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Developing markets weather economic pains

11 Jan 2012  | Barbara Jorgensen

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In the wake of reports on the unemployment rate, the European Union's debt management, and the skyrocketing tablet-computer market, however, companies in the electronics supply chain believe that the next few quarters of 2012 will be tough. VentureOutsource, an EMS/ODM consultancy, released a survey last month that shows a different reality, at least as the electronics supply chain sees it.

On a scale of 1 to 10, with 10 being the most optimistic, the survey's respondents rate their current outlook at an average of 5.34. That figure is down 10% from a survey the company conducted six months ago. The demographics of the report show that 87% of respondents are responsible for participating in purchasing, sales, and operational decision-making. Nearly one in five works in the PC industry. VentureOutsource notes that recent results from companies such as Intel are positive but that smaller companies are reporting mixed results. Overall, the semiconductor segment is seeing revenue growth slowing and layoffs starting to take place. In certain areas, growth prospects are better, but the next several quarters will be challenging for semiconductor companies.

VentureOutsource does not anticipate that semiconductor end-user demand will see sharp uptakes and expects prices in most areas to decline. Few reasons exist for semiconductor decision-makers to be optimistic, except that inventories have already tightened, which means any uptick in demand may prove beneficial to their organizations. EMS/ODM companies, on the other hand, are likely wary of the order volatility they have seen and the worsening end-user demand. With the exception of a few areas, most product segments should see weak demand through 2012.

The report states that developing markets—so far a bright spot for electronics—are now starting to feel the economic pain. China's growth is slowing as both domestic and export markets show weaker demand. To meet these challenges, VentureOutsource notes, EMS/ODM companies have taken steps through the last recession to downsize and remove costs from their operations.

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