OEM和EMS的挑戰(zhàn)——LG公司應(yīng)該為其低端手機(jī)尋找原始設(shè)計(jì)生產(chǎn)商（ODM）

　　現(xiàn)在，制造商必須提供定位明確的產(chǎn)品，并盡可能迅速的對(duì)市場(chǎng)做出反應(yīng)。和許多公司一樣，LG公司的手機(jī)事業(yè)部遇到了一個(gè)令人撓頭的挑戰(zhàn)：如何既保持較高的盈利能力和競(jìng)爭(zhēng)優(yōu)勢(shì)，又能在日益重要的低端手機(jī)市場(chǎng)上不斷擴(kuò)大自己的市場(chǎng)份額？
 
　　和諾基亞、摩托羅拉、索愛相比，LG自己生產(chǎn)了97%的手機(jī)，而不是將其業(yè)務(wù)外包。而LG僅僅將自己27.3%的生產(chǎn)設(shè)備放在發(fā)展中國(guó)家，又遠(yuǎn)遠(yuǎn)低于它強(qiáng)大的競(jìng)爭(zhēng)對(duì)手。顯然，要爭(zhēng)取中國(guó)、印度以及拉丁美洲那些發(fā)展中國(guó)家的新興手機(jī)市場(chǎng)的市場(chǎng)份額，LG必須更好的利用那里廉價(jià)的勞動(dòng)力和元器件。但是，如果靠自己建廠或轉(zhuǎn)移生產(chǎn)線，那么耗費(fèi)的時(shí)間成本必然導(dǎo)致LG被競(jìng)爭(zhēng)對(duì)手遠(yuǎn)遠(yuǎn)落下。因此，它最好的選擇就是和原始設(shè)計(jì)生產(chǎn)商(ODM)聯(lián)合起來(lái)，讓ODM幫助自己快速切入低端市場(chǎng)，而自己則集中攻克那些高端市場(chǎng)。

OEMs and EMS

LG Should Look to ODMs for Low-End Mobile Phone Production

Rapidly expanding market requires the focus and quick response offered by contract manufacturers

By Jeffrey Wu

　　LG Electronics now faces a challenge shared by many companies: How can it expand its mobile-phone business in the increasingly important low-end segment of the market—while simultaneously maintaining its overall profitably and improving its competitiveness? While the South Korean electronics company has several options, its best course of action is to engage with Original Design Manufacturers (ODMs) for inexpensive phone manufacturing, iSuppli Corp. believes. This will allow LG to make a quick entry into the low end of the market while freeing it to pursue the high end segment.

Taking the low ground

　　In recent weeks, many mobile-phone OEMs either have announced or reaffirmed their plans to launch low-cost phones to tap fast-growing emerging regions. For leading mobile-phone OEMs, including LG, it is now not an issue of whether they should penetrate the low-end segment, but an issue of how they can do so competitively and profitably. {{分頁(yè)}}

　　Why is the low-end mobile-phone market in emerging regions so key to OEMs?

　　One reason is that mobile-phone subscription penetration in emerging regions such as India, China and Latin America is much lower than in North America, Western Europe and some East Asian countries. Low penetration implies high market potential, and the increasing purchasing power in these developing countries will translate into robust demand for mobile phones—especially low-cost models—in the near future. 

　　Figure 2 presents mobile-phone subscriber penetration in various countries and regions.

　　In light of the low penetration rates across these densely populated countries, the GSM Association launched the Emerging Markets Handset Program in early 2005 to help accelerate sales of mobile phones in these regions. Motorola Inc. won the program and will supply 6 million units to these countries under this contract.

　　Motorola aimed to offer handsets priced at less than $40 in these countries in 2005, and plans to reduce the price to less than $30 in 2006.

　　Imaginably, other OEMs also are strategizing their approaches to targeting these underserved markets.

LG’s next move?

　　Traditionally, LG Electronics has focused more on the high-end segment, characterized by richer phone features and fancier functions. This has allowed it to heighten its brand positioning and to charge premiums for its products.

　　While this is not an uncommon approach for a new entrant, once the strategy proves successful, the company must assess whether it will want to propagate its products to the lower-end segments, and if so, how.

　　Therefore, LG needs to evaluate whether it wants to stay in the high-end segment only and operate within a smaller scope—or gradually expand to the entry-level segments and increase its overall scale.

　　iSuppli research indicates that Nokia and Motorola are widening the gap between themselves and their competitors. However, Sony Ericsson remains a close rival to LG.

　　Table 1 presents iSuppli’s estimate of OEM mobile-phone market share in 2005.

Table 1:    

Table 1: Top-10 Mobile Phone OEMs in 2005
(Ranking by Unit Shipments)

　　LG recently indicated that its first low-cost phones would be priced in the $50 to $60 price range. However, compared with the aggressively priced phones from Nokia or Motorola in the $30 to $40 range, LG’s first low-cost phones are only half-baked.

Different scenarios for LG

　　LG in 2005 manufactured more than 97 percent of its mobile phones in its own facilities. Compared with those of Nokia, Motorola and Sony Ericsson, the percentage of in-house production for LG is extremely high. In other words, LG in 2005 outsourced only very limited volume, at about 3 percent of its annual shipments, to contract manufacturers.

　　Moving forward, is LG’s current in-house operation able to support the increasing demand for low-cost phones? If not, what can LG do?

The offshoring option

　　One choice for LG is to accelerate the shift of its production capacity to low-cost countries. {{分頁(yè)}}

　　Table 2 compares the estimated capacity allocation of in-house facilities of BenQ Mobile, LG, Samsung and Sony Ericsson across different regions of the world. Note that not all OEMs listed have facilities in every country mentioned under each category. The majority of these OEMs’ capacity in low-cost countries is located in China.

Table 2: Capacity Allocation for In-House Facilities of BenQ Mobile, LG, Samsung and
Sony Ericsson in Various Global Regions

　　As shown, LG has only 27.2 percent of its capacity in low-cost countries, which is the lowest figure across the board. Therefore, from a production standpoint, LG is not well positioned for low-cost manufacturing, although it has been consolidating its manufacturing bases in Korea.

　　Some wonder why it is critical for manufacturers to shift their low-mix, high-volume production to low-cost countries, arguing that the production processes are highly automated.
iSuppli suggests that the shift is not only about cheap land and labor, but more importantly about access to a cost- competitive parts and components supply chain.

　　The fast-growing electronics manufacturing industry in China has enabled the development of suppliers of mechanical parts and most non-proprietary electronic components that go into these electronic products. Therefore, access to these manufacturing externalities is what drives companies’ decisions to shift their capacity to low-cost countries, especially China.

　　If LG is to continue to conduct most of its mobile-phone production in house, it will have to shift more of its manufacturing capacity to China. However, this process may take a couple of years, which could delay LG’s plan and erode its position in the marketplace.

Putting out a contract

　　The other option is for LG to start utilizing contract manufacturers to shorten its time to market for the launch of cost-competitive phones in emerging markets.
　
　　Contract manufacturers, especially ODMs, might provide a timely and feasible solution for LG’s entry-level mobile- phone production. For example, Taiwan-based Compal Communications and Arima Communications have been designing and manufacturing entry-level phones for OEMs for a couple of years.

　　Complementary moves by chip suppliers further reduced the entry barrier for wireless handset ODM services. To address the demand in emerging markets, all chip suppliers engage themselves in developing chip solutions that would contribute to cost-saving efforts.

　　For example, Infineon in February announced a new chipset that incorporates three previously separate chips— baseband, radio frequency transceiver and power management—into one single chip, which would in turn reduce the costs associated with material, design cycle and manufacturing process. 

　　These developments at chip suppliers, along with increased volume outsourced to ODMs, have strengthened the ODMs’ position in the wireless handset supply chain.

LG’s best bet

　　Based on the aforementioned analyses, iSuppli believes that if LG were to stage a full-court press in the entry-level segment, it should consider working with ODMs rather than attempting to produce low-cost phones on its own.

　　By outsourcing low-cost phones to ODMs, LG will be able to focus its resources on developing high-end phones that provide consumers with the most appealing features and the latest technology. As other companies consider their low-cost phone strategies, they would be wise to follow this example, iSuppli believes. 

　　Jeffrey Wu is an analyst, EMS and ODM services for iSuppli Corp. Contact him at jwu@isuppli.com