An Introduction to Industry Lecture 2: Electronics Industry Overview Lecturer name | Contact email

Lecture Plan The lectures in this series are: Lecture 1: Electronics as an Industry Lecture 2: Electronics Industry Overview Lecture 3: Industry Sectors Lecture 4: Electronics Fields Lecture 5: The Component Industry Lecture 6: Assembly and Beyond Lecture 7: Personality and Position Lecture 8: Job Application Lecture 9: Entrepreneurship Lecture 10: Working in Industry This is Lecture 2 – Electronics industry Overview

Review – Electronics as an Industry Last lecture we covered: Why Engineering is Important The Global Nature of the Electronics Industry Who Are the Real Producers of Electronics Products The Importance of Engineering It is the role of the engineer to protect the environment and the people within it. Engineers aim to benefit the people of the present by employing effective structures that are intended to improve transportation and living environments. By continuously developing new technologies, engineers help make the world a better and more comfortable place to live. Many aspects of living we take for granted, such as electricity, water, buildings, transportation vehicles and consumer electronics. Engineering manages sewage, wastes, and purification. These points do affect sustainability, but they are also crucial in defining another aspect of engineering’s importance. Cleanliness and public health are largely defined by engineering. Without proper engineering and sewage systems, we would no doubt run out of fresh water. Global Nature of Electronics Last week, an electronic product – The IPhone – was studied at a component level, and we asked who makes it? Where is it made? How is it transported? How is it sold? We concluded that multiple companies were needed to design, manufacture, assemble, distribute, and sell the IPhone. Its production cycle is the same as almost any other electronic product. Many electronics companies have outlets, factories and offices all around the world in order to compete in various markets, reduce costs, increase productivity and sales. MSi – MSi is a Taiwan-based electronics company, and is one of the world’s largest motherboard and graphics card manufacturers. You can see from the map how many global sites the company has. Many electronics companies are very similar.

Lecture 2: Electronics Industry Overview This lecture will cover: Company Categories Merging Categories How they Interact Now that we know the global nature of electronics and that in general, electronic products are made from many different components from a wide range of companies, we can go into more detail what types of companies there are in the electronics industry. In this lecture we will be looking at the various types of companies within the electronics industry and discuss how they are merging and interacting with each other.

Company Categories OEM – Original Equipment Manufacturer ODM – Original Design Manufacturer IDH – Independent Design House DIST – Distributor CEM (ECM) / EMS – Contract Electronics Manufacturer (Electronics Contract Manufacturer) / Electronics Manufacturing Services These are the main groups in which companies are categorized within the electrical and electronic engineering industry. Each type will be looked at in more detail, and examples of electronics companies will be given.

OEM - Original Equipment Manufacturer Designs and manufactures Their own specifications Their own brand name Sells to customers, who: Use it in their own products Re-brand the product OEM - A company that designs and builds a product based on their own specifications. They may then brand the product themselves or sell it to a company who re-brands it, or uses it as a part of one of their own products. Traditionally, OEMs design products, purchase components from suppliers, operate their own manufacturing plants, and handle sales, service and support activities, but many of those functions are being outsourced today. In the past, there has been some confusion over the definition of the abbreviation ‘OEM’ as it is used as a verb and a noun. When one company "OEMs" another company's product, it buys a complete, already designed and manufactured product (the "original equipment") from another company (the OEM). There is often confusion between different types of companies and brand names. A brand is the identity of a specific product, service, or business. Any type of company can have its own brand. Almost all OEM companies have their own brand. These OEM companies can OEM other companies’ products to sell under their own brand name. There are exceptions for consumer products such as computers, for example, Dell purchases computer components and assembles computers with their own specifications, and sells the finished computer as an OEM branded product. The exception with Dell is that it also acts like an ODM, as it also assembles computers based on customer specifications.

Example OEM Companies Texas Instruments - Texas Instruments (TI) is a global analog and digital semiconductor IC design and manufacturing company. In addition, TI designs and manufactures semiconductor solutions for analog and digital embedded and application processing. Molex – Molex is a supplier of interconnect products focused on the design, development and distribution of electronic, electrical and fiber optic interconnects to switches and application tooling.  Molex serves customers in a variety of industries, including the telecom, datacom, computer/ peripherals, automotive, premise wiring, industrial, consumer, medical and military markets. Vishay - Vishay is one of the world’s largest manufacturers of discrete semiconductors and passive electronic components and integrated circuits. Vishay components are used in virtually all types of electronic devices and equipment, in the industrial, computer, automotive, consumer, telecommunications, military, aerospace, and medical markets. These three companies are in the components sector, the following three companies are from various different sectors. These companies use components and products from other companies in their products, for example the IPhone using a Samsung microchip. Nokia – Nokia is a Finnish multinational communications corporation and is engaged in the manufacturing of mobile devices and in converging Internet and communications industries. Nokia has sites for research and development, manufacture and sales in many countries throughout the world. BAE Systems – BAE Systems is a British defence, security and aerospace company which designs and manufactures mostly military land, sea and air vehicles, weapons and tools. BMW – BMW is a German automobile and engine design and manufacturing company. It also owns and produces the MINI brand, and is the parent company of Rolls-Royce Motor Cars.

ODM – Original Design Manufacturer Designs and manufactures Customer specifications Customer’s brand name ODM - A company that designs and builds a product based on a customer’s specification, to be branded by that customer’s company. For example, a computer company such as HP may write a spec on a new notebook that they want to bring to market. They would specify all of the external details of the product such as screen size and technology, I/O ports, keyboard pitch, speaker location etc, and also some of the major internal details such as the CPU and video controller. The ODM takes the computer company's specification and designs and builds the notebook. Sometimes the ODM bases the design on an existing prototype product that was built to attract business. The result is typically a more cooperative/joint effort than in the OEM situation. So is the new notebook HP’s product, or is it really the ODM’s? Essentially it is HP’s product because they specified the functionality and form of the product.

Example ODM Companies Quanta - Quanta Computer today is the largest notebook computer ODM Company in the world. They sell notebook computers to OEM companies such as Dell, HP, Apple and Sony. ASUSTeK - Asus sells a range of computer products including motherboards, graphics cards, sound cards, optical disc drives, computer monitors and laptops. These are sold to companies such as Apple, Dell, Falcon Northwest and Hewlett-Packard. Britannia2000 – Britannia2000 is a specialist video surveillance equipment manufacturer that sells specialist cameras, image transmission systems and integrated vehicle systems for defence, police, emergency services and intelligence applications based on customer specifications. Compal – Compal is an ODM of notebook computers and monitors for a variety of clients around the world, including Acer Inc., Toshiba, and Fujitsu Siemens Computers and is famous for producing select models for Dell, Hewlett-Packard and Compaq.

IDH – Independent Design House Designs ONLY Specialised area of expertise Complete designs IDH - These companies often specialise in a particular application area or vertical market, offering design expertise in specific technology areas. IDH companies offer fully designed products, including physical and circuit designs often included with a bill of materials. IDH companies are consulted by other companies on specialised areas, and design products on their area of expertise based on their customer’s needs. 40% of Europe’s IDH companies are based in the UK.

Example IDH Companies Pebble Bay - Pebble Bay provides independent, professional embedded consulting services for a wide range of OEM companies involved in digital video and communication technologies, focusing on RTOS Technologies, Device Driver Development Integration and application and protocol integration. Customers include Kaon, Radstone, Freescale, Rapita, Hitex Design and Phaedrus Systems. And Technology Research Ltd - And Technology Research Ltd specialises in the use of embedded computing technologies, which provide R&D services & tools for electronic product development & ambient computing. Customers / partnerships include Renesas, Microchip, Toshiba, Texas Instruments and STMicroelectronics. Bitwise – Bitwise is an independent software developer that supplies embedded system software for medical instruments, communications, electronic payments and transaction processing to customers worldwide. Customers include Panasonic, IBM, Mitel, Natwest and Motorola.

DIST – Distributor Purchases complete products Resells products to: Retailers End consumers Benefit from large economies of scale Types of distributor include: Industrial Distributor Reseller / Retailer Kitting House DIST - Company that buys non-competing products or product-lines, warehouses them, and resells them to retailers or direct to the end users or customers. Acts as an intermediary between manufacturers and consumers. Distributors benefit from large economies of scale, so they can buy products at very low prices, and offer these products to customers at a lower price than if they were to buy them directly from the manufacturer. Provides several benefits to both manufacturers and consumers: improved efficiency, a better assortment of products, easier searching for goods as well as customers. Very few electronics manufacturers have their own retail outlets, for example: Apple and Sony. The general business term distributor can be broken down into three categories: Industrial Distributor, Reseller and a Kitting House. Industrial Distributor: A wholesaler who sells primarily to business or institutional customers who purchase items for business use rather than for resale. Reseller / Retailer: A Company or individual who buys goods from a manufacturer and resells them to customers unchanged. A reseller sells to either the end consumer, or, in a complex distribution chain, may be an intermediary upstream of the final consumer. Kitting House: Kitting houses provide a wide range of services from supplying kits with a diverse range of parts specified by the customer, to component perform and electronic sub-assembly. Some manufacturing companies choose to use specialist kitting houses to cater for their material requirements as it can reduce administration costs, reduce vendor base, reduce stores workload and increase productivity.

Example Distribution Companies Farnell – Farnell is a world leading high service, low volume distributor of electronic, electrical, industrial and maintenance, repair & operations (MRO) products. Ebuyer.com - Ebuyer.com is one of the largest internet retailers of electrical and computer products in the UK. Vanilla Electronics - Vanilla Electronics is a kitting house distributor with over 6000 suppliers and is able to supply all electronic component requirements in any kitted format, depending on their customer’s needs.

CEM and EMS CEM / ECM – Contract Electronics Manufacturer Manufactures Uses customer’s designs EMS - Electronic Manufacturing Services Additional services include: Testing Return / repair services Distribution CEM- A company that offers electronic manufacture and assembly contracts to its customers. EMS - A company that manufactures, tests, distributes, and provides return/repair services for electronic components and assemblies for OEMs. Only a short list of additional services is included. Many EMS companies are continuously increasing the number of additional services for their customers. For instance, instead of attempting to manufacture complex circuit boards themselves OEM companies often outsource their manufacturing operations to CEM companies. In effect Contract manufacturing providers do not post their brand name on any product, and both design and the brand name belongs to the OEM. The business model for the EMS industry is to specialize in large economies of scale in manufacturing, raw materials procurement and pooling together resources, industrial design expertises as well as create added value services such as warranty and repairs. This frees up the customer who does not need to manufacture and keep huge inventories of products. Therefore they can respond to sudden spikes in demand more quickly and efficiently. The reason why CEM and EMS companies are grouped together will be explained shortly.

Example ECM / EMS Companies Flextronics – Flextronics provides enhanced design and engineering solutions that are vertically integrated with manufacturing, logistics, and component technologies, optimizing customer operations by lowering costs and reducing the time to market. Largest customers include Cisco Systems, Hewlett-Packard, Microsoft, Motorola, Sony-Ericsson and Western Digital. Elcoteq – They offer ECM / EMS for consumer electronics devices such as mobile phones and their accessories, set-top boxes, LED lamps and luminaires, flat panel TVs as well as System Solutions products such as infrastructure systems, modules and other industrial segment products. They also offer a range of engineering, manufacturing, fulfillment and after market services. Plexus – Plexus provides solutions including mechanical, electronic and software design, printed circuit board development, prototyping services, new product introduction, material procurement and supply chain management, printed circuit board and higher level assembly, test development, in-circuit and functional testing, service, and repair. Sanmina-SCI – An EMS company that provides OEM companies in technology-related industries such as communications and computer hardware with end-to-end manufacturing and services including PCB fabrication, Backplanes, cables, plastic injection moulding, enclosures / machining / assembly, modular and optical solutions and PCB and final system assembly. Venture - Venture Corporation Limited is a global provider of technology services, products and solutions, providing integrated turnkey manufacturing services including complex PCB assemblies, strategic sub-assemblies, complex fibre optics assemblies, and the manufacturing of photonic switches, full product assemblies (box-build), systems integrations and complex test development services. Venture also provides ODM services in several sectors. Customers include Agilent Technologies, HP, IBM and Intermec. Jabil Circuit - Jabil designs and manufactures electronic circuit boards in a diverse group of industries including automotive, computing and storage, consumer products, medical, networking, peripherals and telecommunications. Its services include design, manufacturing and Supply Chain services for the EMS and consumer industries; After-Market Services (warranty & repair). Customers include Cisco Systems, Philips Electronics, Hewlett-Packard and Johnson Controls.

What Do These Companies Do? Here are a few companies you may have heard of. Students should get into groups of 3 or 4. In these groups, they should write a brief summary (a few lines) of the following companies’ products and services, and state whether they are an OEM, ODM, CEM / EMS, IDH or DIST. Students should have heard of these companies. Agilent Technologies (OEM) – They offer a variety of electronic test and measurement products and services, including oscilloscopes, analyzers, meters, generators, sources, supplies, software and repair and calibration services. It also provides additional products and services in life sciences and chemical analysis. Cambridge Consultants Ltd (IDH) – They provide design and development services specialising in Medical Technologies, Consumer Products, Industrial Products, Smart Metering, Defence & Security, Wireless, Semiconductor, Transport and Cleantech. They also provide consulting services for innovation management, performance improvement, market strategy, transaction support, and technology consulting. Maplin (DIST) – Maplin is a specialist retailer in consumer electronics selling everything from MP3 players and Sat Nav systems, to digital cameras and Wi-Fi connectors, across the broad categories of Sound & Vision, Computer, and Hobbies & Electronics. Inventec (ODM) – Inventec is a Taiwanese ODM that makes notebook computers, servers and mobile devices. Toshiba (OEM) – Toshiba is a diversified manufacturer and marketer of advanced electronic and electrical products spanning information & communications systems, digital consumer products, electronic devices and components, power systems including nuclear energy, industrial and social infrastructure systems, and home appliances.

Last week we looked at the IPhone… Last week we looked at the IPhone. The IPhone is a fairly popular electronic product, and is considered one of the most popular phones around.

…and what was inside Upon opening the product up, we found that the IPhone is made up of many components from different companies. One company you may have heard of is Samsung.

Things to Consider What type of company is Samsung? OEM What type of company is Apple? Who manufactures for Apple? Foxconn What type of company is Foxconn? ECM / EMS What type of company is Frog Design? IDH Who sells Apple’s products? Own retailer Distributors So what type of company is Samsung? Samsung is an OEM company that designs and manufactures a large variety of products from stylish phones to semiconductors, from DRAM to digital TVs. Samsung designs and manufactures most of its own products, and OEMs components for those products. Samsung also purchases other products and re-brands it them as a Samsung product. One of these companies is the large ODM company Asus. In fact, all the components in the IPhone are made by OEM companies. So what type of company is Apple? Apple is an OEM as it designs and manufactures its own electronics products. It is one of the few electronics manufacturing companies that has its own retail outlets. Apple also re-brands some products from large ODM companies such as Quanta. Apple doesn’t do much manufacturing itself, so who does manufacture Apple’s products? As mentioned in the previous lecture, Apple’s main manufacture is the company Foxconn. What type of company is Foxconn? Foxconn is an ECM/ EMS company that provides joint-design, joint-development, manufacturing, assembly and after-sales services to global Computer, Communication and Consumer-electronics companies, focusing on fields of nanotechnology, heat transfer, wireless connectivity, material sciences, and green manufacturing processes. Frog Design was the company that designed Apple’s unique design language and the Macintosh when Apple was first established. What type of company is Frog Design? Frog design is a global innovation firm, an IDH. They design multiple technologies, platforms and media in various industries, including consumer electronics, telecommunications, healthcare, energy, automotive, media, entertainment, education, finance, retail, and fashion. So who sells Apple’s products? Mentioned briefly earlier, Apple is one of the few electronics OEM companies that have their own retail outlet, however the majority of its products are sold via distributors such as PC World, Comet, Argos and Carphone Warehouse.

IDH ECM EMS ODM OEM Merging Categories Many IDHs have recently started to provide development, consultancy, prototyping and manufacturing, services in addition to designing products based on their customers’ needs. This integrates many IDH companies into the ECM / EMS category, as not only are they designing for their customers, but they are also manufacturing and providing additional services for them as well. As ECMs grew larger, and faced with thin, shrinking (and sometimes negative) margins, the big contract manufacturers such as Foxconn, Flextronics, Celectica, Jabil Circuit, Sanmina SCI and Solectron, continually seek to expand or diversify into higher value added activities. They have broadened and deepened the range of services that they offer, in addition to branching out to other sectors, such as medical, automotive, space and aircraft. They now prefer to be known as providers of Electronic Manufacturing Services (EMS) to indicate just how their range of services offered has evolved. EMS companies not only have a significant opportunity to provide environmental redesign and recycling services for OEMs, but also have an opportunity to design and build new products with superior environmental properties from the outset. It's less expensive and quicker to design a new product, with qualifying bills of materials, ease of recycling and other resource-efficient properties, than to revamp an existing one and change processes midstream. Today the trend continues even further, with many EMS becoming what are now called ODMs, offering complete electronic products for companies such as Wal-Mart, skipping the OEMs altogether. ODMs are also extending their model to become Original Brand Manufacturers, competing directly with OEM companies.

How Do These Companies Interact? Request Design Completed Product Distribution OEM / Brand These types of companies all interact with each other from design to distribution of a product or service. A completed component, part or product ends with distribution channels leading to the end consumers. OEM and Brands sell their products to the end consumers via distribution channels, either directly or by distributors. OEMs can sell their products to branding firms which brand the product under their own name; they can also sell their own products under their own brand name. OEMs design their own products, but can also send product design requests to IDH firms, which produce complete designs of the requested product. OEMs can also give product requests to ODM companies who can design and manufacture complete products based on their specifications, which the OEM can re-brand as their own product. The OEM can design and manufacture the product themselves, or, possibly due to high demand, they can send the design to a CEM or EMS that will manufacture the product and provide them with other useful services. CEM / EMS IDH ODM

Summary This lecture we have covered: Company Categories Merging Categories How they Interact In this lecture, the various types of companies in the electronics industry have been covered, as well as how they have started to merge and how they interact with each other. Hopefully you will have a much better understanding of the electronics industry, and how end products get to the market.

Next Lecture Lecture 3: Industry Sectors Engineering Industry Sectors The Production Cycle and Systems Design Company Profile: BAE Systems Next lecture we will be looking at the various industry sectors that are available to work in. The production cycle will be discussed, followed with a focus on Systems Design. The lecture will end by looking at a company profile of BAE Systems, and what graduate opportunities is has to offer.

Any Questions?