New analysis from Frost & Sullivan expects the market for electronic manufacturing services (EMS) within the medical device industry to grow to $34.38 billion by 2019. Just what is EMS, and how does it benefit original equipment manufacturers?
EMS provides product assembly, build projects, engineering support, product introduction, manufacturing design and other value-added services for OEMs that just can't handle the demand for more robotics, wireless devices and software within the industry. In essence, OEMs come up with the design and then outsource the manufacturing to someone else.
"The challenge in maintaining certified, state-of-the-art manufacturing facilities and complex supply chain operations is that it strains OEMs' profit margins, compelling them to adopt EMS," said Frost & Sullivan research analyst for electronics and manufacturing equipment Lavanya Rammohan.
"EMS providers, with their exposure to various verticals, are the ideal solution to manage the electronics boom in healthcare."
While EMS may provide OEMs with a way to outsource manufacturing at a lower cost than doing the job in-house, regulatory oversight makes some OEMs wary of considering outsourcing as an option. For example, because of regulations, OEMs can currently only outsource tactical device manufacturing, like building circuit boards and sub-systems.
EMSs also face challenges as they try to grow within the market. Regulations make the outsourcing cycle longer, so OEMs are often hesitant to use an EMS that doesn't have a proven track record in the industry. That reluctance limits the abilities of new companies to get started in the market.
Also, since the OEM is coming up with the designs, the OEM maintains intellectual property rights and revenue from strategic customer touchpoints. EMSs, therefore, have a limited capacity for generating revenue from these outlets.
Still, Frost & Sullivan expects the industry to more than double in revenue over the next seven years. Demand for new healthcare equipment isn't going anywhere.
Edited by
Ashley Caputo
