There are mainly two types of PCB purchasers: Original Equipment Manufacturer companies (“OEM” companies) and Electronics Manufacturing Services companies (“EMS” companies). In general terms, an EMS customer demands a much wider range of PCBs than an OEM customer, as its range of products is wider. EMS customers focus more on price than OEM customers. It is explained by, inter alia, that PCBs account for a much larger share of the value of an EMS customer’s product, approximately 8-12 percent for PCB-As, but also of the lower margins EMS customers typically operate with. PCBs account for approximately 1-3 percent of the value of an OEM customer’s end-product. Due to the EMS customers’ wide product offering, traders are used to a large extent. Typically, OEM customers source HMLV orders from traders and high-volume orders directly from Asian manufacturers.
EMS companies provide assembly and purchasing services to OEM customers and Original Design Manufacturer customers (“ODM customers”) when their own production is not suitable depending on technical level and capacity. An EMS customer purchases components, which it combines to an assembly for an OEM customer or an ODM customer. The assembly can be, for example a PCB-A, comprising the PCB and electronic components such as diodes, transistors, microprocessors, resistors, relays and switches, but it can also be a complete end-product such as a cell phone.
The typical EMS customer needs to source numerous different PCBs due to its high number of products, while the typical OEM/ODM customer generally has fewer products resulting in fewer types of PCBs needed. An EMS customer generally has several preferred suppliers to primarily purchase PCBs from the HMLV segment from. Due to the breadth of EMS customers’ product lines, they often hire advanced traders in order to benefit from their expertise when purchasing PCBs. EMS customers account for approximately 60 percent of NCAB’s sales.
OEM customers are manufacturers of their own products, and operate in their own end-industry. OEM customers can either purchase both components and PCBs, and assemble the components into a PCB-A in-house, or buy PCB-As from an EMS company. Direct sales to OEM customers account for approximately 40 percent of NCAB’s sales.
ODM companies do not have any in-house production, and they normally only do the design, marketing and sales distribution of a product. ODM customers instead use EMS companies to assemble the complete product. Consequently, ODM customers are only indirect customers to NCAB and indirect sales to ODM customers are accounted for as sales to EMS customers. In approximately one fourth of NCAB’s orders that originate from an ODM customer, the ODM customer decides which PCB supplier(s) the EMS company that it works with has to use. This is more frequently occurring for hi-tech applications, and the PCB supplier is generally in a strong bargaining position to achieve high margins in these situations.