Modest growth for the EMS<br>market through 2010

Bruce presented some more facts and figures for us. Of the World GDP of $39 trillion, 6% is electronics, or $2.5 trillion. The industry, between 1995-2000, was possessed of some pretty irrational exuberance, the maxim "you build it - they'll come" prevailed, but in 2000 there was just too much of it, and there was one heck of a downturn. Globalisation was taking off, China was emerging, but there was housing wealth, consumer spending, low inflation, easy credit, which has seen steady growth, although between 2005 - 2010, we will see interest rates rise and jobs soften, but consumer spending will be sustained. Bruce Rayner Emerging economies have actually emerged, and from 2007 onwards we will see China growing, but others staying much as they are on GDP. Watch India. How does this all impact on electronics? Well, there will be more incremental growth in sales of PCs in China, but the big new markets have relatively poor buyers, so we get pressure on price, and unit growth together. The TAM (Total Available Market) over the next 5 years is $1,451 billion, of which $222 billion will be EMS, and $157 billion ODM. Whilst EMS & ODM growth through to 2011 will be about 10% CAGR, ODMs will outperform EMS companies, in all respects - revenue growth, net profit, return on assets, return on invested capital. ODM revenue growth will be 21.7%, ROIC 9.6%. In contract manufacturing, EMS growth is slowing, ODM is outperforming EMS but financial performance is converging, and EMS profitability could weaken as ODMs strengthen. Bruce said that there will be major TAM in communications, 8.5%, followed by medical then aerospace, defence, down to automotive at 5%. EMS growth will be 12% globally, 8-9% if you leave Foxconn, and ODM growth will be in the computer segment, with the biggest growth in China, of course. Russia and Brazil as possibilities? Russia is (as yet) rarely mentioned when talking growth opportunities, but Brazil is an interesting market, and a significant manufacturing segment of its own due to import tariffs, but much what is made in Mexico goes to Brazil.