Electronics outsourcing growth will slow
A global recession will temper EMS and ODM revenue growth, OEMs will continue to outsource
By Jim Carbone -- Purchasing, 11/6/2008 3:24:00 PM
The global electronics contract manufacturing business will not escape the impact of the current economic downturn, but it will continue to expand and even experience a mild rebound in three years, according to researcher iSuppli.
The economic downturn will slow outsourcing growth, but global contract manufacturing revenue, consisting of sales by electronics manufacturing services (EMS) and original design manufacturing (ODM) providers, is expected to grow by 8.3% in 2008.
In 2009, growth will slow to 6.1% as the global recession sets in and demand from consumers and enterprises continue to soften. In 2010, OEM demand will stabilize and contract-manufacturing growth will rise to 7.6%. For the year 2011, growth will rise to 9% as the global electronics and contract manufacturing markets recover.
“Speculative activities specific to the housing market and mortgage-backed securities will or already have triggered a recession in the United States that could spread across the world,” says Adam Pick, principal analyst, EMS/ODM for iSuppli in El Segundo, Calif. “Demand specific to the electronics marketplace will continue to soften.”
As demand from the end-markets erode due to recession, there will be less revenue growth for electronics supply-chain, including EMS/ODM providers, he says.
However, the contract manufacturing market will continue to expand during this period as OEMs attempt to adjust their cost structures and enhance core competencies.
“OEMs, including Dell, are reported to be selling off up to $15 billion in annual manufacturing revenues via a divestiture of desktop and integration facilities,” says Pick.
In September, Purchasing.com reported that Dell was moving forward with its outsourced manufacturing strategy with former Solectron executive Mike Cannon spearheading the move for the PC maker.
Also see: EMS requirements on distribution can be challenging
Electronics outsourcing revenue to drop 9.9%
02/10/2009Top 10 EMS providers suffer revenue declines
03/10/2009Demand for contract manufacturing to slow
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