SAN JOSE – Revenues of electronics manufacturing services providers will grow 13% this year, down from 20% last year, according to a report by research firm Technology Forecasters Inc. The burst of the housing “bubble” coupled with astronomical energy prices could wreck the current recovery, the firm said.

TFI economic analyst Matt Chanoff said, “Two macroeconomic phenomena could have significant negative impact on overall worldwide GDP over the next five years: extended very high energy costs and the collapse of the housing bubble, either of which could lead to a drastic reduction in consumer spending and ultimately, recession.”
The firm says the most likely outcome is continued growth, however. Growth will range from 11% to 18%, depending on the end-markets served, TFI said. “Growth is certainly decelerating in the electronics and outsourcing industries, but we do think that the most likely scenario is continued top-line growth in most segments,” Chanoff said.

TFI released the data last month at its quarterly meeting, in Toronto.

The firm also recognized a trend in relative margins between EMS and ODM companies, with the latter consolidating at a faster rate. Said Chanoff: “Last spring, we discussed the structural oversupply in outsourcing that has led to significant declines in profitability for both EMS and ODM companies. Although net margins are lower for the EMS group as a whole than they are for ODMs, profits have been shrinking faster for the ODMs.”

  

	2004	2005	2006	2007	2008	2009
EMS	109.6	120.5	132.2	148.0	166.2	187.6
ODMs	69.5	81.9	95.2	111.2	128.6	148.0

The five-year CAGR is 11.4% for EMS and 16.3% for ODMs.