Contract Manufacturers Branching Out

In mid-September we wrote about the possibility of contract manufacturers eventually reaching out and creating their own brands / going direct (read the post). Two announcements this week displayed their intent. HTC, a manufacturer of cell phones and other electronics for many name brand manufacturers, announced a global distribution deal with Brightpoint (article) and Alibaba, a Chinese e-commerce company that connects buyers and manufacturers through its online platform, is rumored to be developing a closer relationship with Hon Hai Precision Industry, the world’s largest contract manufacturer of electronics by revenue. Interestingly, Hon Hai owns .3% of Alibaba (WSJ article).

What does this mean? Essentially, be careful whom you partner with as today’s supplier could be tomorrow’s competitor, especially with the growth of generic/no-name brand acceptance and private label providers (some of which are name brand companies!)

So who to trust and whom not to? Reportedly there were a number of distributors discussing name brand manufacturers who private label at the recent IMARK meeting. Proving is a challenge, but perception is reality. Are these manufacturers suppliers to distributors or competitors? What role in the channel do generic / no-name brand suppliers provide? Are they the future (see our recent article in Electrical Wholesaling on private labeling and generics/no-name brands).