Proving the outsourcing trend shows no signs of abating, telecom giant Motorola Inc. Tuesday said it has signed Flextronics International Ltd. to a five-year contract manufacturing deal valued at more than $30 billion.
Under terms of the deal, Flextronics will manufacture a variety of products for Motorola, including wireless phones, two-way pagers, wireless infrastructure products and other devices, the companies said.
For Flextronics, San Jose, the deal strengthens it position in the consumer telecom market, where its biggest customers include Ericsson.
Motorola is the latest telecom OEM to embrace the outsourcing trend. Over the past two years, telecom companies have been stepping up their outsourcing activities based on increased consumer demand for high technology products such as mobile phones. CEMs with a global manufacturing presence that offer a broad array of services from design to after sales support have been the beneficiaries.
The Motorola-Flextronics pact forms a non-exclusive strategic alliance that is expected to exceed $10 billion in the fifth year of the agreement.
The accord is part of a decision by Motorola's Communications Enterprise to outsource non-core competencies, said Merle Gilmore, Motorola's executive vice president.
"We will be better able to anticipate our customers' evolving needs and help speed the time to market of our products around the world," Gilmore said.
The deal will represent about 15% of the total manufacturing requirements of the CE division over the next five years, Motorola said.
The companies said they would tie Motorola's order entry and logistical requirements to Flextronics' operations activities, to provide a seamless interface between Motorola's customers and the production activities at Flextronics.
``We are extremely pleased that this alliance calls for the use of virtually all of Flextronics' capabilities,'' said Michael Marks, Chairman and chief executive of Flextronics International. ``Both companies have agreed to develop our businesses together in a substantial way, from e-commerce connections to global supply of a wide range of services, while sharing some financial costs and gains.''