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Race to Brazilian Market Begins for Contract Manufacturers
February 28, 2007 |Estimated reading time: 2 minutes
The strong market prospects in Brazil have the electronics world bubbling with anticipation. Electronics manufacturing activity in Brazil is expected to rise at a Compound Annual Growth Rate (CAGR) of 15.2 percent during the period from 2005 through 2011, according to iSuppli Corp.
Seeking to satisfy demand both inside and outside of Brazil, electronics contract manufacturers are expected to expand their activities in the nation to $6.2 billion by 2011, rising at a CAGR of 15.9 percent from $3.0 billion in 2006. Of this revenue, 97.8 percent will be generated by Electronics Manufacturing Service (EMS) providers and the remaining 2.2 percent will come from Original Design Manufacturers (ODMs), according to iSuppli.
Figure 1 presents iSuppli's forecast for Brazil's electronics contract manufacturing revenue for the period from 2005 through 2011.
Figure 1: Brazil's Electronic Contract Manufacturing Revenue Forecast, 2005-2011 (Millions of U.S. Dollars) Source : iSuppli Corp. | February
All about potentialThe BRIC nations are considered to be among of the globe's most dynamic emerging markets. The economic growth potential of these countries is remarkable, with all four expected to be among the five largest economies in the world by 2050. These countries are expected to represent more than 40 percent of the world's population and to generate a combined Gross Domestic Product (GDP) of $73 trillion during the next 40 years.
Because Brazil already represents 70 percent of the entire GDP of South America, it stands to be one of the world's largest destinations for investment dollars in the coming years.
But can Brazil keep up with the other BRIC countries?
Some say Brazil is falling behind China and India, given that the country's GDP was revised downward several times during 2006.
Government incentivesAlthough its government has maintained a protectionist approach to trade in the past, the Brazilian government is now seeking to stimulate the nation's export and import industries. Furthermore, to spur innovation, the government is seeking to offer contract manufacturers tax incentives in order to improve their design capabilities. Already these policies have prompted the expected entry in the near future of Taiwanese ODMs into the Brazilian market, according to iSuppli.
Additional reasons iSuppli believes contract manufacturing in Brazil is poised for growth include:-- The continued shift to outsourced electronics manufacturing-- A favorable view of select, electronic segments (e.g. compute, wireless, wireline) in the domestic Brazilian market -- A decrease in black market / pirated electronics system sales-- EMS providers already in Brazil are expanding their facilities (e.g. FIH), and new companies are poised to enter the market -- The export of Brazilian products is likely to increase to surrounding countries due to the country's participation in the South American free trade group known as MERCOSUR.-- A developing supply base, which will include local semiconductor fabs in the near future-- Because of high-cost manufacturing in North America and Europe, Brazil may represent an attractive, lower- cost alternative for EMS providers.Adam Pick is principal analyst for EMS/ODM at iSuppli Corp. For more about the Brazilian contracting manufacturing market, see Pick's recent report entitled: Outsourcing in South America: Brazil Builds a Foundation for Future. To learn further details, please visit:http://www.isuppli.com/catalog/detail.asp?id=7801