< Back to Contract Manufacturing

Component supply constraints hinder ‘full-throttle’ EMS growth, says iSuppli

El Segundo, Calif. — Although the global electronics contract manufacturing industry will return to growth in 2010, the market still faces major uncertainties this year, according to the latest report from iSuppli Corp.

Worldwide revenue generated by the two segments of the contract manufacturing business –electronics manufacturing services (EMS) providers and original design manufacturers (ODMs) — is projected to reach $280.8 billion in 2010, up 7.8 percent from $260.5 billion in 2009. This follows a 13.4 percent decline in 2009 caused by a global economic recession.

“Things are definitely looking up for the EMS/ODM market in 2010,” says Adam Pick, principal analyst for EMS and ODM at iSuppli, in a statement. “However, we’re holding our breath until the second half of 2010 given certain industrial and macroeconomic issues that could inhibit the outsourcing cycle.”

The report, “EMS/ODM: From Stability To A Growth Dichotomy,” shows that orders for the leading EMS and ODM providers are recovering. Senior managers at contract manufacturers are indicating that the typical seasonal downturn in the first quarter will be mitigated by stronger-than-normal demand signals from their OEM customers, says iSuppli.

Pick says major EMS companies — Jabil, Sanmina and Plexus — announced some bullish guidance for the first quarter during their fourth-quarter earnings results. He also says “most companies posted improved earnings, enhanced operations and elevated return on invested capital (ROIC) performance.”

ODMs are set for a growth rebound due to their penetration of booming markets like mobile PCs and LCD-TVs, although some EMS companies will experience slower growth due to their focus on traditional segments like networking and telecom, says Pick. Global ODM revenue is set to rise by 10.8 percent in 2010, while the EMS market will expand by only 5.2 percent, according to iSuppli.

isuppliemsrevenue

Some individual EMS companies could face ongoing constraints in particular component supplies, including display panels, optical disc drives and chipsets, says Pick. The recent shortages have inhibited full-throttle assembly activity among contract manufacturers for the past six months, he says.

Other possible impacts cited include high unemployment, waning stimulus efforts and more than a trillion dollars in residential and commercial mortgage resets.

In addition, at the industrial level, OEMs are continuing their efforts to tighten control of the bill of materials (BOM) to minimize purchase-price variance.

This entry was posted in Contract Manufacturing, North America. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *