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Electronics Production | December 08, 2008

Global Crisis impacts on EMS/ODM

Based on projections of a zero-growth year for the global Electronics Industry, it is estimated that CY2009 revenue in the EMS sector will be flat to up less than 1%.
However, as this projection includes both CMs (forecast to be flat to down 3%) and ODMs (forecast to be flat to up ~3%) it is also predictive of a continuation in the transfer of market share from the CM to the ODM solution. Therefore 2009 is expected to be a very challenging year for CMs (at all tier levels/across all industrial segments) that could be further exacerbated should the projections for the overall electronics industry prove to be overly optimistic, state Charlie Barnhart & Associates.

This now seems likely given the recent International Monetary Fund’s (IMF) prediction of "particularly weak" economic growth in all G7 countries and the daily reports of lay-offs and shut-downs by OEMs around the world.

A potential bright spot: given that OEMs tend to expand their fixed-to-variable based cost initiatives during periods of downturn and that Japanese manufacturers (who account for approximately 1/3 of the global TAM but less than 1/8 of the global outsourcing spend) are experiencing unprecedented levels of competition from significantly lower-cost producers in China and India, a significant “up-tick” in outsourcing from Japan, which would be extremely favorable to both CMs & ODMs, now seems at least plausible, the report from Charlie Barnhart & Associates continues.

Image source: Elcoteq

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