The EMS sector posted 10% average revenue growth quarter over quarter in Q4’14. EMS companies realized 5.1% growth in revenue in 2014 while leading ODM companies grew at a slightly slower rate of 4.7%. A lot of this positive growth was due to strong demand for smartphones. Growth in the EMS industry has been gradually slowing (particularly in the last three years) to the point that it is equal to or sometimes less than that of the overall electronics (OEM) industry growth. However, the Auto (smart cars) and medical fields (instruments) are fueling growth for electronics which is positively impacting EMS.1
In 2014, the largest EMS company in the industry, Foxconn, is in the process of reversing this trend by becoming a hybrid supplier and migrating more toward ODM, and then, ultimately, OEM services.2
Avnet’s sales increased at an 11% CAGR over the last five years, from US$16.2bn in fiscal year 2009 to US$27.5bn in 2014. After two years of zero growth, sales picked up in fiscal year 2014. Without considering acquisitions worth 500 million in sales, revenue grew 5.2% year over year. Arrow had higher gross margins than Avnet, but gross profit has been volatile. Avnet's management has been focused on improving profitability. Avnet has also invested in working capital to sustain future sales growth, so it is expected to show some improvement in revenue and also margin expansion in the coming quarters.
Flextronics reported positive earnings, with a 10% increase in net income and a 7.6% increase in revenue sequentially. The company had net sales of US$7.02bn, and EPS increased 15% year over year to US$0.30. The company continued its aggressive buyback program, repurchasing 8 million shares for US$84mn. The company has also repurchased over 30% of all outstanding shares since 2010 and has authorization to repurchase another 20%. Flextronic’s US$33.7mn free cash flow helped to fund the buyback program.
Ingram’s revenues of US$14.0bn in Q4’14 were up 24.2% quarter over quarter against US$11.2bn in Q3’14 and 17.9% year over year against US$11.8bn in Q4’13. Growth was driven by a strong rise in sales globally across all majors verticals, such as mobility, supply chain solutions and cloud. An extra week in the quarter (14 weeks in Q4’14 as opposed to the 13 weeks in both Q3’14 and Q4’13) also helped boost revenues by 7%. The benefit of higher revenues also reflected on the company’s net income, which stood at US$119.0mn in Q4’14, an impressive quarter-over-quarter improvement of 64.8% against US$72.2mn in Q3’14 and a year-over-year improvement of 6.1% against US$112.2mn in Q4’13.