EL SEGUNDO, CA -- Apple's commitment to outsourcing to Foxconn notwithstanding, the vast majority of cellphones are being made in-house.

Led by Samsung Electronics, LG Electronics and Nokia, OEMs produced 73.4% of all mobile phones built in 2012, down 1.1 percentage points year-over-year, IHS iSuppli said. Apple remains the outlier, relying primarily on Foxconn.

Nevertheless, market share of EMS providers fell 50 basis points to 19.6% for the year, while the ODM share rose 150 basis points to 7%. iSuppli cited flagging sales of RIM's BlackBerry smartphone for the change.

Th research firm says OEMs are "not likely to drastically change their outsourcing strategies," predicting that by 2016 OEM will build 72.1% of all handsets in-house, outsourcing 21.1% to EMS and 6.7% to ODMs.

iSuppli says Nokia, LG, Sony and Motorola have been scaling back use of contract assemblers to boost capacity rates at internal facilities and for quality assurance. While Nokia and LG are not expected to change their outsourcing strategies, Motorola is committed to fully outsourcing smartphone production, the firm says.

Meanwhile, Chinese competitors like Huawei and ZTE are using low-cost assemblers, a strategy they will increasingly rely on.

iSuppli sees EMS providers with an advantage over ODMs, thanks to Apple, which keeps design in-house.

iSuppli notes problems with both outsourcing sectors, as evidenced by Foxconn International Holdings, which has been a consistent money-loser. Moreover, OEMs that relied heavily on EMS missed the smartphones revolution, iSuppli says, a blunder that reverberated to their EMS partners. Large ODMs such as Compal and Arima have also suffered due to poor demand from customers like Motorola and Sony.

iSuppli says the best strategy for EMS providers in the handset space is to concentrate on building product and leaving designs to the OEMs. The firm expects further commoditization of entry-level smartphones would drive more programs to EMS providers and ODMs. The profitability of those programs is another story, however.

See the annual CIRCUITS ASSEMBLY Top 50 EMS Companies for 2012 here.

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