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Market analysis

The worldwide electronics manufacturing services (EMS) market is a determining force in the production of electronics products and now accounts for almost 40% of all assembly. While the rate of growth for outsourcing is slowing, it still represents the most desired manufacturing model for the assembly of electronics products available to OEM companies.1

Total electronics assembly value is expected to grow at a compound annual growth rate (CAGR) of 5.7% from US$1.3trn in 2014 to US$1.8trn in 2019. Fueled by the demand for EMS services, the EMS industry is expected to grow at a CAGR of 6.2% from US$460bn in 2014 to US$621bn in 2019.1

Global flat panel display (FPD) industry revenue is expected to decline by 2% in 2015 to US$129.0bn from US$131.4bn in 2014. Dwindling thin-film-transistor liquid-crystal display revenues, declining panel demand in the PC sector, along with ongoing panel-price erosion are the primary reasons for overall FPD revenue declines this year.2

Starting in the second half of 2015, the overall consumption of active-matrix organic light-emitting diode (AMOLED) materials is expected to grow as LG Display increases the production of white organic light-emitting diode (WOLED) TV panels. During the first half 2015, the WOLED organic materials market reached US$58mn. However, in the second half of the year the market will increase nearly threefold, reaching US$165mn. The WOLED organic materials market is expected to grow at a CAGR of 79% from 2014 to 2019.3

Despite the strong market growth forecast, Flextronics posted revenue of US$5.6bn in Q2 2015, a year-over-year decline of 16.2% against US$6.6bn in Q2 2014 and a sequential decline of 6.5% against US$6.0bn in Q1 2015. Softness in the mobile devices business as well as broad declines in telecom, server and storage businesses contributed to the weak performance. As a result, revenues from the Consumer Technology Group (CTG) and the Integrated Network Solutions (INS) business groups were lower by US$657.2mn and US$473.9mn, respectively. These decreases were partly offset by growth in the High Reliability Solutions (HRS) group, attributable to higher sales to medical customers. Geographically, revenue declined 28.0% in China, 14.9% in the US, 18.9% in Brazil and 14.8% in other markets. Mexico and Malaysia showed revenue improvements of 6.7% and 0.8%, respectively. Net income of US$110.9mn was 36% lower year over year and 18.0% lower quarter over quarter. The decline in net income was due to a 7.5% decline in gross profit and a 10.4% rise in intangible asset amortization on account of three acquisitions in the medical devices and the household industrial markets.

Ingram Micro posted Q2 2015 revenue of US$10.6bn, a 3.3% decline over the same quarter last year due to weaker foreign currencies. Sequentially, revenue was flat. However, Ingram suffered a net loss of US$34.3mn in Q2 2015 compared to net profits of US$50.6mn in Q2 2014 and US$43.3mn in Q1 2015. This was due to a US$115.9mn non-cash, pre-tax charge related to the impairment of internally developed software as Ingram stopped its global ERP deployment program. The acquisition of Armada, Anovo and distribution businesses in Chile and Peru also led to operating expenses spiking by 22.3%. Ingram also saw interest income fall by 8.5%, interest expense rise by 15.1% and foreign exchange losses increase from US$582mn in Q2 2014 to US$6.7mn in Q2 2015.


1Global Information, Aug 2015

2EMSNow, Aug 2015

3I-Connect007, Aug 2015