Printed circuit board manufacturer sees challenges ahead as civil market embraces offshore option.

Continued downward pressure on costs is forcing civil aviation manufacturers to outsource electronic components to cheaper offshore suppliers. But the switch to such providers is not a failsafe option, says Garry Myatt, of specialist electronics manufacturer Exception.

“It’s no secret that the major players in the civil aviation market – namely Airbus and Boeing – are stuck between a rock and a hard place at the moment. While they, like every other global manufacturing business, are facing tough market conditions that are demanding jobs losses and cost-cutting strategies like never before, the fact remains that these businesses have a backlog of over 7,000 aircraft, equivalent to eight years work. Clearly, there are contracts to fulfil, but the businesses need to restructure significantly to remain profitable."

“To achieve this, many manufacturers have embarked on demanding cost reduction programmes, working closely with both tier one and tier two suppliers in a bid to reduce the total cost of manufacture. This usually involves moving the production of components to lower cost offshore locations, as opposed to predominantly European or North American-based suppliers that have traditionally been found near the company’s HQ or main R&D/assembly sites. Hence, we have historically seen a significant density of suppliers clustered around cities such as Toulouse and Bristol, both known for their aerospace heritage. This established model is now changing rapidly."

“While switching to lower cost economies such as Asia can cut costs considerably, OEMs need to be mindful of the pitfalls of this strategy as many more will no doubt rush headlong down this road in 2009. Dual sourcing is now a big trend we are seeing, especially in the electronics supply chain. There is a definite trend in the aerospace industry, whereby what was once manufactured in Europe or North America, is now migrating to China and other Asian based regions. But this switch can be painful if not handled sensitively and strategically."