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Leading Indicator Report for OEMs and EMS Providers
September 14, 2009 |Estimated reading time: 1 minute
Average EMS margin expectations by volume/industrial sector(000,000) $USD
<1
1-5
5-10
10-25
25-50
50-100
100-250
250-500
500-750
750-1B
>1B
Computing
38
28
22
18
14
12
10
8
7
6
6
Communications
36
28
23
19
15
12.5
10
8
6.5
6
6
Consumer
30
24
20
15
14
10
8
7
6
5
5
Industrial
42
32
26
22
20
16
14
12
11
10
8
Medical
42
30
25
20
18
16
14
12
11
10
8
Mil/Aero
45
32
28
22
18
16
15
12
11
10
8
Automotive
50
40
30
26
24
22
20
16
9
8
7
MAUI, HI — Charlie Barnhart & Associates LLC released Leading Indicators Q4CY2009 report on the electronics manufacturing business, tracking latency factors like global cost of labor, corporate EMS costs, and margins; hysteretic factors like geographic and sector pacing, as well as capacity utilization by geography; and probability factors such as risk constants by geography. Read last quarter's Q03CY2009 report here.
Labor costs are relatively flat, though generalizations of labor costs must take into account variations in worker skill level and other factors.
Margins in all sectors are expected to remain relatively constant in Q4CY2009 as backlogs and book-to-bill ratios stabilize. Historically, during times of flat to falling demand in the EMS industry, average margin expectation tends to be flat to very slightly down at the higher levels (i.e. $100M and above, as business at this level is extremely competitive at all times), down in the mid-range (i.e. >5M$ <100M$ as Tier I & II & III EMS aggressively pursue these opportunities to back-fill their factories) and flat to up slightly on the smallest projects (i.e. <$1M, as Tier IV EMS who require higher margins to be profitable become the primary solution for most of these opportunities).
With rare exception, all geographic areas saw capacity exceeding demand for production in July/August, a trend that has persisted throughout 2009. Capacity utilization is best in India and the Middle East, followed by China, then parts of Eastern Europe and South America and Mexico. Capacity utlization has declined globally from January/February 2009.
Lead-times remain relatively flat to slightly down and are expected to improve slightly over the balance of the second half of CY09 as demand is expected to remain soft as a result of the global economic situation.
For the full report, visit http://charliebarnhart.com/wp-content/uploads/2009/09/Sept-09-Leading-Indicators.pdf.
Read related manufacturing analysis:TFI Calls Manufacturing Downturn Catalyst to Manufacturing Strategyand the H02CY2009 manufacturing report Almost 40% of Manufacturers Predict Revenue Increase in H'02 2009