Motorola joins outsourcing trend

The trend by vendors to outsource the manufacturing of their products continued on Wednesday when Motorola announced a massive $30bn deal with Flextronics International.

Flextronics, which is already a major supplier to Ericsson, will manufacture a variety of products for Motorola, including wireless phones, two-way pagers and TV set-top boxes. Eventually, Flextronics will manufacture 15 per cent of Motorola's consumer electronics products.

The five-year deal is the latest in a series of moves by companies, particularly in the communications world, to concentrate on designing products and chasing new markets rather than deal with issues on the factory floor.

As a result, outsourcing manufacturing companies such as Flextronics, Solectron and Celestica are growing in leaps and bounds. US investment house Merrill Lynch, for instance, believes Solectron will rake in sales of $20bn next year, a substantial increase from this year's figure of $15bn.

To ensure it can keep an eye on its supplier, Motorola has bought a five per cent stake in Flextronics for $100m.

Explaining the rationale behind the deal, Merle Gilmore, Motorola's executive vice president, said: "We will be better able to anticipate our customers' evolving needs and help speed the time to market of our products around the world."