Smartphone assembly via ODM/EMS was soft in 4Q17 due to low demand and product shifts, says IDC

FRAMINGHAM, Mass. April 12^th, 2018: According to the International Data Corporation (IDC) Worldwide Smartphone ODM QView, smartphone ODM and EMS assembly shipments decreased 13.8% year-on-year in 4Q17 due to weakening market demand. This was a slight quarter-on-quarter growth of 2.1%.

"The fourth quarter is traditionally a strong season for smartphone production, but this year's weakness was the result of both conservative supply and weakening demand," said Sean Kao, research manager with IDC's Worldwide Hardware Assembly Research Group. "Driven by a migration to full screen smartphones, Chinese OEMs accelerated their inventory cleanup of old models while staying conservative on orders for new models. Component suppliers were also cautious given the fast-changing specs. All these contributed to the unusual shipment trend across the supply chain prior to the Chinese New Year."

Domestic consumption in China was also sluggish due to longer replacement cycles and the absence of operator subsidies, while local vendors in emerging markets shortened their purchase cycles and reduced order sizes in response to market changes. Seasonal increases for Apple, Huawei and Xiaomi also led to ranking changes in the smartphone ODMs.

Factors to watch out for in the upcoming quarters include the shift to full screen smartphones and improving facial recognition technologies. But total shipments will not likely to grow significantly until low-end smartphone specifications stabilize in 2Q18. Midrange and low-end products are likely to be the target segment for brand vendors as emerging-market demand becomes a key driver for growth.

IDC Worldwide Hardware Assembly Research

IDC's Worldwide Hardware Assembly Research analyzes companies that provide assembly, manufacturing, and design services to branded vendors. ODMs and EMS's are in the upstream industry supply chain, as noted in the red segment of Figure 1. Companies include Foxconn, Huaqin, Compal, Quanta, Compal, and Wistron, while their clients are branded or white-box vendors, such as Apple, Amazon, Lenovo, Huawei, OPPO, etc.

Figure 1: Industry Supply Chain of Electronic Products

EMS (Electronics Manufacturing Services): company's activity mainly focuses on product manufacturing. ODM (Original Design Manufacturer): company’s activities include both product design and manufacturing.