H1 2022: Outsourcing Trends In Cellular IoT Modules

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Cellular IoT module outsourced manufacturing to grow at around 17% CAGR from 2021 to 2026

According to the latest report by Counterpoint’s Global IoT (Internet of Things) Module Manufacturing Tracker, outsourced manufacturing accounted for 52.4% of the cellular IoT module shipments in H1 2022. Further, the study estimates a 17% CAGR (Compound Annual Growth Rate) for outsourced manufacturing of cellular IoT modules in the 2021-2026 time period.

The report said that the global cellular IoT module market recovered in Q2 2022 from the previous quarter, despite macroeconomic headwinds and lockdowns in China, the largest IoT market.

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Furthermore, Original Design Manufacturers (ODM) of cellular IoT modules witnessed the fastest growth of 45% YoY in H1 2022. At the same time, Electronics Manufacturing Services (EMS) grew at 30% YoY, and in-house manufacturing at 21% YoY.

Ivan Lam, a Senior Analyst at Counterpoint Research, commented on the ODMs and EMSs shipments trends, “In the past few years, leading Chinese OEMs (Original Equipment Manufacturers) have grown significantly in size. They have experience in managing supply chain partners and manufacturing allies. Leading OEMs have brought in multiple supplier policies to maintain their cost competitiveness, which gives them an advantage in terms of cost offering”.

Lam believed manufacturing cost to remain one of the key elements of an IoT module’s cost structure, apart from the cost of the components. He added, “Leading OEMs are growing rapidly in China and they are likely to predominantly hire manufacturing partners that have production sites within the country. However, we observed that OEMs also hired EMSs with global production sites, such as production facilities in Mexico or Brazil to cater to the North America and LATAM (Latin American) markets. We forecast the manufacturing capacity utilization in India, Southeast Asia and LATAM will continue to grow given the significant increase in IoT module applications in these markets.”

The report pointed out that the top 10 ODM/EMS players captured two-thirds of IoT module outsourced manufacturing in H1 2022. While China and Taiwan-based BYD Electronics, TDG-Tech and Qisda are the leading suppliers, traditional EMS companies like Zollner, Jabil and USI are also helping the top IoT module OEMs in their global expansion.

Senior Research Analyst with Counterpoint, Soumen Mandal commented the following on IoT module manufacturing: “We are expecting outsourced manufacturing shipments to grow at a CAGR of 17% between 2021 and 2026. The soaring IoT module market, driven by innovation and digital transformation, especially in the enterprise segment, will play a pivotal role in IoT module manufacturing. IoT module players may focus on building platforms and services instead of manufacturing IoT modules as they present recurring revenue generation opportunities. This will also be an opportunity for ODM/EMS players to increase their footprint in the IoT module market. However, module players will try to increase control over the supply chain and look for vertical integration even for small components. This will help IoT module players reduce costs and remain competitive in the market. With higher demand in the market, top OEM players are also looking to expand their EMS supplier base to tap global markets.”


 

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