Electronics buyers who are involved in outsourcing decisions can expect electronics manufacturing services (EMS) providers in China to diversify their manufacturing capabilities in China and expand into less developed areas to take advantage of lower labor rates.

Some EMS companies in China are focusing more attention on automotive and medical electronics. For instance, Surface Mount Technology, a Hong Kong-based EMS provider, has established factories in Changchun City in Kilin Province and Tianjin to add capacity for automotive electronics products. China First Automotive Works Group, China's largest automaker, is a major customer of Surface Mount Technology.

The automotive electronics market in China is expected to grow from about $4 billion in 2004 to more than $7 billion in 2010, says researcher iSuppli.

Some companies are migrating to low cost areas. EMS providers have been located in the Pearl River Delta, Yangtze River Delta and Bohai Gulf. Now some EMS providers are starting to expand into the northeast and mid-western areas of China.

The migration is occurring because of labor and power shortages in the Yangtze and Pearl River delta areas. However, as EMS companies migrate, there are challenges including complicated logistics management because of fewer transport links.

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