A key challenge for CEMs is to ramp up quickly to achieve economies of scale, i.e. grow fast enough to satisfy OEM customers. Contract Manufacturing is an industry in which size matters, i.e. the big players dominate through sheer size. The biggest players are winning because the new globalisation outsourcing trend demands sufficient scale, scope and management structure. CEMs must also have the cash flow to be able to buy in bulk in order to secure lower prices. This industry has recently undergone an acquisition and consolidation phase.
Acquisition involves buying out smaller CEMs as well as the manufacturing plants from major OEMs.
Having the expertise to manage these major issues will be a major competitive advantage. Emerging Trends that Affect Asia OEMs are outsourcing most or all of their manufacturing. The trend is moving towards a complete outsourcing to the point where the OEM does not see the product. M is notified that the product has been shipped and sends an invoice to the customer. As CEMs grow and become vertically integrated, opportunities are created for small CEMs in niche markets.