Nokia stops using ODMs: Where is going the ODM market?
Thomas Menguy | March 30, 2009For long (see my article about the industry ecosystem) OEM have heavily relied on ODM for production and many times design of their phones…except Nokia which has historically preferred to keep everything internally to manage cost, scaling, distribution and above all margins, but kept around 20% of its production in the hand of tightly controlled ODMs,
In 2008, Nokia outsourced about 17 percent of the manufacturing volume of its mobile phone engines, which include the phone and software that enable its basic operations.
Nokia’s key subcontractors have been Foxconn (2038.HK), China’s BYD (1211.HK), Jabil Circuit (JBL.N) and Elcoteq (ELQAV.HE).
certainly to balance its risks and not put its internal factories and staff exposed to a high demand slow down from the market. This is happening today.
And Nokia:
Nokia Pulls More Than $5 Billion in Business From Contract Manufacturers
We’ve seen some signs already with this Foxconn announcement:
Foxconn Full-Year Profits Drop 83%
Foxconn International Holdings – the mobile phone manufacturing division of Taiwan’s giant Hon Hai Precision Industry has reported a net loss for the second half of last year, which dragged its full year profit down by 83.% to US$121 million – compared with US$721 million a year earlier.
And those industry moves:
TAIWAN ODM handset maker Arima Communications and EMS provider Elcoteq have temporarily set aside merger talks in favor of joining forces to produce low-cost handsets for LG Electronics, company sources told DigiTimes.
SAN JOSE — Flextronics has reportedly laid off about 70 workers in Taiwan and additional cuts are possible, according to a local newspaper report.
The Apply Daily, citing company sources, said most of laid off workers are from the company’s notebook and server operations.
Flextronics acquired the Arima notebook and server business operations in March this year.
Arima is the big SEMC ODM, and is really hurt by SEMC woes.
When time are tough, sub contractors are the first to be cut, but when economy is rising again they are the first to get the benefits: if they were able to survive. Let’s watch at this space to look at the first sign of recovery!
Thomas