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EL SEGUNDO, CA — Contract electronics manufacturers will not escape the impact of the current economic downturn, but will continue to expand and even experience a mild rebound in three years, according to iSuppli Corp.

Global EMS revenue, including ODM providers, is expected to grow 8.3% in 2008, down from 16.1% in 2007. iSuppli previously forecasted growth of 9.1% this year.

In 2009, growth will slow to 6.1%, as the global recession sets in and demand from consumers and enterprises continues to soften. In 2010, OEM demand will stabilize and contract-manufacturing growth will rise to 7.6%. In 2011, growth will rise to 9%, as the global electronics and contract manufacturing markets recover.

“Speculative activities specific to the housing market and mortgage-backed securities will or already have triggered a recession in the United States that could spread across the world,” observed Adam Pick, principal analyst, EMS/ODM, for iSuppli. “Demand specific to the electronics marketplace will continue to soften. As the end-markets erode due to recession, the trickle-down effect will cause less significant revenue growth for electronics supply-chain participants, including EMS/ODM providers.”

However, the EMS market will continue to expand during this period, as OEMs attempt to adjust cost structures and enhance core competencies.

“OEMs, including Dell, are reported to be selling off up to $15 billion in annual manufacturing revenues via a divestiture of desktop and integration facilities,” Pick said. “Furthermore, non-traditional OEMs – i.e., those in the medical, industrial, aerospace markets – will continue to explore, test and adopt external manufacturing partners during the financial downturn.”

The firm indicates short-term credit issues are not currently impacting contract manufacturers’ operations. “Fear and concern that most contract manufacturers are at a short-run risk for bankruptcy appear to be overstated,” Pick opined.

An analysis of the bankruptcy risk for the top eight EMS providers indicates most providers remain in a financial safety zone. Furthermore, iSuppli’s quick survey of EMS providers did not indicate any immediate risk specific to upcoming maturity dates for debt instruments. Finally, the short-term cash reserves of the top EMS providers should mitigate any short-term financial crisis.

During the last major recession, between 2001 and 2003, the contract manufacturing industry managed to maintain growth, and then experienced a surge in revenue in 2004 as the market recovered. The EMS/ODM industry has frequently noted this “rubber-band effect,” where the market snaps back vigorously from industry downturns.

“This recession and recovery will be fundamentally different for the contract manufacturers,” Pick stated. “There are several macroeconomic and industrial factors that will prohibit the revenue explosion we saw in 2003, 2004 and 2005.”

ELKHART, IN -- The top financial officer of CTS Corp. yesterday suggested the economy is straining smaller EMS firms, thus opening the door for larger players.

On a conference call with analysts, president and chief financial officer Vinod M. Khilnani said, "Financial constraints on smaller tier three and tier four competitors are presenting new business opportunities for our EMS business."

ANGLETON, TX -- Benchmark Electronics today announced that cofounders Steven A. Barton and Donald E. Nigbor will retire effective Dec. 1. Both have served as directors for more than 20 years.

Barton and Nigbor will remain directors until the 2009 annual meeting of shareholders. The board intends to nominate chief executive Cary T. Fu to succeed Nigbor as chairman, effective in May 2009.

Fu will become the last of the founders to remain with the company.

Benchmark was founded in 1986.

STAMFORD, CT -- The economic crisis is having a significant impact on the semiconductor industry, as worldwide semiconductor revenue growth in 2009 is expected to be 1%, down by approximately seven points from previous estimates, according to preliminary estimates from Gartner Inc.

In the third quarter, worldwide semiconductor revenue for 2009 was forecast to be $307.7 billion, a 7.8% increase from 2008. Gartner now expects worldwide semiconductor revenue in 2009 to total approximately $282 billion, a 1% increase.

Although semiconductor companies mostly met expectations for the third quarter (the semiconductor industry grew by approximately 5% quarter over quarter) guidance for the fourth quarter continues to drop. Gartner estimates worldwide semiconductor revenue in 2008 to total $279.4 billion, a 2% increase from 2007.

"Semiconductor growth was surprisingly strong until recently, given the very weak economic environment, but this will start to change in the fourth quarter of 2008," said Bryan Lewis, research vice president at Gartner. "Mounting evidence suggests that the semiconductor industry will see negative growth starting in the fourth quarter of 2008, and that this will continue throughout most of 2009."

Gartner assesses the potential impact on semiconductor growth by checking the sensitivity of changing demand in key application markets. Gartner applied assumptions to reductions in system units and reductions in semiconductor content in systems. PCs and cellphones account for approximately a third of the total semiconductor market, so they are the biggest applications for adjusting growth. For example, if the system unit percentage change of PCs is lowered by 8%, this would impact semiconductor growth by 1.61%.

"In a recession, it's important to remember that there will not only be a potential reduction in the number of systems sold, but also a move to lower-cost systems with less semiconductor content," Lewis said.

HARTLEPOOL, UK -- Stadium Group has purchased neighboring electronics manufacturer Zirkon Ltd. in a deal worth $4 million.

LIMERICK, IRELAND -- Flextronics plans to lay off at least 100 workers at the Raheen Industrial Estate here, according to published reports.

Flextronics employs 290 people at its warehousing operations in Limerick, where it supplies Dell and other local companies, the Limerick Leader newspaper said.

SINGAPORE – Surface Mount Technology reported September quarter revenue of $146.8 million, and a loss of $1.3 million. In the June quarter, the EMS company reported a loss of $900,000.

For the six-month period ended Sept. 30, the group’s revenue was $314.5 million, up about 3.1% year-over-year. The firm reported a loss of $2.2 million for the period, compared to a profit of $5.6 million last year. The year-over-year revenue growth resulted mainly from higher demand for turnkey projects in consumer products, the company said.

“The world is experiencing an unprecedented financial and economic crisis. Market demand for export is softening. The global outlook is very uncertain. We are taking proactive measures to push for more China domestic sales and intensify our cost reduction efforts,” said Chan Kei Biu, chairman and senior managing director.

MACAO -- Nam Tai Electronics chief executive Masaaki Yasukawa tendered his resignation, effective immediate, citing family reasons. The company has named Wong Kuen Ling (Karene Wong) president and acting chief executive.

Wong has been with the company since June 1989, and since 2007 has been chairman of NTEEP.

Nam Tai is the world's 20th largest EMS provider, but its revenues have plunged more than 20% this year through September.

MACAO – EMS provider Nam Tai Electronics reported third-quarter sales fell 21.5% to $160 million, while gross profits and net earnings both dropped more than 60% year-over-year.

BANNOCKBURN, IL – IPC will host a meeting with European automotive industry leaders, including Porsche, Volvo and Volkswagen, to investigate adding automotive-specific requirements for electronics used in cars, trucks and military vehicles to IPC-A-610D, Acceptability of Electronic Assemblies.

A kickoff meeting will be held Nov. 12 in Munich to select a committee. Technical professionals involved with quality, reliability, production and purchasing of electronic parts and assemblies for the automotive industry are invited.

“Ideally, we would like to publish an automotive addendum to IPC-A-610D within nine to 12 months,” said Lars Wallin, IPC European representative.

Jack Crawford, IPC director of certification and assembly technology, will moderate the meeting.

For more information and to register, contact Lars Wallin, LarsWallin@ipc.org.

SAN JOSE -- Worldwide sales of semiconductors rose 1.6% year-over-year to $23 billion in September, and 1.1% from August, the Semiconductor Industry Association said last night.

HERNDON, VA – Dr. Robert C. Pfahl Jr., vice president of global operations for iNEMI, received an Electronics Goes Green 2008+ award in Berlin last month.

Pfahl received the award “for his commitment to environmental protection and inspiring ideas concerning sustainable development in technology and business solutions.”

Prior to joining iNEMI in 2002, Pfahl was director of international and environmental research and development for Motorola Labs.