Participants in the electronics industry — be they buyers, manufacturers, journalists, or avid readers — view forecasts with skepticism. That's well deserved. The industry's has been burned more than once by overly optimistic predictions. Today, another upbeat report has been released: Let's look at that report along with some hard data.
PricewaterhouseCoopers today released the PwC US Manufacturing Barometer, which says 63 percent of industrial products manufacturers expressed optimism about the US economy's prospects in the fourth quarter 2010, a sharp rise from the previous quarter's 35 percent. This current level of optimism is 16 points higher than a year ago (47 percent), and has not been this high since the second quarter of 2007 (62 percent).
This echoes a report earlier this week saying that CEOs are expressing more optimism about the US and global economy. As more and more financial results are released this week, there are reasons to believe things are getting better. (See: CEOs More Confident, But…)
In the EMS sector — one of the biggest in electronics and in manufacturing overall — companies that have reported their results have seen revenue and income increase. A sampling from the past two days:
Celestica: For fiscal year 2010, revenue was $6.5 billion, compared to $6.1 billion for fiscal year 2009. GAAP net earnings for 2010 were $80.8 million, or $0.35 per share, compared to $55.0 million, or $0.24 per share, for 2009. (See: Celestica Posts Q4 Results.)
Sanmina-SCI: Revenue for the first quarter increased 12.5 percent to $1.66 billion, compared to $1.48 billion for the same period of fiscal 2010. (See: Sanmina-SCI Posts Q1 Returns.)
Flextronics: Net sales for the third quarter ended December 31, 2010, increased 19 percent to $7.8 billion compared to net sales for the quarter ended December 31, 2009, of $6.6 billion. (See: Flextronics Reports Q3.)
In the fab sector:
UMC: Revenue from the fourth quarter 2010 was NT$31.32 billion, a 4.1 percent quarter-over-quarter decrease from NT$32.65 billion in the third quarter, and a 12.9 percent year-over-year increase from NT$27.75 billion in the year-ago quarter. (See: UMC Closes Q4.)
TSMC: Today announced consolidated revenue of NT$110.14 billion, net income of NT$40.72 billion, and diluted earnings per share of NT$1.57 (US$0.26 per ADR unit) for the fourth quarter ended December 31, 2010. In US dollars, fourth-quarter revenue grew 3.1 percent from third quarter 2010 and 27.2% year-over-year. (See: TSMC Closes Q4.)
Lam Research: Today announced financial results for the quarter ended December 26, 2010. Revenue for the period was $870.7 million, gross margin was $407.4 million (46.8%), and net income was $221.9 million, or $1.78 per diluted share, compared to revenue of $805.9 million, gross margin of $377.3 million (46.8%), and net income of $193.7 million, or $1.55 per diluted share, for the September 2010 quarter. (See: Lam Reports on December Quarter.)
Motorola Mobility Holdings: Today reported net revenues of $3.4 billion in the fourth quarter of 2010, up 21 percent from the fourth quarter of 2009. The GAAP earnings in the fourth quarter of 2010 were $80 million, or $0.27 per share, compared to a loss of $204 million, or $0.69 per share, in the fourth quarter of 2009. (See: Moto Ends Fiscal 2010.)
The PwC report goes on to note that only 7 percent of industrial products manufacturers remain pessimistic, while 30 percent are uncertain. The 12-month outlook for the world economy also improved significantly, with 60 percent of those marketing abroad now optimistic about the world economy's prospects, up 22 points from the prior quarter. Only 2 percent are pessimistic, while 38 percent remain uncertain.
“The major shift from uncertainty to optimism in this quarter's findings gives us good reason to be hopeful. We may now begin to see industrial manufacturers start making business decisions in a less guarded, more confident manner as we move into 2011,” says Barry Misthal, US industrial manufacturing leader for PwC. “The industry is looking quite strong and steady compared with the past couple of years, and manufacturers appear poised for a robust start to the new year.”
A few more data points from PwC:
- For US-based industrial manufacturers that sell abroad, international markets showed notable improvement in the fourth quarter of 2010, with 59 percent reporting an increase in sales, up 15 points quarter-to-quarter, and only 2 percent reporting a decrease.
- Over the next 12 months, 48 percent of panelists plan to add employees to their workforce, up 6 points from last quarter and 18 points higher than a year ago (30 percent).
- Looking at the next 12 months, 82 percent are planning to increase operational spending, led by increases in new product or service introductions (50 percent) and research and development (45 percent). On the rise this quarter is prospective spending for geographic expansion, information technology, and, for the first time, Internet commerce. Additionally, plans for M&A remain high (39 percent), and plans for new facilities abroad jumped 9 points to 27 percent.
As with any forecast, there are methodologies, definitions, and parameters to be considered, all available at www.pwc.com. There are also a number of challenges noted in PwC reports and in earnings releases, which should be reviewed. Not to mention what the Fed thinks. (See: Ending the Economic Limbo.) But for now — as the snow piles up outside and digging out my car seems like too much to handle at the moment — I'll go with the optimism.