To his credit, Mr. Ojo did point out the risks that EMS companies face if they assume the role that authorized distributors play in the channel. He noted that distributors have survived the worst their business climate could throw at them. Despite highlighting some of the risks that EMS companies will face, Mr. Ojo's conclusion was a non sequitur. His comments ignore history and a number of marketplace truisms. For one, outsourcing is cyclical.
History shows that businesses go through cycles of centralization and decentralization.
We are nearing the peak of a decentralized cycle as OEMs spin off as many noncore competencies as they can in an effort to appear more profitable. At some point in the near future, the pendulum will swing the other way. Because product quality is a core competence and the only way that OEMs can control quality is to control the manufacturing process. The threat of component suppliers bypassing distributors and going direct to EMS providers is no different than the age-old practice of some suppliers going direct to OEMs. In the final analysis, EMS companies are the emerging OEMs.