Software giant Microsoft has just reported Q3 revenues of US$20.4bn.the company revealed that Office 365 Home has signed up more than 4.4m subscribers in just three months.
Dublin: 25.04.2014 03.53AM
While the pace of mobile innovation has never been more impressive, it seems that 2010 will be a tough year for contract mobile manufacturers.
According to iSuppli, the world’s Top 10 contract manufacturers of mobile phones will experience a difficult 2010 following a year that upended their longstanding business models and dealt them unprecedented losses.
Overall mobile phone shipments for the Top 10 Original Development Manufacturers (ODM) and Electronic Manufacturing Services (EMS) providers will rise by 3.4pc to 204.2m units in 2010, up from 197.5m in 2009, said Jeffrey Wu, senior analyst for EMS & ODM at iSuppli.
However, viewed from the perspective of an industry accustomed to double-digit growth, the slight increase is no cause for celebration, Wu noted.
“The relatively flat growth anticipated in 2010 by the top contract manufacturers for wireless handsets is unimpressive when juxtaposed against the steep 30pc plunge recorded by the group last year,” Wu said.
At that time, shipment levels fell from 280.9m units in 2008, iSuppli figures show.
The persisting challenges for the wireless handset contract manufacturers represent a carry-over of the upheavals in 2009, when a fall in the global wireless handset market forced key strategic shifts throughout the industry supply chain, Wu said.
Responding to reduced demand, many mobile handset firms adjusted their overall manufacturing and outsourcing strategies, in the process impacting ODMs and EMS providers alike. As such, prospects remain gloomy in 2010 for the group, Wu noted.
Among OEMs using the services of the contract manufacturers — outsourcing strategies are being adjusted in the face of the recession, and OEMs remain cautious about re-engaging contract manufacturers in case the market does not recover as quickly as expected.
Nonetheless, the overall wireless handset market will bounce back this year, not only growing 12.8pc to 1.5bn units, but also expanding at a Compound Annual Growth Rate of 6.8pc from 2009 to 2014 — suggesting that recovery could be around the corner even for the Top 10.
One example of the severe blow absorbed by contract manufacturers is exemplified in the 2009 decision by Nokia Corp. to bring in-house previously outsourced orders. iSuppli estimates that Nokia’s overhaul of its old business model translated into revenue losses among contract manufacturers reaching up to $5bn.
Sharing similar concerns about internal capacity utilisation, other OEMs contemplating a ramp-up in contract manufacturing services then either reduced the size of their outsourcing programs or halted outsourcing considerations altogether.
In addition to the pullback from these companies, the market-share losses of Motorola Inc. and Sony Ericsson — two major Tier 1 OEMs that relied on contract manufacturers heavily — rippled through the chain, impacting the manufacturing partners of the two giants down the line.
Demonstrating the difficulties for wireless handset contract manufacturers, shipments effectively halved in 2009 for some major players, such as Foxconn International Holdings, Flextronics International Ltd., Compal Communications Inc., Arima Communications Corp. and Elcoteq SE.
Wu observed that while expanding into manufacturing for the smart-phone segment allowed big-name contract manufacturers to obtain new orders from Tier 2 OEMs, those gains could not offset the larger losses that slipped away from the pullback of bigger customers, such as Nokia and Sony Ericsson.
“Ultimately, it is only when robust growth is attained in the wireless handset market and confidence restored among firms that contract manufacturers can expect to revitalise their pipeline,” Wu said.
By John Kennedy
Photo: The world’s Top 10 contract manufacturers of mobile phones will experience a tough 2010, iSuppli suggests