MANUFACTURING

Hon Hai Precision Industry

Contract electronics manufacturing set for modest growth in 2013

Electronics outsourcing industry appears on track for steady expansion over the next few years, provided global economy co-operates

PUBLISHED : Thursday, 14 February, 2013, 12:00am
UPDATED : Thursday, 14 February, 2013, 4:53am

With mainland China as the hub of global production, the electronics contract manufacturing industry is forecast to post moderate revenue growth this year as it reaches a record US$404.5 billion.

That would mark a 4.5 per cent increase from US$387 billion last year, according to electronics market research firm IHS iSuppli.

In a report, IHS senior principal analyst Thomas Dinges said: "While this year's growth is slightly down from the estimated 5 per cent rise that the industry enjoyed in 2012, the next few years appear on track for solidly reliable - if unspectacular - rates of increase."

Provided the global economy co-operates, the industry's total revenue is projected to hit US$451.9 billion by 2016.

"Outsourced manufacturing is giving OEMs [original equipment manufacturers] across multiple industries the capability to expand into new, fast-growing markets, including smartphones, [media] tablets and industrial electronics," Dinges said.

Technology giant Apple, for example, has mainly relied on outsourced manufacturing to ramp up production and supply of its products worldwide.

Hon Hai Precision Industry, Apple's primary contractor for the iPhone and iPad, is the industry's biggest player.

The Taiwanese company owns and operates dozens of electronics manufacturing subsidiaries, which are collectively known under the trade name of Foxconn Technology Group.

This group employs about 1.2 million people across its various operations on the mainland, which include Taipei-listed Foxconn Technology and Foxsemicon Integrated Technology, and Hong Kong-based mobile phone maker Foxconn International.

The IHS report said both industry players and their customers were expected to closely monitor potential factors that could affect their businesses. These include the sovereign debt crisis in Europe, the United States' response to government spending and the new leadership on the mainland.

Li Keqiang, the premier-in-waiting who will succeed Wen Jiabao next month, has encouraged greater market competition in the country as a way to stimulate trade, boost consumption and create more jobs.

IHS also expects electronics contract manufacturers this year to sharpen their focus on increasing efficiency, lowering operating costs and cutting inventory, while negotiating for fair pay with their customers.

Bernstein Research senior analyst Alberto Moel forecast industry leader Hon Hai to see stronger margins this year due to improved productivity and an increase in components it supplies for Apple products.