Electronics outsourcing revenue to fall 9.9% as EMS demand slips
By James Carbone -- Purchasing, 3/12/2009 2:00:00 AM
The recession is taking its toll on the electronics contract manufacturing industry as electronics outsourcing revenue will fall nearly 10% in 2009, according to researcher iSuppli.
Global contract manufacturing industry revenue includes of sales by electronics manufacturing services (EMS) providers and original design manufacturers (ODMs). iSuppli says combined sales of EMS providers and ODMs will drop 9.9% to $270.8 billion in 2009 from $300.7 billion in 2008. Last November, iSuppli forecast contract manufacturing revenue would grow 2.2% in 2009.
"It's not pretty," says Adam Pick, principal analyst, EMS/ODM for iSuppli, based in El Segundo, Calif. "Stalwarts of the electronics marketplace—including leading brands, manufacturers and component suppliers—have issued lackluster guidance, or in Sanmina's case, no guidance at all." He says a rally by some ODMs "seems to be losing steam" as Taiwanese manufacturers are seeing sales drop and inventories rise.
Pick predicts that global contract manufacturing revenue will rise at a compound annual growth rate (CAGR) of only 1.3% from 2006 though 2012, down from the previous outlook of 5.3%.
Pick says OEMs do value the benefits of outsourced manufacturing. However, weak demand has triggered program delays and push-outs. "Also, we have detected some OEM in-sourcing activities that will hamper EMS/ODM industry performance during 2009," he says.
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