An increasing number of original equipment manufacturers (OEMs) in cardiovascular and respiratory devices are beginning to outsource their manufacturing requirements to electronic manufacturing services (EMS) providers. High growth is anticipated in audiology and imaging devices in the near future, and upcoming technologies such as optical electronics and photonics are expected to increase the overall potential for contract manufacturing. In addition, perceiving Asian regions as being unreliable, OEMs prefer outsourcing to smaller local participants. This makes the North American medical devices market an attractive one for EMS providers.

This Frost & Sullivan research evaluates the current and future prospects for outsourcing in the North American medical devices market in three key segments: electronic manufacturing services (EMS), Printed Circuit Boards (PCBs) and medical electronic components. It analyzes the challenges and driving factors in each segment that will assist electronic manufacturers to formulate their future marketing strategies. Additionally, it provides market revenue forecasts and geographic and technological trends in each segment.

Stringent Manufacturing Regulations and High Capital Investments Deter Market Entry

Despite the spurt in outsourcing to EMS providers, market entrants are hindered by the stringent regulatory mandates. Procedural delays involved in approvals, clinical testing, stress testing of boards, emission testing of devices, and documentation increases the time to market. Capital investments that would be required before getting an approval at the plant level and at the product level are very high and this can be a major deterrent to newcomers. OEMs tend to opt for manufacturing partners who are established in the medical devices industry.

"Since most EMS providers are on a cost cutting spree, they are reluctant to invest in capital equipments, which are usually expensive and eat into the profit margins," says the analyst. Yet another factor that limits profit margins and restrains growth is the long product lifecycle. "The repeat purchase rate is very low among medical devices. This not only inhibits growth but also reduces the attractiveness of this sector with respect to contract manufacturing."

Advanced Technologies in Printed Circuit Boards Promises High Returns

Printed circuit boards (PCB) using increased board density would help achieve device miniaturization and this is expected to boost revenue growth substantially. While rigid boards are likely to see a heavy growth in the high-end device section, flex boards would grow in line with consumer related medical devices such as blood pressure (BP) monitors, diabetes monitors, etc.

Significant growth is also anticipated in the electronic applications in Medical micro electro mechanical systems (MEMs) used especially in areas of orthopedic and surgical devices. "MEMs, which combine mechanical and electronic applications require advanced technological changes in the board layout and substrate, and are likely to drive the market after 2005," says the analyst.

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