Overview of Electronic Contract Manufacturing

Electronic contract manufacturing is the outsourcing of electronics manufacturing to a third-party company that specializes in design, assembly, testing, and distribution of electronic products. CEMs provide these services to OEMs, allowing them to focus on their core competencies, such as research and development, marketing, and sales.

The electronic contract manufacturing industry has grown significantly in recent years, driven by the increasing complexity of electronic products, the need for cost reduction, and the demand for faster time-to-market. According to a report by Grand View Research, the global electronic contract manufacturing market size was valued at USD 531.0 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 7.4% from 2021 to 2028.

Benefits of Outsourcing to a CEM

Outsourcing electronics manufacturing to a CEM offers several benefits to OEMs, including:

1. Cost savings: CEMs can achieve economies of scale by serving multiple clients and leveraging their purchasing power to obtain components and materials at lower costs.
2. Access to expertise: CEMs employ skilled engineers and technicians with expertise in various areas of electronics manufacturing, such as printed circuit board assembly (PCBA), box build, and testing.
3. Flexibility: CEMs can quickly adapt to changes in demand, allowing OEMs to scale their production up or down as needed.
4. Faster time-to-market: By outsourcing manufacturing, OEMs can focus on product development and bring their products to market faster.
5. Reduced capital investment: Outsourcing eliminates the need for OEMs to invest in expensive manufacturing equipment and facilities.

Services Offered by CEMs

CEMs offer a wide range of services to support the entire product lifecycle, from design to end-of-life management. Some of the key services provided by CEMs include:

1. Design and Engineering

Many CEMs offer design and engineering services to help OEMs develop new products or improve existing ones. These services may include:

• Concept development
• Feasibility studies
• Schematic and PCB layout design
• Bill of materials (BOM) creation
• Prototyping
• Design for manufacturability (DFM) analysis

CEMs can also provide value engineering services to help OEMs reduce costs, improve performance, and enhance reliability.

2. Printed Circuit Board Assembly (PCBA)

PCBA is the process of assembling electronic components onto a printed circuit board. CEMs offer various PCBA technologies, such as:

• Surface mount technology (SMT)
• Through-hole technology (THT)
• Mixed technology (SMT and THT)
• Chip-on-board (COB)
• Ball grid array (BGA)

CEMs use automated equipment, such as pick-and-place machines and reflow ovens, to assemble PCBs efficiently and with high quality.

3. Box Build and System Integration

Box build and system integration involve assembling PCBAs and other components into a complete product, such as a computer, medical device, or industrial control system. This process may include:

• Mechanical assembly
• Wiring and cabling
• Functional testing
• Burn-in testing
• Packaging and labeling

CEMs can also provide custom enclosure design and fabrication services to meet specific product requirements.

4. Testing and Quality Control

CEMs employ rigorous testing and quality control processes to ensure that products meet or exceed customer specifications and industry standards. Some of the testing services offered by CEMs include:

• In-circuit testing (ICT)
• Functional testing
• Boundary scan testing
• X-ray inspection
• Automated optical inspection (AOI)
• Environmental testing (temperature, humidity, vibration, etc.)

CEMs may also provide failure analysis services to identify the root cause of product defects and implement corrective actions.

5. Supply Chain Management

CEMs manage the entire supply chain for their clients, from component sourcing to finished product delivery. This includes:

• Vendor selection and management
• Component procurement and inventory management
• Logistics and transportation
• Warehousing and distribution

CEMs use sophisticated supply chain management tools and techniques to optimize inventory levels, reduce lead times, and minimize supply chain risks.

6. Aftermarket Services

CEMs also provide aftermarket services to support products throughout their lifecycle. These services may include:

• Repair and refurbishment
• Spare parts management
• Technical support
• Warranty management
• End-of-life product management

By offering these services, CEMs help OEMs extend the life of their products and maintain customer satisfaction.

Production Models in Electronic Contract Manufacturing

CEMs offer several production models to meet the diverse needs of their clients. The most common models include:

1. Consignment Model

In the consignment model, the OEM provides the components and materials to the CEM, who then assembles the products according to the OEM’s specifications. The OEM retains ownership of the inventory until the finished products are shipped.

2. Turnkey Model

In the turnkey model, the CEM is responsible for the entire manufacturing process, from component procurement to finished product delivery. The CEM manages the supply chain, assembles the products, and ships them directly to the OEM’s customers.

3. Joint Development Manufacturing (JDM)

In the JDM model, the OEM and CEM collaborate on product design and development. The CEM provides input on manufacturability, cost, and supply chain considerations, while the OEM focuses on product functionality and market requirements.

4. Original Design Manufacturing (ODM)

In the ODM model, the CEM designs and develops the product based on the OEM’s specifications and requirements. The CEM owns the intellectual property for the design, and the OEM markets and sells the product under its own brand.

Choosing the Right CEM

Selecting the right CEM is critical to the success of an OEM’s outsourcing strategy. Some factors to consider when choosing a CEM include:

1. Technical capabilities: Does the CEM have the necessary equipment, processes, and expertise to manufacture your products?
2. Quality management: Does the CEM have a robust quality management system and a track record of delivering high-quality products?
3. Financial stability: Is the CEM financially stable and able to invest in new technologies and capacity to support your growth?
4. Geographic location: Is the CEM located in a region that provides access to key markets, skilled labor, and favorable trade policies?
5. Cultural fit: Does the CEM have a culture that aligns with your company’s values and communication style?

OEMs should also conduct thorough due diligence, including site visits, reference checks, and financial audits, before selecting a CEM.

Industry Trends and Challenges

The electronic contract manufacturing industry is constantly evolving, driven by technological advancements, changing consumer preferences, and global economic factors. Some of the key trends and challenges facing the industry include:

1. Miniaturization and Increased Complexity

As electronic products become smaller and more complex, CEMs must invest in advanced manufacturing technologies and processes to meet the challenges of miniaturization. This includes the adoption of fine-pitch SMT, 3D packaging, and advanced materials.

2. Digitalization and Industry 4.0

The rise of Industry 4.0, or the fourth industrial revolution, is transforming the manufacturing landscape. CEMs are embracing digital technologies, such as the Internet of Things (IoT), artificial intelligence (AI), and robotics, to enhance productivity, quality, and flexibility.

3. Supply Chain Resilience

The COVID-19 pandemic has highlighted the importance of supply chain resilience in the face of disruptions. CEMs are diversifying their supply chains, increasing inventory levels, and adopting risk management strategies to mitigate the impact of future disruptions.

4. Sustainability and Environmental Responsibility

As consumers and regulators demand more sustainable and environmentally responsible products, CEMs are adopting green manufacturing practices, such as the use of renewable energy, waste reduction, and the elimination of hazardous substances.

5. Skilled Labor Shortage

The electronic contract manufacturing industry faces a shortage of skilled labor, particularly in advanced manufacturing roles such as engineers and technicians. CEMs are investing in training and development programs to attract and retain talent.

Frequently Asked Questions (FAQ)

1. What is the difference between a CEM and an OEM?

2. An OEM is a company that designs and sells products under its own brand, while a CEM is a company that manufactures products on behalf of OEMs.

3. What are the advantages of outsourcing to a CEM?

4. Outsourcing to a CEM can provide cost savings, access to expertise, flexibility, faster time-to-market, and reduced capital investment.

5. What services do CEMs typically offer?

6. CEMs offer a wide range of services, including design and engineering, printed circuit board assembly, box build and system integration, testing and quality control, supply chain management, and aftermarket services.

7. What factors should OEMs consider when choosing a CEM?

8. OEMs should consider factors such as technical capabilities, quality management, financial stability, geographic location, and cultural fit when choosing a CEM.

9. How is the electronic contract manufacturing industry evolving?

10. The electronic contract manufacturing industry is evolving in response to trends such as miniaturization, digitalization, supply chain resilience, sustainability, and skilled labor shortages.

Conclusion

Contract electronics manufacturing is a critical component of the global electronics industry, enabling OEMs to bring innovative products to market faster, more efficiently, and at a lower cost. By outsourcing manufacturing to CEMs, OEMs can focus on their core competencies, such as research and development, marketing, and sales, while leveraging the expertise and capabilities of specialized manufacturing partners.

As the electronics industry continues to evolve, CEMs must adapt to new challenges and opportunities, such as the increasing complexity of products, the adoption of digital technologies, and the need for sustainable manufacturing practices. By staying at the forefront of these trends and delivering value to their clients, CEMs can help drive innovation and growth in the electronics industry for years to come.

Service	Description
Design and Engineering	Concept development, feasibility studies, schematic and PCB layout design, prototyping, DFM analysis
Printed Circuit Board Assembly	SMT, THT, mixed technology, COB, BGA assembly using automated equipment
Box Build and System Integration	Mechanical assembly, wiring, cabling, functional testing, burn-in testing, packaging, and labeling
Testing and Quality Control	ICT, functional testing, boundary scan, X-ray inspection, AOI, environmental testing, failure analysis
Supply Chain Management	Vendor management, component procurement, inventory management, logistics, warehousing, distribution
Aftermarket Services	Repair, refurbishment, spare parts management, technical support, warranty management, EOL management

Table 1: Key services offered by contract electronics manufacturers

Production Model	Description
Consignment	OEM provides components and materials; CEM assembles products according to OEM specifications
Turnkey	CEM manages entire manufacturing process, from component procurement to finished product delivery
Joint Development Manufacturing	OEM and CEM collaborate on product design and development; CEM provides input on manufacturability and cost
Original Design Manufacturing	CEM designs and develops product based on OEM specifications; CEM owns intellectual property; OEM markets product

Table 2: Common production models in electronic contract manufacturing