* Benchmark Electronics, an EMS provider employing a ‘virtual’ electronics contract manufacturing business model, recently indicated the Company feels the vertical EMS model will have trouble in high-mix segments such as medical, industrial, and infrastructure-related product end-market segments. If this is the case, VO believes this could drive further revenue growth for other virtual models such as Plexus and Jabil and, adversely impact companies with vertical models such as Sanmina-SCI and Flextronics.
* OEM and EMS companies and some distributors are noting a rise in lead-times for ceramic capacitors and their pricing, respectively. VO is seeing some Japanese ceramic products with lead-times greater than three months. Meanwhile, the components sector, overall, is displaying pretty solid demand, low inventories, and somewhat stabilizing pricing and lead-times.
* A major flexible PCB manufacturer with a majority of its revenues from the handset and PDA market sectors recently increased its net income guidance roughly 25% due to stronger-than-expected handset strength. (Flexible PCBs are heavily used in the handset and PDA product markets as well as other markets). Some EMS companies with exposure to handset and PDA markets include Flextronics (~25% revenues), Jabil Circuit (5-10%), and Solectron (<8%).
* The rapid pace for outsourcing electronics product programs to China is not letting up. This is in spite of the fact China is not always the best low-cost geography solution. VO encourages executives to be more cautious when developing and executing their outsourcing initiatives. In addition to high-volume products like PCs, handsets, and consumer electronics, it appears OEMs are accelerating the relocation of more complex builds to Asia. There is reason to believe some EMS providers are under pressure from OEMs to relocate more complex communications infrastructure programs from North America and Europe to China.
VentureOutsource.com, January 2006
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