.
• The United States, Japan, Asia Pacific, and to a lesser extent, the EU, comprise most large electronic OEMs.
  
• Japan has the most members of the top 30 OEMs.
• China has few large headquarter operations. This will change, but for now they still depend on leadership from abroad.
• Competition from Chinese companies, aided by their government, will become a major factor over the next decade, assuming economic and political stability.
• The Pacific Rim, in general, and more specifically, China, is becoming a dominant factor in electronic manufacturing, including subcontract manufacturing.

Reference sources: Bishop & Associates; Electronic Business; Hoovers; Yahoo Financial; Forbes; Business Week; and company websites.

John MacWilliams
Senior Consultant and Analyst, Bishop & Associates Inc.
John MacWiIliams has been in the electronics industry for more than 40 years. His main areas of experience have included: U.S. competitiveness programs, market research studies, authored articles, field sales and management, product marketing management, strategic marketing, new product planning, venture development, advertising and media relations, direct sales, manufacturers representative, distribution sales management, and international marketing. MacWilliams has worked with AMP, Diceon Electronics, TRW, and IRC in marketing management positions. Prior to joining Bishop & Associates, MacWilliams served as the group director of marketing and new product planning for AMP.

MacWilliams graduated from Lehigh University with degrees in business management and engineering.