Telecom Shaping Up as Building Block for a Strong U.S. Manufacturing Base
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OEMs Can Succeed with the Help of Job Shops that Function as an Extension of their Capabilities
By Mark Shortt
Editorial Director, Design-2-Part Magazine
The telecommunications industry, where high-speed data transmission never goes out of style, is a wide-open field where rapid technological change drives the development of equipment and hot new products. The industry's premium on the high data transmission speeds enabled by higher bandwidth may be rivaled only by its motivation to bring products to market with lightning speed. Once dominated by wireline telephone communication, the industry now comprises increasing shares of Internet service, cable and satellite program distribution, and wireless communication services. Technological improvements are driving the delivery of voice, video, data, graphics, TV, and Internet at faster speeds and in an increasing number of ways, according to the Bureau of Labor Statistics (BLS). And wireless systems are expected to provide increasingly faster data transmission speeds as companies within the industry develop and deploy the next generation of technologies.
Telecom permeates virtually every facet of daily life and cuts across every imaginable sector, from healthcare to defense, homeland security, aerospace, and automotive. But even telecom isn't immune to global economic downturns. In its 2009 ICT Market Review and Forecast, released in May, the Telecommunications Industry Association (TIA) projected a 3.1 percent decline in revenue for the overall global information and communications technology (ICT) market in 2009. The decline, attributed to global economic conditions, was the first overall decline that TIA has ever predicted in 23 years of forecasting for the ICT industry. Revenue for the same period in the U.S. was projected to decline 5.5 percent.
Although revenue is predicted to remain weak in 2010 with an increase of 1.2 percent, TIA sees a much brighter future for the global ICT industry in the long term. For 2011, TIA expects a 6.4 percent increase in revenue and, for 2012, an increase of 7.9 percent. Within the U.S., telecommunications revenue is predicted to decrease by 6.4 percent in the next two years, followed by a strong rebound in 2011-12, when it's expected to rise by 14.4 percent. TIA expects that the effects of the current Stimulus Package, which allocates $7.2 billion for broadband investment, will spur growth "throughout the ICT industry and beyond."
Analysts at Wilkofsky Gruen Associates, who helped develop the Market Review and Forecast, say that growing demand for high-volume data applications is driving all segments of the industry. And despite the recession, TIA estimates that wireless and business data revenue will grow by 73 percent during the next four years, reaching $110 billion in 2012 (up from $64 billion in 2008). In further analysis, the report also projects that pent-up demand for equipment upgrades will drive economic recovery during 2011-2012, and that broadband growth will expand the platform for VoIP and IPTV.
"Broadband will be a driver for recovery in all areas, from healthcare IT to smart grid technology, public safety networks to education, as well as for businesses and consumers," said TIA President Grant Seiffert, in a statement. "While TIA was instrumental in obtaining the $7.2 billion for broadband, other funding for energy, health IT, and R&D will also spur recovery, especially in reviving some of the hundreds of thousands of jobs lost recently. The sum of increased productivity and revenue amongst all other industry segments whose growth broadband deployment contributes to is often underrated and perhaps immeasurable."
With expectations for strong future growth, the telecom industry figures to be a growing market for U.S. manufacturers as telecommunications service providers continue to build out the 3G and 4G communications infrastructures. The expected rise in demand for new products and equipment upgrades should correspondingly increase the demand for contract design and manufacturing services, as well as custom parts and components. For OEMs poised to capitalize on the anticipated growth, getting to market fast is essential. But it must be done cost-effectively, without sacrificing quality, and in a way that enables a product to stand out from the competition.
It's a tall order for telecom OEMs, who stand a better chance of accomplishing their goals by partnering with savvy suppliers who not only understand the needs of high-value markets like telecom, but can function as an extension of the OEM's capabilities. Excellent quality management, the ability to turn jobs around quickly, and a knack for creating value through design assistance and engineering are some of the things to look for in a supplier. Companies offering engineering skills that enable a customer to reduce costs while improving the manufacturability of a design make very valuable partners. And so do companies that are skilled in new product introductions and use their understanding of specific markets to tailor the aesthetics of a product to the best advantage.
Companies serving the telecom industry offer services in virtually every manufacturing category, from design through finishing and assembly. In this issue alone, you'll find companies skilled in the full range of custom design-through-manufacturing processes, including engineering, new product introduction, pressure forming, sheet metal fabrication, electromechanical assembly, and injection molding, as well as various metal finishing processes that include plating, chemical film, and anodizing.
Telecom is shaping up as one of many potential building blocks for a strong U.S. manufacturing base, joining other areas like automotive, greentech (renewable energy, smart grid, and energy-efficient building), and medical. In future issues, Design-2-Part will take a closer look at U.S. manufacturing, its potential for growth, and sourcing opportunities currently available for product manufacturers and technology innovators.
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