In recent years, many OEMs have outsourced manufacturing to electronics manufacturing services (EMS) providers operating in China. Some have formed partnerships with original design manufacturers (ODM) who provide manufacturing services and higher level of design expertise. Now, more OEMs are also using independent design houses (IDH) in China, says researcher iSuppli.

IDHs offer OEMS a variety of design services, including system design, printed circuit board layout and application software development. IDH provide those services for manufacturers of mobile phones, set-top boxes and consumer electronics equipment, including DVD and MP3 players among others.

However, the role of the IDH is expanding. Besides offering design services, Chinese IDHs are helping OEMs develop bills of materials, decide which suppliers to use, and assist OEMs select an EMS provider. They also offering logistics and manufacturing services.

Many of them have formed relationships with major EMS providers, including Flextronics and Solectron.
For buyers, IDHs offer another outsourcing solution choice especially as IDHs improve their capabilities. It also means more competition.

Byron Wu, director of China research for iSuppli, says Chinese EMS providers will form alliances with IDHs to improve their design services so they can better compete with ODMs. ODMs run the risk of being squeezed out or at least having a diminished role in the supply chain.