Worldwide Electronic Manufacturing Services Will Return to Steady, But Uneven Growth in 2010, According to IDC

FRAMINGHAM, MA. – April 26, 2010 – The electronic manufacturing services (EMS) industry contracted by 11% in 2009, less than expected due to a resurgence of consumer spending late in the year. According to a new forecast from International Data Corporation (IDC), the EMS industry will enjoy a compound annual growth rate of 8% for the 2010-2014 forecast period. But the recovery is still on shaky ground, with periods of weakness expected into 2011.

"While the PC market has roared back to life, the strength of the global economy is still questionable," said Michael Palma, senior research analyst, Electronic Manufacturing Services & Consumer Device Semiconductors. "With unemployment high, consumer spending will be slow to recover. Meanwhile, most enterprises remain cautious in their spending. Significant expansion opportunities will present themselves, but growth will be uneven throughout the industry, with some segments faring better than others."

In the near term, the PC segment will benefit from the end of ASP erosion and new form factors that will stimulate consumer demand, bringing shipment growth rates back into the low double digits. However, manufacturer concerns about inventory levels and component shortages may limit some growth opportunities. The industry's growth is still largely tied to the PC industry, with as much as a fifth of its revenues coming from PCs. The growing share of the PC segment within the industry has also altered the competitive landscape.

Elsewhere, datacenter expansion and continued interest in cloud computing will stimulate gains in the server, storage, and networking segments, while peripherals (ie, printers and monitors) will experience very low growth due to lagging demand. In the consumer devices segment the signs remain mixed, with emerging economies presenting some of the best markets for consumer spending in 2010 and beyond. The telecommunications segment will be driven by the continued rollout of 4G wireless networks and growth in optical and fiber telecommunications infrastructure.

Over the long term, market conditions will remain difficult for EMS and original design manufacturing (ODM) firms due to multiple issues:

* The shift in the mix of computer and consumer products to lower priced products will continue to place downward pressure on revenues

* Many original equipment manufacturers (OEMs) are expected to continue following commodity purchasing patterns, which erode profits for EMS/ODMs

* OEM desires to increase efficiency in supply chains will continue to pressure lead times and inventory levels

* Consolidation of OEMs and suppliers will continue even as emerging entrants from developing regions begin to impact global markets

* Alternative service providers are likely to pose a greater competitive threat to the EMS industry and EMS firms will be challenged to keep providing new value to their clients

The IDC study, Worldwide IDC Electronics Manufacturing Services Market Forecast, 2009-2014: Beyond the Great Recession (Doc #223043), provides an assessment of the current situation and future opportunities for the worldwide EMS industry. The analysis and forecast consider the EMS industry by sector and product segment (computers, peripherals, consumer devices, server & storage, networking, telecommunications, automotive, medical, and industrial), and provides essential guidance for EMS and ODM firms.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. For more than 46 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com [http://www.idc.com].

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