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April 2, 2013

Rise of smartphones challenges manufacturers: report

Suggests outsourced manufacturers focus on core capabilities

By CBR Staff Writer

Outsourced manufacturers have been witnessing new challenges in the manufacturing of mobile handsets, mainly due to smartphone dominance which has overturned earlier models of design and production outsourcing, according a report by iSuppli.

In addition, handset brands that have conventionally relied more on outsourced manufacturers for lower-end feature phones are now focusing on internal production for their smartphones, ultimately challenging outsourced manufacturers.

IHS iSuppli Global OEM Manufacturing & Design market tracker report revealed that in 2012, most mobile phones were made in-house by original equipment manufacturers, over mobile phones produced by outsourced manufacturers.

During the year, in-house OEMs accounted for 73.4% of all mobile phones produced in 2012, down from 74.5% in 2011, mainly due to Apple’s move to continue to outsource iPhones manufacturing to electronic manufacturing services (EMS) providers.

EMS providers were responsible for 19.6% of global mobile phone production, reporting a decline from 20.1% registered in 2011, over BlackBerry’s dull performance in the smartphone segment.

However, original design manufacturers (ODM) reported a 7% rise in shares during 2012 compared to 5.5% in 2011. IHS anticipates that by 2016, in-house OEM handset production would capture 72.1% share, compared to EMS share of 21.1% and ODM with 6.7% share.

According to the report, OEMs have been scaling back their deployment of outsourced manufacturers as many struggling brands look to optimise product portfolios toward smartphones.

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