Electronic component suppliers to grow in Brazil
By Jim Carbone -- Purchasing, 11/1/2007 12:02:00 PM
Buyers involved in outsourcing decisions will be hearing more about Brazil over the next several years, especially if their companies hope to sell electronics equipment in Brazil.
While Brazil cannot be considered a hotspot for the global electronics industry, demand for electronics equipment is growing there and so is the electronics manufacturing services (EMS) industry.
There are few electronics component suppliers in Brazil and most parts have to be imported, but some semiconductor companies operate design centers there and more centers are planned. While there is no volume production of chips in Brazil, some limited production could start as early as next year.
With growing demand for electronics equipment and a healthy EMS industry, an electronics component supply base is all but inevitable. Both global component manufacturers and indigenous suppliers will set up operations in Brazil.
They will be encouraged to open facilities in Brazil by equipment manufacturers, which have to pay tariffs on all imported goods, including electronic components. Local component production would reduce the cost for equipment manufacturers.
Revenue from electronics equipment sold in Brazil will grow at a compound annual growth rate of 15.2% from 2006-2011. Systems revenue in 2006 was $34.4 billion and will grow to $68.3 billion by 2011, according to researcher iSuppli. The EMS growth rate will mirror systems growth. EMS revenue in Brazil will grow from $2.9 billion in 2006 to $6 billion in 2011, a compound annual growth rate of 16%, says iSuppli.
“There’s no question that electronics in Brazil is growing,” says Mike Andrade, senior vice president strategic business development for EMS provider Celestica, based in Toronto. “There is an emerging middle class in Brazil and in South America, per capita income is rising and they are starting to buy more consumer goods such as cell phones,” he says.
Celestica builds high-end cell phones as well as communications base stations, switches and enterprise IT and consumer products. The company has had a facility in Brazil for eight years, he says.
John Yapp, director of global sourcing for EMS provider Sanmina-SCI, based in Sunnyvale, Calif., says there is very little electronic components manufactured in Brazil. He says Sanmina-SCI buys sheet metal and mechanical assemblies locally for the telecommunications equipment and computers it builds in Brazil, he says.
“The semiconductor industry is not there. Most electronic products you need have to be shipped in,” he says.
Brazil imported $3.3 billion in semiconductors alone in 2006, up from $1.6 billion in 2001, according to the Brazilian Electrical and Electronics Industry Association.
Importing electronics is an issue because Brazil imposes tariffs on electronic product imports. For instance, there is a 6% duty on integrated circuits, a 12% duty on finished printed circuit board assemblies and a 16% tariff on monitors.
“Brazil is an interesting market,” says Yapp. “They have some creative taxation duties. The duties encourage companies to build there. The more assembly you do in Brazil, the better. The more you buy from Brazilian manufacturers, the better.”
Now Playing: 