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The Industry’s NEW Powerhouses: Top 100 Electronics Manufacturers

By John MacWilliams, Bishop & Associates

November 20, 2012

We recently featured an article on the Global 500 as it relates to the connector industry’s customer base.

We found several interesting aspects of the Fortune 500 Global list, which is a tabulation of the world’s largest companies. First, it is dominated by petrochemical companies; second, China is very well-represented in 2012; third, Samsung is now the largest electronics OEM; fourth, Japan remains strong on the list, even while suffering from stagnant sales — it is second only to North America; and finally, you have to go well down the list to find electronic powerhouses like IBM, Dell, Intel, and Microsoft.

Here we look at the electronics hardware side, with the help of an organization called the Top 100 Research Foundation in the Netherlands, a non-profit foundation dedicated to charting the IT industry. In a future article, we will look at contract manufacturers, although a few are also listed here in the electronics section, led by $100B Foxconn.

Top 100 Dynamics

The term “OEM manufacturers” is to a great extent a misnomer in today’s outsourcing marketplace with EMS and ODM design/manufacturing/logistics subcontractors. This outsourcing phenomenon includes at least four major activities that OEMs like to outsource: 

  1. Manufacturing, with all the people and facilities investment that entails
  2. Design (in some cases to ODM/EMS firms that specialize in certain product areas) 
  3. Logistics through management of a global supply chain
  4. Offshoring, done easier, and with less bad PR, when done through subcontractors who know how to navigate foreign bureaucracies (i.e. China)

The outsourcing of logistics directly affects component suppliers who become split between covering the OEM and getting print position where possible, and supporting the ODM/EMS firm who may demand local, even on-site manufacturing support. In many cases, OEMs police their QPL and more or less insist on using them. In other cases, EMS firms take responsibility for quality and exert price pressures that often lead to lower-cost substitutions. OEMs, such as Dell, came to realize they were missing out on these savings and took control of procurement.

Recently, due to the massive amounts of offshoring and its political ramifications, OEMs have become sensitized to outsourcing, particularly to China. Apple’s huge recent successes, followed by well-publicized problems in Chinese factories, have brought this issue to the fore. Major OEMs like Intel and Microsoft have been vocal in their concerns about the domestic labor force, restrictions on green card importation, lack of work skills, and other issues. 

For the US and major manufacturers to bring production back to the US, several things need to happen:

Consumers’ willingness to pay more, as much as 10-15% for consumer products assembled in North America

  • Availability of a skilled workforce, including graduate-degreed green card workers
  • Lower energy costs, particularly electricity
  • Less regulatory burden and tax incentives, including repatriation of foreign earnings and lower corporate taxes
  • Automation, a key component of which already exists: high-volume board assembly

On the plus side, companies will save on logistics and shipping costs for the NA regional market, have tighter control on manufacturing, and have the ability for mass-customization where required. The downside is that some companies, like Dell, have already tried this and found EMS suppliers with low-cost, offshore capabilities are much more nimble and willing to work on thin operating margins. Where an IBM needs a 40%+ gross margin, Foxconn works on less than 10%. Time will tell — but a trend toward insourcing has started and may accelerate in the years ahead.

Electronic hardware estimates are difficult to come by. Below is the list of the Top 100 Hardware companies from 2010. Some interesting facts to consider about this data:

  • HP dropped from #1 in hardware revenue in 2009 to #2 behind Samsung in 2010.
  • Foxconn vaulted to #3 among all hardware companies.
  • Only seven of the Top 25 companies were North American and just one was from the EU, while 17 were in Asia.
  • Among the top 100, North America had 40, Japan 21, Taiwan 18, and China 7.
  • The top YTY growth companies were Apple with 69%, Compal with 53%, and ZTE with 36%.
  • The biggest losers were Nortel, down 46%; Motorola down 41%; and Sun Microsystems down 34%.
  • Some of the Top 100 manufacturers do not apply to our production interests, such as semiconductor or component makers.
  • The Top 100 methodology is explained on the Top 100 Foundation’s web site.

Here are the top 25 electronic hardware producers and some background on how they achieved their spots on the list:

  1. Samsung – Korea. Strong in consumer electronics, appliances, mobile phones, rising in computers and tablets. Vertical integration. Does most of its manufacturing.
  2. HP – Palo Alto, Calif. Strongest in printers, servers. PC business is under pressure. Glaring omissions: tablets, smartphones (Palm decline). Ink cartridges important to profits.
  3. Foxconn – Taiwan. Contract manufacturing. 2012 sales est. to be over $100B. Apple is its largest customer. Recent bad publicity in Chinese factories. Diversification is key, as are future trends in mainland China outsourcing.
  4. LGE – Korea. Strong in consumer electronics, monitors, appliances, mobile phones. Has not challenged Samsung in computer market or announced a tablet.
  5. Nokia – Helsinki, Finland. Long slide in mobile phone leadership to Apple, Samsung, and others as smartphones take hold. Strong position in EU and is banking on Windows 8 phones.
  6. Toshiba – Japan. Mid-level consumer electronics and notebook PC OEM. Business and medical products. Japan Display now JV with Sony and Hitachi.
  7. Dell Computer – Round Rock, Tex. PCs and servers. Dropped from #1 to #3 behind HP and Lenovo due to de-emphasis on low-end consumer market. Mostly abandoned in-house manufacturing. Some build-to-order left. Waiting for tablet: probable MSFT surface design.
  8. Intel Corp. – Santa Clara, Calif. Mostly semiconductors (processor sockets, packaging, and test). Major influence on PC market: reference designs, industry standards. World-leading semiconductor manufacturer.
  9. Apple Computer – Cupertino, Calif. Consumer electronics, Mac computers, iPhone, and iPad. What’s next?
  10. Cisco Systems – San Jose, Calif. Routers, switches, networking/datacom equipment.
  11. Quanta Computer – Taiwan. Leading ODM notebook PC design-manufacturer for OEM customers worldwide. Also makes rack and blade servers for OEM customers and has branched out into Microsoft Skype-ready notebooks and Cloud computing.
  12. Fujitsu – Japan. Servers, storage, PCs, and networks. Japan- and EU-centric. Includes former Fujitsu-Siemens, now Fujitsu Technology Solutions, Augsburg, Del.
  13. Canon – Japan. Digital photography and printing equipment, office equipment, industrial imaging equipment.
  14. Ricoh – Japan. Office equipment, cameras, digital imaging equipment.
  15. Asus – Taiwan. PC-related computer equipment and motherboards. Fast-growing “Asian Tiger.”
  16. Acer – Taiwan. Acer has been a leading PC supplier, including its acquisition of Gateway and E-Machines. Its product line remains solid, but Samsung and Lenovo are adding pressure to the PC market in Asia.
  17. Compal – Taiwan. ODM competitor to Quanta. Strong in notebook production in China. Also tablets, LCT-TV, monitors, and mobile phones. Manufacturer for major OEM brands.
  18. IBM – Armonk, NY. Mainframes and servers. Leader in enterprise systems. Has not de-emphasized hardware, but software and services are more profitable. Sold PC division in 2006 to Legend Holdings (now Lenovo).
  19. Lenovo – Hong Kong. Major PC brand now rivaling HP for #1. Strong sales in China. Halo effect from IBM with many former IBM engineers and marketeers. Distinctive ThinkPad/IdeaPad designs.
  20. NEC – Japan. NEC, like other major Japanese corporations, has experienced a decline in sales and market share. Makes business computers including PCs and servers, monitors, and storage equipment. Also, optical transceivers and other telecom equipment. No longer a factor in global PC business.
  21. Alcatel-Lucent – Paris, France. Shadow of former telecom giant’s post-internet revolution. Makes central office and telecom infrastructure products, including cellular base stations. Combines former AT&T Bell Labs/Lucent Technologies with French Alcatel.
  22. Sony – Japan. Consumer electronics/entertainment conglomerate. Once the leader, now adjusting to paradigm shift to digital convergence with competitive products like HDTV, iPod/Pad/Phone. In TV, the market exploded with the shift to LCD. iPod-like products decimated Walkman and other Sony products.
  23. Hitachi – Japan. Servers, storage, telecom equipment. Acquired IBM HDD business. Highly diversified Japanese corporation.
  24. Motorola – Schaumburg, Ill. Acquired by Google in 2012. Mobile phone posture is good but flat to down due to competition from Samsung and Apple. Google expected to instill high-level Android capability but walks tightrope with its other Android customers.
  25. Wistron – Taiwan. ODM/EMS spin-off from Acer. Competes with Foxconn, Quanta, Compal, and Pegatron for ODM business: PCs, notebooks, other.

See the complete Top 100 list.

 

John MacWilliams
Senior Consultant and Analyst, Bishop & Associates Inc.
John has enjoyed a long and diverse career in the electronics industry, including management positions with IRC, TRW, AMP, and his own company, US Competitors LLC. He is the author of many industry articles, including past and current iNEMI.org connector industry roadmaps, U.S. government competitiveness initiatives, and numerous Bishop Reports on the computer and consumer electronics industries. He is an outspoken supporter of the future of U.S. manufacturing in a global marketplace.

John is a graduate of the Wm. Penn Charter School in Philadelphia, and of Lehigh University, Bethlehem, PA. He and his wife Louise, reside in Newark, DE, and Delray Beach, FL.

No part of this article may be used without the permission of Bishop & Associates Inc.

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