You might be surprised to learn that most of your electronics—from your iPhone to your laptop to your video game console—weren’t actually made by the company you bought them from. In fact, outsourcing consumer electronics to third-party contract manufacturers (or CMs) is the rule rather than the exception. Often operating out of facilities in developing countries, where labor and materials are less expensive, these CMs save businesses like Apple, Intel, and Microsoft a lot of money.
Despite having never been heard of by the average consumer, the following CMs have come to dominate an industry valued in the hundreds of billions of dollars. As some of the most influential enterprises on the planet, the following companies—and the leaders that put them on the map—are worth knowing a little more about.
Mkt Cap: $43B; Employees: 1,290,000
Foxconn is world’s largest electronics manufacturing service (or EMS) and its third biggest employer. It was founded by Terry Gou in 1974 to make plastic parts for television sets. More than forty years later, Taiwan-based Foxconn (the trade name of Hon Hai Precision Industry Co., Ltd) specializes in the world’s most popular consumer products, as well as in supply chain solutions, industrial automation, and telecommunications. Perhaps best-known as the manufacturer of the iPhone, Foxconn’s CV also includes Amazon’s Kindle Fire and the Microsoft’s XBox One. While in recent years its biggest customer, Apple, has shifted a significant portion of its business over to its competitors, Foxconn still managed to move up a notch on the 2015 Fortune 500 list, coming out at #31 in global revenue this year.
Known as much for his business acumen as his idiosyncratic management style, CEO Gou appears to have attained his success through sheer force of will. In the face of his vision and relentless drive—he’s admitted to forcing Apple founder Steve Jobs to give him his business card—perhaps empire was inevitable. Even fierce international scrutiny after the highly-publicized suicides of 14 Shenzhen factory workers in 2010 was met with an almost dismissive confidence. “We are certainly not running a sweatshop,” Gou said in 2014. “We are confident we’ll be able to stabilize the situation soon. A manufacturing team of 800,000 people is very difficult to manage.”
Despite Gou’s polarizing public image, Foxconn has come to be known as one of the best-run CMs on the planet. But rising costs in the manufacturing sector have led it to make a concerted shift towards automating production. Diversification is also an objective: despite its roots in electronics manufacturing—it earns half its revenue from Apple products—plans to expand into software development and telecommunications services, as well as further diversification of its manufacturing capabilities, are well underway.
Mkt Cap: $5.66B; Employees: 150,000
Flextronics International Ltd. began making PCBs for Silicon Valley back in 1969. In the 1980s, it went public and expanded its operations overseas, but went private again in 1990, and then public again in 1994. Rebranded as Flex in 2015, it now provides design, manufacturing, distribution, and aftermarket services to companies like Apple, and makes products like HP’s Notebook laptop.
While nowhere near as dramatic a figure as Gou, CEO Michael Marks is just as iconoclastic. After taking over in 1994, Marks catapulted Flex into the top five CMs of the world almost overnight, doubling its size after winning the bid for manufacturing Ericsson SpA’s telephone network equipment in 1996. Inspired by Toyota’s philosophy of lean manufacturing, Marks bucked conventional management styles by transforming the Flex supply chain, prioritizing the reduction of inventory by reducing waste and focusing on quality of product.
Like Foxconn, Flex has also sought to diversify against loss of market share to competitors, focusing on more profitable enterprises like engineering design, intellectual property, and startup investment. Marks’ legacy will be his repositioning of Flex as the original design manufacturer, or ODM, of the future: one that specializes in a multitude of services far beyond manufacturing.
Mkt Cap: $3.78B; Employees: 161,000
Founded in Detroit by James Golden and William E. Morean in 1966, Jabil Circuit, Inc., remains headquartered in the United States a half century later. Today, Jabil—a portmanteau of the founders’ first names—boasts 101 facilities in 23 countries and $17.9 billion in fiscal revenue. In 2015, it was listed as #18 on the Forbes Top Technology Companies of the Fortune 500, and #191 overall. From its humble beginnings as a PCB manufacturer, Jabil went on to be recognized by Fortune Magazine as one of the Fortune 500 Most Admired Companies in 2012.
It was Morean’s son, William D. Morean, who brought this small EMS onto the global stage. When he took over the company in 1978 at the age of 24, it was commanding less than $700,000 in annual revenue. An outdoor and motorcycle enthusiast often described as a rebel, Morean helped Jabil clinch a deal with auto parts manufacturer AC Delco the following year, the company’s first step towards becoming the international powerhouse it is today.
Mkt Cap: $1.42B; Employees: 44,000
Like three other companies on this list, Sanmina Corporation was established as a PCB manufacturer in 1980 in San Jose, California. Although its capabilities have grown to include fabrication, injection-molded plastics, and optics, its expertise remains in the telecom, aerospace, and medical systems, with products like ultrasound systems and blood glucose meters. In 2015, it reported $6.37 billion in revenue and marked its fifteenth year on the Fortune 500, with a ranking of #432.
Of Sanmina’s two original founders, only one remains with the company. Croatian-born Jure Sola has been CEO and Chairman since 1991. Serbian-American Milan Mandarić, who as a child was a World War II refugee and has described his financial success as the “classic American dream,” has made yet another fortune buying and selling European soccer teams.
Mkt Cap: $1.31B; Employees: 25,000
A product of IBM’s transition from hardware to software in the early 1990s, Celestica was formed as a subsidiary in the early 1990s. Now a world-class EMS based in Toronto, its global manufacturing network services corporations like Sun Microsystems, HP, and Lucent. Until 2012, one of its biggest products was the Blackberry smartphone, accounting for 20% of its revenue. But after deteriorating sales caused Blackberry to outsource its manufacturing to Asia, Celestica reinvented itself, investing in other industries like big data storage, health care technology, and green energy. Its global suite of services continues to include design and engineering, systems assembly, fulfillment, after-market services, and supply chain managed services.
It was IBM’s head of manufacturing, Eugene Polistuk, who engineered the Celestica spinoff. Recognizing what he saw as the weaknesses in the original management structure, Polistuk overhauled it completely. One of his first big changes was offering the same share offerings to everyone in the company, rather than reserving the best prices for executives. Polistuk was looking for a buyout, but Celestica’s growing clientele—thanks to his efforts—made IBM unwilling to lose it. Eventually, however, they agreed to sell to Onex Corporation, an equity investment firm, in 1996. By 1998, Onex had taken the company public.
The Future of Electronics Contract Manufacturing
Advancing technology has always changed the face of enterprise, and by most accounts, the emerging Internet of Things (IoT) is already making its mark. Over the last few years, the IoT has exploded to the forefront of the tech industry, and with it, speculation as to its long-term impact. Many predict that as IoT capability continues to improve, so will demand for the smart devices that support it.
Of course, these capabilities will have significant impacts on production itself: IoT-enabled equipment will optimize efficiency, safety, and agility for manufacturers. The question is, will today’s heavy hitters of EMS capitalize on these advances? While some from this list have already positioned themselves as contenders in this new IoT ecosystem—like Jabil, for example, with its Blue Sky Innovation facility—whether these giants can stay on top remains to be seen.
Davey Davis is the Copywriter and Marketing Coordinator at Blue Clover Devices, an electronics ODM specializing in the design and manufacture of power, wireless, and IoT products. Follow BCD on Twitter or check out the website for industry updates from San Francisco.