The OEM push to in-source work is already being felt at many suppliers, and more are expected to see their business hit in the near future, a Canaccord Genuity survey shows.
"We were surprised that over 25% of the respondents have already lost work to Boeing, or other suppliers, as they in-source more, and that an additional 30% who have not lost work yet expect they will in the future," Canaccord analyst Ken Herbert wrote of the survey, which reflects the views of more than 30 suppliers. "As Boeing looks to in-source more work in select areas, and position itself for much greater exposure to the aftermarket, we believe these efforts have more room to run."
The revelations come just a few months after Boeing officially unveiled its Boeing Global Services arm, which consolidates its aftermarket support efforts. The OEM has ramped up focus on supporting its own aircraft, but is also eyeing competitive platforms, executives say, adding that such a move won't happen immediately
Meanwhile, suppliers are responding with a variety of tactics. The most extreme: consolidation, best illustrated by the proposed UTC - Rockwell Collins combination.
Other moves include offshoring work to lower-cost labor environments. For U.S. companies, moving work to foreign countries in search of cheaper production costs presented risks in the early days of the Trump Administration, as the White House pushed to keep jobs in-country. But Herbert says the anti-offshoring political winds have calmed.
"The use of lower-cost countries does not now seem to be as much at risk as it was soon after the…election," Herbert wrote. "We believe this push for more content from lower-cost countries will increase."