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2013 Contract electronics industry sees 4% to 5% growth

Despite lingering weakness in the global economy and continuing uncertainty in technology markets, the outsourced manufacturing industry is expected to post moderate revenue growth this year as original equipment manufacturers (OEM) increase their outsourcing activities to capitalize on opportunities for expansion across multiple industries including consumer electronics, industrial electronics and automotive electronics, according to analytics firm IHS.

 

 

Revenue in 2013 for the worldwide outsourced manufacturing industry is forecast to reach US$404.5 billion, up 4.5 percent from $387.0 billion last year.

While growth for 2013 is slightly down from the estimated 5.0 percent rise the industry enjoyed in 2012, the next few years appear on track for solidly reliable — if unspectacular— rates of increase provided the global economy cooperates.

By 2016, contract electronics revenues will amount to $451.9 billion, as shown in attached figure, following the industry’s recovery from the declines seen in 2008 – 09.

Potential economic troubles that could undermine market growth include the sovereign debt crisis in Europe and the U.S. response to realigning its long-term spending trajectory.

Providers and customers driving opposing forces
2013 will also see the industry attempt to balance two key trends, each likely to pull in the opposite direction: OEM customers wishing to lower their costs on one hand, versus outsourced manufacturing providers hoping to see improved cash flow on the other.

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From their end, OEM customers will want to know what price is considered fair to pay an outsourced provider in order to make their product thus forming part of the client’s effort to reduce overall manufacturing costs. See: Understanding provider contract agreements and cost)

For providers, on the other hand, concerns will focus around how to reduce inventory in order to achieve a stronger provider balance sheet; how to do more with less, especially in the area of capital expenditures; and how to bring down operating costs as a whole.

In essence, how both themes play out this intricate interplay — between hard-nosed OEM customers wanting lower prices but faster supply chain responsiveness and cash-generation focused manufacturing providers -— will prove of great interest.

The next big player
One issue of interest to the industry revolves around which organization will become the next big player to drive the space. In the past decade, for instance, particular customers or end markets fueled growth, only to be superseded by other actors and variables.

First came contract electronics industry growth via the consolidation of assets spun out of OEMs. This was followed by a massive asset shift to China as it became the hub of outsourced manufacturing. (See: Managing China supply chains)

Ultimately, this led to the rise of consumer electronics products such as smartphones and tablets, which served as palpable tickets to success for both clients and their manufacturing partners alike.

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The industry has shifted somewhat the past few years as it then turned its attention to industrial and higher mix customers as a means to drive growth, with consumer-focused companies becoming the somewhat less favored entities afterward. Now, the bet is being made on an alliance of sorts between those last two forces.

Growth remains with consumer-oriented companies that make the gadgets desired by the purchasing public everywhere, but those companies in turn are spurring enterprises to help companies capitalize on new ways to grow.

These new highways to growth include consumer traffic, commerce and data—avenues that can be exploited by devices like smartphones, tablets, and other interactive ‘smart’ devices.

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