Year-end surveys tend to be pretty optimistic, or at least they find one silver lining amongst the clouds. Nobody wants to set a tone of pessimism for the upcoming year.
Then there's reality. In spite of reports that the unemployment rate is decreasing (temporarily); the EU is close to an agreement on debt management (we've heard that before); and the tablet computer market is skyrocketing (mostly Apple), companies in the electronics supply chain believe the next few quarters will be tough.
A survey released this week by VentureOutsource, an EMS/ODM consultancy, comes much closer to reality — at least as the supply chain sees it.
On a scale of 1 to 10 (with 10 being the most optimistic), VentureOutsource respondents rate their current outlook at an average of 5.34. That's down 10 percent from a survey the company conducted six months ago. “The survey results show that the outlook for the electronics supply chain has become very pessimistic and does not see much improvement over the next two quarters,” the report says.
The demographics of the report show that the great majority of respondents — 87 percent — are responsible for participating in purchasing, sales, and operational decision making. Nearly one in five works in the PC industry.
One of the report's more interesting analyses comes from the semiconductor manufacturing industry. VentureOutsource notes recent results from companies such as Intel are very positive, but smaller firms are reporting mixed results. Overall:
- The semiconductor segment is seeing revenue growth slowing and layoffs are starting to take place. In certain areas growth prospects are better, but overall the next several quarters will be challenging for semiconductor firms.
- Semiconductor end-user demand is not expected to see any sharp uptakes and prices for most areas are expected to decline. There are few reasons for semiconductor decision-makers to be optimistic, except that inventories have already tightened, which means any uptick in demand may prove beneficial to their organizations being upstream in the supply chain.
- EMS/ODMs, on the other hand, are likely scared of the order volatility they have seen and the worsening end-user demand climate. With the exception of a few areas, most product segments are expected to see weak demand through 2012 and this likely concerns most EMS/ODM executives.
The report adds that developing markets, which so far have been a bright spot for electronics, are now starting to feel the economic pain. China’s growth is slowing as both domestic and export markets show weaker demand. As to how the industry can meet these challenges, VentureOutsource notes that EMS/ODM companies have already taken steps through the last recession to right-size their operations and take costs out. Any slowdown will only cause further damage.