Global contract manufacturing revenue, consisting of sales by Electronics Manufacturing Services (EMS) and Original Design Manufacturing (ODM) providers, is not being affected by short-term credit issues and is expected to grow significantly for the next three years, according to iSuppli.
In 2008, the sector will grow by 8.3 per cent in 2008, says iSuppli, in 2009, growth will be 6.1 per cent, and in 2010 OEM demand will push contract-manufacturing growth to 7.6 per cent. In 2011, growth will rise to 9 per cent.
The multi-year expansion for contract manufacturing market will be driven by OEMs attempting to adjust their cost structures and enhancing their core competencies.
"OEMs, including Dell, are reported to be selling off up $15 billion in annual manufacturing revenues via a divestiture of desktop and integration facilities," said Adam Pick, principal analyst, EMS/ODM, for iSuppli, "furthermore, non-traditional OEMs-i.e. those in the medical, industrial, aerospace markets-will continue to explore, test and adopt external manufacturing partners during the financial downturn."
iSuppli's research also indicates that short-term credit issues are not currently impacting contract manufacturers' operations.
"Fear and concern that most contract manufacturers are at a short-run risk for bankruptcy appear to be overstated," Pick opined.
An analysis of the bankruptcy risk for the Top-8 EMS providers indicates that most providers remain in a financial safety zone. Furthermore, iSuppli's quick survey of EMS providers did not indicate any immediate risk specific to upcoming maturity dates for debt instruments. Finally, the short-term cash reserves of the top EMS providers should mitigate any short-term financial crisis.
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