Best in class brands routinely evaluate component vendors and manufacturing partners to maximise quality while minimising bill of material (BOM) and production costs. Second sourcing and geographical diversity are two strategies to harden supply chains without incurring significant finished goods investments.
Seven of the top tier LED brands as well as thirteen second tier brands all manufacture in mainland China. Each has large factories and the top tier vendors have especially strong buying power for key ingredients but do not support OOC or OOT objectives. Each is actively OEMing or ODMing for other brands or open to the possibility. A primary concern is directly competing with these vendors’ branded offerings head-to-head in international markets, especially the top tier that have established strong international businesses in Americas and EMEA. The concern is less with second tier as most have not expanded significantly outside of China and APAC. A portion of the buying power and vertical integration cost benefit of these vendors can be lost due to price of differentiation and reduced cost advantage.