Chip Shortages Drive OEMs to Deepen Ties with EMS Partners
- By Lipika Agarwal
- 13 May 2025
- Business
Original Equipment Manufacturers (OEMs) have been severely impacted by the global semiconductor shortage, leading them to strengthen relationships with Electronic Manufacturing Services providers (EMS). This move aims to strengthen supply chain resilience, ensure timely component availability, and keep production schedules on schedule.
Strengthen OEM-EMS Partnerships
Historically, OEMs and EMS providers maintained transactional relationships. But due to recent supply chain disruptions, this dynamic has changed: OEMs now work closely with EMS partners to share real-time data, sync production plans, and jointly address supply chain challenges; such collaboration has resulted in improved transparency and quicker responses to component shortages.
Diversification and Localization Strategies
OEMs are diversifying their supplier networks in order to reduce risks associated with supply chain dependencies and decrease localized disruptions. Furthermore, localizing manufacturing processes is becoming more prevalent; OEMs partnering with domestic EMS providers allows for shorter lead times, lower shipping costs and smaller carbon footprints.
Integrating Advanced Technologies
OEMs are increasingly adopting advanced technologies, including artificial intelligence and automation, into their production processes. Partnering with EMS providers with expertise in these areas allows OEMs to enhance production efficiency, reduce human error, and more efficiently manage inventory levels - an invaluable way to help navigate through today's chip shortages.
Long-Term Strategic Commitments (LTSCs)
Responding to the semiconductor crisis, some OEMs are entering into long-term agreements with electronic manufacturing services providers (EMS). Such arrangements often include commitments for specific production volumes and timelines that give EMS providers stability for capacity expansion and technological upgrades; providing both parties a steady supply of critical components while creating mutual growth opportunities.
Strategic Inventory Planning (“Just-in-Case”)
The industry has shifted from lean, JIT models to buffer-heavy “just-in-case” strategies—holding extra components as insurance against shortages. OEMs now coordinate closely with EMS partners on bulk ordering and stockpiling critical parts to avoid disruptions.
What It Means Going Forward
- Faster ramp-up and de-risked launches: OEMs can swiftly adapt product designs when a chip becomes unavailable.
- Resilient supply chains: Diversified sourcing and buffer stocks shield against future crises.
- Deeper integration: OEMs rely more on EMS partners—not just for production but for strategic supply-chain decisions.
Conclusion
The semiconductor shortage has demonstrated the importance of solid OEM-EMS partnerships. By engaging in closer collaboration, diversifying supply chains, adopting advanced technologies and forging long-term relationships between OEMs and EMS providers, OEMs and EMS providers can effectively navigate current challenges while building an agile manufacturing ecosystem for the future.
