EMS forecast gets upgraded
Staff -- Purchasing, 6/17/2004 2:00:00 AM
The electronics manufacturing services industry is bouncing back and will have a compound annual growth rate of 10.6%, according to market researcher iSuppli.
The researcher upgraded its forecast after positive first-quarter earnings reports from several major EMS companies including Flextronics, Celestica, Sanmina SCI and Plexus. Earlier, iSuppli had forecast an 8.7% annual growth through 2007.
The EMS companies each had strong performances in the first quarter, which typically is a slow period for the EMS market. Celestica and Plexus boosted revenue on a sequential basis. Others experienced only marginal sequential sales decreases. All companies surveyed by iSuppli posted double-digit sales increases on a year-over-year basis.
The strong performances indicate that the manufacturing markets are stable and slowly transitioning into a recovery mode. Other signs of EMS recovery include broad end-market strength, new program wins and capital expenditure.
In 2002, the EMS revenue was $44.8 billion and grew to $92.1 billion in 2003. However, with the next wave of growth the industry will reach $162.4 billion in sales by 2008.
Contributing to revenue growth for EMS companies was increased demand for telecommunications and networking equipment. For instance, Flextronics' communications infrastructure production increased 10% in the first quarter, according to iSuppli. Celestica's production in the enterprise communications and telecom segments both grew by 10% Enterprise communications represented 27% of Celestica's gross sales and telecom was 24% of the company's revenue in the first quarter.
Plexus's networking production contributed 42% to the company's first quarter revenue, an increase of 13% from the prior quarter. Sanmina-SCI's telecommunications production was up 2%.
Large EMS companies will focus more on their original design manufacturing (ODM) capabilities for the rest of the year. Flextronics says its ODM products, including handsets, printing and imaging products were profitable during the first quarter. Sanmina-SCI says its Newisys line of 64-bit servers will begin shipping during the June quarter and will contribute about $50 million per quarter by the end of the year.
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