EMS Industry Lacks Direction in 2012

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 {complink 2125|Foxconn Electronics Inc.}, driven in turn by increasing shipments to its largest customer, {complink 379|Apple Inc.}. 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.

2 comments on “EMS Industry Lacks Direction in 2012

  1. stochastic excursion
    June 12, 2012

    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.

  2. Barbara Jorgensen
    June 12, 2012

    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.

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