Worldwide EMS will continue growth at lower pace, says IDC

In 2009, IDC expects the EMS industry to grow by just 7.8%, assuming demand for electronics does not fall farther than expected. "The slower growth rate is the result of decreased computer demand and weakened consumer device segment," said Michael Palma, senior research analyst for Electronics Manufacturing at IDC. "While other segments should also slow significantly, opportunities exist for EMS firms in the industrial sector where OEMs are expected to increase their use of contract manufacturers." The EMS industry in 2009 will experience a significant slowdown in end-markets, endangering the prospects of several EMS/ODMs which are facing overcapacity, competition from new entrants into specific market segments, and larger internal issues with their business models and value propositions. Additionally, IDC believes the EMS industry will feel the impact of OEMs' risk aversion and attempts to reduce costs by "in-sourcing" design to differentiate products. While increased outsourcing, especially in the industrial segment presents some upside, these new opportunities will unlikely materialize before 2010. In the meantime, emerging products such as netbooks and MIDs in the computer and consumer device areas will not be enough to offset increasingly weak demand for electronics. In IDC's most likely scenario, the industry should achieve an 8.1% CAGR in 2012 driven by increased outsourcing in the industrial, automotive, and medical device segments, and recovering end-market demand for networking equipment starting in 2010. The computing and consumer device segments will not likely return to the double-digit revenue growth rates that fueled the EMS industry's recovery from the dotcom meltdown.