The worldwide electronics manufacturing services (EMS) industry is expected to grow by just 7.8 percent in 2009, according to research firm IDC. The slowdown comes after the industry clocked two years of double-digit revenue growth--20 percent in 2006 and 16 percent in 2007. The industry will clock just 9.3 percent, reaching US$291 billion in revenue, in 2008, said IDC.
"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 manufacturers who are facing overcapacity, competition from new entrants into specific market segments, and larger internal issues with their business models and value propositions.
This industry is also expected to feel the impact of OEMs' risk aversion and attempt to reduce costs by 'in-sourcing' design to differentiate products. While increased outsourcing, especially in the industrial segment presents some upside, these new opportunities are unlikely to materialise before 2010. In the meantime, emerging products such as netbooks will not be enough to offset increasingly weak demand for electronics.
In IDC's most likely scenario, the industry should achieve a compound annual growth rate of 8.1 percent 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.
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