Electronics Production | May 31, 2012

Forecasting trouble hurts EMS

The Bloomberg U.S. Electronics Manufacturing Services Index has fallen 24 percent since February 23 thanks to weak demand for consumer products.
The list, comprised of Flextronics International Ltd., Jabil Circuit Inc. and 11 other companies, has taken a sharp fall compared with a 3.7 percent decline for the Standard & Poor’s 500 Index Bloomberg reports.

While some EMS providers have said they are confident that demand will pick up due to the typical seasonal upswing, many investors are sceptical that this will occur. Examples such as RIM’s recent profit warning have only served to increase insecurity according to analysts.

One reason for concern is the lack of clear forecasting. Plexus' President and Chief Executive Officer Dean Foate said on an April 19 conference call that its top 10 customers are “struggling with forecasts”, while Celestica Chief Financial Officer Paul Nicoletti said on an April 24 conference call that demand from customers was “very spotty”.


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