industry report homework notes

industry report homework notes - Producers of electronic...

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Producers of electronic equipment mainly for the OEM (Original Equipment Manufacturers) markets. Electronics Manufacturing Services (EMS) companies, found within the Electronics Industry, provide production and design services to firms that utilize electronics components and printed- circuit-boards. Major firms in the communications, computing, wireless, consumer electronics, test/instrumentation and other industries often hire these companies , primarily for the purpose of reducing their cost of goods. The EMS sector is highlighted by firms with solid revenue prospects, though some probably rely on a few sizable customers, and operating margins are usually narrow. EMS firms typically attract outsourcers through their abilities to manufacture products at a reduced total cost . These companies also tend to offer expertise in production and design , as well as supply-chain management capabilities that allow for an accelerated time-to-market and ramping up of output volume. Other advantages to electronics companies of hiring EMS firms may include improved inventory management and purchasing power, in addition to reduced capital investment requirements . As a result, demand for EMS services has generally been climbing, and more industries have been jumping on board. The largest EMS entity covered by Value Line is Flextronics International (FLEX), which derives a large proportion of its business from telecom (infrastructure and wireless) entities. Names of other providers consist of Jabil Circuit (JBL), Celestica (CLS), Sanmina-SCI (SANM), Benchmark (BHE), and Plexus (PLXS) . The profit outlook for companies firms is bright for 2011. Demand from key industries is mostly strong, based, in large part, to the vigorous market for handheld wireless products. Flextronics’ personal computing-related sales are likely to double this year, given deals to make tablet PCs. Benchmark also should realize benefits of recently entered computing contracts. A healthy market for consumer products ought to support top- and bottom-line gains, too, such as for Celestica. On the other hand, however, there are some concerns surrounding soft demand from the optical networking and defense industries, as recently indicated by Sanmina-SCI management. At the same time, numerous EMS players’ share earnings will probably gain from increased outsourcing activity in several emerging industries. As only less than 25% of production is currently outsourced, there exist ample opportunities for growth from new customers. Examples include those in the automotive, medical, and industrial control equipment fields. Revenue growth from these markets may well outpace those from traditional outsourcers. Also, margins could well widen, but spending is also required to ramp production programs to full volume. Overall, margins for these companies are tight because of stiff competition with each other and
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This note was uploaded on 03/30/2012 for the course BUSM 409 taught by Professor Bryansudweeks during the Winter '11 term at BYU.

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industry report homework notes - Producers of electronic...

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