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October 2008

Vol 9. No. 10


Global Contract Manufacturing Transforms by 2013

The global electronics contract manufacturing (CM) industry is undergoing a period of deceleration and consolidation, phenomena that will transform the market by 2013 as competitors are forced to rethink how they deliver value to their customers, according to iSuppli Corp.

Revenue for the global CM industry, consisting of electronics manufacturing services (EMS) and original design manufacturing (ODM) providers, is set to expand to US$432.3 billion by 2012, rising at a compound annual growth rate (CAGR) of 7.2 percent from US$305.5 billion in 2007.

While a US$126.7 billion gain in revenue during a five-year period may sound like fantastic growth, it actually represents a major slowdown compared to years past, on a percentage basis. Global CM revenue rose at a CAGR of 15.5 percent from 2002 to 2007. The industry CAGR amounted to 49 percent during the 1990s.

“Several factors are inhibiting the revenue surge of the past 20 years,” noted Adam Pick, principal analyst, EMS/ODM at iSuppli. “Those factors include the statistical law of large numbers, which makes it difficult for such a large market to expand much on a percentage basis. Other factors include a slowdown at leading EMS provider Foxconn, shifting EMS/ODM business models, new OEM procurement strategies and OEM/CM asset transfers.”

A major consequence of this slower growth is continued consolidation among the world’s top CM providers, as the ranks of the competitors thin out. Revenue consolidation among the leading EMS and ODM companies accelerated during the 2004 to 2007 time frame, as the industry’s global manufacturing capacity remained underutilized.

The latest development in this consolidation trend was the news in June 2007 that EMS provider Flextronics would acquire its former rival, Solectron. It appears that Wall Street may rally around the idea that consolidation is beneficial for the global CM industry, particularly the more troubled EMS providers. Following the Flextronics/Solectron merger announcement, Celestica’s stock bounced up 11 percent.

Since the technology recession of 2000-2001, the EMS/ODM industry has repeatedly been called ‘volatile’ and ‘evolutionary’ by analysts. During the next five years, iSuppli expects those monikers will continue to populate discussions about the CM marketplace. That said, there are many opportunities for this unique breed of outsourced providers to address newer markets such as medical, aerospace, industrial, and military, offer value-add services and extend their value propositions to garner more spend and enhance shareholder valuations.

Tim Gouldson,
Editor, Canadian Electronics
tgouldson@clbmedia.ca

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In the November issue of Canadian Electronics Magazine

  • Motors & Motion Control
  • Power Supplies & Converters
  • Connectors
  • Contract Manufacturing
  • Assembly Equipment
  • Semiconductors

For advertising information e-mail:
rheritage@clbmedia.ca or click here to download a Media Kit.

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See more new products online @ www.canadianelectronics.ca







On Our Web Site


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UPCOMING EVENTS

Electronica 2008
November 11-14, Munich
Contact: Brigitte Mertens, Canada Unlimited Inc.
Tel.: 416-237-9939
Email: bmertens@canada-unlimited.com
Web site: www.canada-unlimited.com

SCADA & Industrial Automation Conference
December 3-4, Calgary
Contact: Sarah Montgomery
Tel: 1-800-324-4244
E-mail:
sarah.montgomery@idc-online.com
Web site: www.idc-online.com

DesignCon 2009
February 2-5, 2009, Santa Clara, Calif.
Contact: Christine Paplaczyk
Tel. 312-559-4616
E-mail: cpaplaczyk@iec.org
Web site: www.designcon.com/2009

EDS 2009
(Electronic Distribution Show)

May 12-14, Las Vegas
Contact: Gretchen Oie
Tel. 312-648-1140
E-mail: gretchen@edsconnects.com
Web site: www.edsconnects.com




WEB WATCH

Check Distributor Stock: Vishay Intertechnology Inc. has announced that its Web site — www.vishay.com — has capabilities for checking product inventory and generating quotes. These capabilities are available via the 'Check Distributor Stock' function located directly on the Vishay homepage. Visitors to the Vishay Web site can enter a part number in the 'search' window at the top right of the homepage, select 'Check Distributor Stock', and click the 'search' button to see the quantity available by distributor and the geographic region in which the inventory is located.

Edgecards and Headers: Sullins Connector Solutions recently launched a newly designed Web site, www.sullinscorp.com, to provide engineers and mechanical designers with easy access to their expanding portfolio of quality edgecards and headers. Intuitive and easy to navigate, the site provides a comprehensive overview of Sullins' and Micro Plastics' standard and custom edgecards, headers, bi-level, and CompactPCI connectors. Components are quality engineered to meet the precise specifications of a range of applications, and are suited for employment in high-temperature, high-cycle life environments including test and burn-in ovens, communication systems, process control, medical equipment, instrumentation, and automotive.





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