Despite a stronger-than-expected performance in the first quarter that spurred a mild upgrade in the growth forecast for 2012, the outlook for the electronics manufacturing services (EMS) market this year is somewhat uncertain, with no clear trends defining the industry this year.
The global EMS market revenue is set to rise to $217 billion in 2012, up 4 percent from $212 billion in 2011, according to the EMS & ODM Service at information and analysis provider HIS. The previous forecast, issued in December, called for 2 percent growth.
The upgrade was prompted by surprisingly robust results from EMS industry leader Foxconn Electronics Inc. , driven in turn by increasing shipments to its largest customer, Apple Inc. (Nasdaq: AAPL). However, beyond this development, there is little direction for the EMS industry nearly halfway through the year. In fact, the outlooks for the various application markets are all over the map.
In the communications realm, some smartphone vendors utilizing contract manufacturing -- notably Apple -- are doing quite well, even though others in the exact same industry are not. The forecasts among communications brands vary widely, with most guiding lower. In other areas, the computing market is facing challenges as a whole due to lower growth. Meanwhile, pockets of strength exist in the infrastructure space for the industrial markets, but some areas such as medical devices have been difficult for many EMS providers.
On the automotive front, formerly strong growth in China is starting to show signs of strain, with recent reports indicating high levels of dealer inventories despite continuing strong growth among luxury brands. In the United States and Europe, in comparison, car sales have been mixed and are highly dependent on specific models and geographies.
Such divergent patterns on various fronts coalesce to form an altogether disjointed picture of the EMS industry, with no clearly identifiable trend at this point in time. With the market showing little direction in the first half, growth for the year will hinge upon the two major demand events of the second half: the back-to-school season and Christmas. And for the industry to achieve 4 percent growth in 2012, these two events will have to pull a lot of weight for the year.
Foxconn seems to be diversifying, while other EMS companies don't seem to be stretching into other businesses. One of the other issues for EMS is solar, which isn't taking off in the US or Europe quite as expected. I know a number of compnaies invested heavily in their production capabilities but are waiting for those to pay off. I agree there is a lack of direction, but as you point out, the industry is far from a disaster. But the industry will have to move beyond the low-margin manufacturing model to sustian gorwth, and it will be interesting to see what direction it moves in.
Back to school and Christmas surges tell you that consumer electronics thrives on demand in youth markets. Phenomenal products have been introduced in the past year or two that have spiked sales, but spikes like these will only be seen when there are latest and greatest products available to buy.
Improved inventory velocity was a key theme for the outsourced manufacturing industry in 2012. Fast forward 12 months, and the hoped-for improvement has not really materialized.
So far this decade, the product mix has shifted slightly as more industrial products have started to flow through the EMS industry. In parallel with this shift, there has been a rise in focus on enhancing capabilities.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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