What can we expect from the OEM markets this year?
While long-term visibility remains cloudy, the outlooks from major ODM/EMS companies give some perspective on the near-term expectations.
Looking at publicly traded EMS and related supply chain (connector suppliers and component distributors), median supply-chain sales came in ahead of implied fourth-quarter guidance, according to data from Deutsche Bank. For the December quarter, sales increased 5.1% year-over-year at the median, almost double that of guidance (2.6% growth).
Likewise, implied first-quarter median sales guidance is 4.3% growth year-over-year which points to continued growth for the supply chain.
“In general, supply chain growth continues to be driven by company-specific new program ramps, although management teams are seeing a more positive demand environment,” DB said.
Two players that just announced quarterly earnings, Celestica and Flextronics, agree that storage and server sales will slump. Another, Sanmina, sees that end-market as stable.
The related communications and telecom sector is seen by Celestica as a big gainer (up 20%), but not so much by Flex (down five to 10%) or Plexus (down 4 to 7%) or Benchmark (down 15% or more). Sanmina called the market stable.
Automotive has, ahem, driven much of the sales growth for many EMS companies for the past eight years. Flex and Fabrinet both expect the surge to continue. So does Kimball, for which automotive makes up 42% of its revenue.
Consumer is expected to take some hits. Flex sees a 20 to 30% drop, Jabil foresees a smaller loss, and Celestica expects flatness.
Medical/healthcare is a mixed bag. Jabil forecasts a 2% drop, IEC also expects it to be lower, while Ducommon and Plexus say flat. Benchmark, Sparton and Jabil see growth, likely in the low to mid single digits.
As for military/aerospace, IEC and Sparton see them as growing, while the larger EMS companies (Celestica, Sanmina, and Ducommon) see them closer to flat. Plexus is most bullish on the segment, at 14 to 16% growth.
Only Flex is bullish on industrial, forecasting 10 to 15% growth. Ducommon sees it as flat to 1% higher, while Celestica, Sparton and IEC don’t expect much either. Plexus predicts a 4 to 7% drop. Benchmark expects sales to fall in the high single digits.
Many EMS companies don’t break out semiconductor, test or instrumentation. An exception is Benchmark, which sees strength there, with anticipated growth or 10% or more.
Finally, remember when computing drove seemingly everything? Benchmark expects that sector to fall 30% or more. It’s a sign of how far computing has dropped in significance among North American-based EMS’s in that many of them now group it as part of consumer.)