Business models of Indian EMS companies can broadly be classified under four categories -
1. ODM (Original Design) model - Under this, EMS companies design products as per the specifications provided by the OEMs. EMS companies then source components, carry out fabrication and assembly, test the final product, and also undertake logistics and after sales services related activities. ODM model helps the EMS companies to have deeper and long-term business relations with the OEMs.
This is a high margin business and comes at a premium for good designs.
2. EMS model - At present, this model is widely followed in India. Under this, OEM provides designs and specifications to the EMS companies. EMS companies source components manufacture / assemble components and supply the finished product back to OEMs.
3. Job work - The term Job-work typically refers to the processing of goods supplied by the principal. In the concept of job work, a principal manufacturer can send inputs or semi-finished goods to a job worker for further processing, which may or may not culminate into manufacture. This business model is followed mostly by the small and micro-EMS companies. Smaller EMS companies, who do not have any engineering or sourcing capabilities, undertake this business with OEMs in a fragmented or price sensitive market.
Large OEMs and Overseas companies generally prefer to have one point solution with their EMS companies, so this is a very low margin business.
4. After-sales service - After-sales service is an important activity which helps the companies to build long-term brand image and brand loyalty. Globally, EMS companies are offering end-to-end services including after-sales service. This is a nascent business for Indian EMS companies, however gaining traction in the recent times.
