IDHs/ODMs are the key force behind the brands designing as well as manufacturing hot-selling smartphones to make mark in the industry and are important part of the value chain which needs to be tracked to understand the direction where mobile industry is heading

The entire smartphone industry now depends on the Chinese design houses, original design manufacturers called as IDH/ODMs; Taiwanese outsourced manufacturing services providers known as EMS and more so for US/Korean/Japanese component suppliers for quality components and cheaper components sourced from China/Taiwan.

Outsourcing design & manufacturing of smartphone models has become a growing trend in the global mobile phone industry. According to the latest research from Counterpoint ODM Monitor Service, in CY2017, shipment of smartphones designed by external ODMs or IDHs represented 23% of the global smartphone shipments (see here). Going forward, we estimate that shipment of externally designed smartphones will continue to rise and climb to 35% level as many of their clients expand to newer markets and focus on time to market.

  Source: Counterpoint IDH/ODM Monitor 2017

Benefits of out-sourcing the design & manufacturing of smartphones to ODM companies are evident, especially in lower-tier market where time-to-delivery and cost are sometimes more important than innovation. Cooperating with ODM partners is widely adopted and favoured by smartphone OEMs to optimize product development efficiency, especially Chinese smartphone OEMs (E.g. Huawei, Xiaomi, Gionee, Meizu, etc), local leaders in emerging markets (E.g. Micromax, Lava, etc) and telecom operators who own their own-brand smartphone line (E.g. China Mobile, Reliance Jio, etc).

While many of the OEMs or smartphone brands outsource design, development and manufacturing to IDHs or ODMs, many of the key brands such as Apple actually just outsource manufacturing to EMS. Most of the key ODMs such as Huaqin, Wingtech, Wind now hail from China whereas Taiwanese companies such as Foxconn, Pegatron or Wistron all have developed expertise in high quality manufacturing adopting EMS model. Though as an outlier, Foxconn’s subsidiary FIH Mobile has ramped up its ODM services banking on brands such as Sharp, HMD (Nokia) and Infocus.

Mainland China, with its richer experience and expertise in product design & manufacturing, advantage with skilled labour force dominates this industry.  Top five global IDH/ODM leaders are all Chinese companies. Huaqin, Wingtech, Longcheer and Wind lead the pack with mid to premium tier phones. Whereas, the long tail tier-2 and tier-3 ODMs such as Sprocomm, Techain, BYD, Ragentek, Huiye, CK Telecom working with local kings, operators across different markets to focus on lower cost entry- to mid-tier smartphone models. China based ODMs alone captured more than 90% share of the global smartphone shipments designed/manufactured by ODMs in 2017.

Global Top ODM Companies Competitive Analysis

• Huaqin and Wingtech led the 2017 smartphone ODM & IDH market; together they have captured 43% of the global ODM market share. Huaqin’s focus is on the ODM business while Wingtech is stronger in IDH business.
• Longcheer is a distant number three benefitting from growth of its biggest client Xiaomi in 2017.
• Tinno the world’s fourth largest ODM focuses on serving overseas OEMs and building its in-house smartphone brand Wiko, though have been challenging times lately.
• Wind’s focus is on the assembly business in the overseas market apart from serving as an ODM to its biggest client Meizu.
• While Gionee has slipped YoY due to weaker performance in China and India (see here) compared to 2016, Foxconn’s FIH Mobile has ramped up well leveraging ODM for some of the brands it has invested or owns such as Infocus, Sharp and HMD Global’s Nokia brand allowing it to jump into the top ten rankings for the full year and top five in Q4 2017.

  Source: Counterpoint IDH/ODM Monitor 2017

Remarks:

*Global ODM + IDH players includes companies from mainland China, Taiwan, South Korea, Japan, India, South-east Asia and etc.

*ODM: Original Design Manufacturer. ODMs can undertake design and manufacturing, including: industrial design, electronic system design, pre-production testing, semi-knocked-down and fully-knocked-down manufacturing.

*IDH: Independent Design House. IDH perform electronic system design including PCB. They may also perform industrial design and software design and integration. Some IDHs purely perform design, however most offer design as part of a wider ODM service.

*EMS: Electronics manufacturing services. EMS companies provide up to full manufacturing services, including procurement, supply chain management, semi-knocked-down, fully-knocked-down manufacturing, finished goods logistics and etc.

IDHs' continue to garner decent business, helping out newer brands to perform entire electronic system design, pre-production testing and some low-level PCB manufacturing. Which then is manufactured or assembled by EMS providers. Wingtech, Huqin and Longcheer are the leaders in the IDH market in 2017 offering these services for brands which lack R&D and testing capabilities or for some who would like to outsource this for some special smartphone models. Nevertheless, with the growing demands of OEMs for one-stop services covering industrial design, supply chain management and product manufacturing and faster time to market we are more positive on the future potential of ODMs than IDHs, which can offer the complete range of services.

Global Top IDH Companies Competitive Analysis

• Wingtech stood out in the IDH market thanks to strong comeback by Xiaomi in 2017; Redmi series designed by Wingtech has made significant contribution to Xiaomi’s global success especially in India (see here).
• Longcheer has adopted a business model like Wingtech focusing more on design than design+assembly and leverage EMS partners for manufacturing wherever possible.
• While Huaqin’s focus is more on ODM business but due to its huge scale also offers IDH services. But IDH contributed to just 17% of Huaqin’s business compared to 37% of Longcheer’s business.

                                                        Source: Counterpoint IDH/ODM Monitor 2017

Other insights from Counterpoint’s Global ODM Monitor Service:

• Regional Shifts: Global ODM/IDH centre has shifted from Japan, South Korea and Taiwan over the last decade to mainland China.
• Labour & Resources: Mainland China has aggregated most of resources along the value chain of global IDH/ODM industry building a strong ecosystem parallel to none. It has allowed China to cover a complete range of services including R&D, PCB design, material procurement, supply chain management and product manufacturing; Taiwan’s focus is on equipment manufacturing and EMS business while still serving as ODM for limited OEMs in the premium sector; Japan, U.S. and South Korea are major suppliers for advanced components; South-east Asia e.g. India and Indonesia, are providing assembly services.
• Product Development Trend: The global IDH/ODM players after strengthening the core in smart devices space have been expanding product lines from these traditional businesses (e.g. mobile phone, notebook, tablet) to emerging areas e.g. servers, smart speakers, AR/VR headsets and other IoT connected devices.
• Revenue analysis of leading ODM companies: Huaqin was the leader in ODM sector while Wingtech dominated IDH sector. The total corporate revenues for Huaqin generated from its overall IDH/ODM business reached over CNY 20 billion (USD 3.2 Billion) in China in 2017, which represents the highest amongst global IDH/ODM players.
• Global Tablet EMS Business Analysis: Foxconn and Huaqin are the top-tier leaders in the global tablet EMS market, and Huaqin is the only mainland China player managing to lead the tablet segment. Foxconn is strong in supply chain management, and therefore demonstrates the best expertise in the EMS business. 

Please CLICK here for access to the full report “ 2017 Global Technology ODM / IDH Industry Whitepaper: Key Players, Market Dynamics, Industrial Trends and Development Outlook”, and read the latest data with thorough analysis on the global ODM industry.