Warning: Cynicism ahead.
Two stories will dominate the EMS industry over the course of 2010: component shortages and health care reform. And, being naturally suspicious, I expect the industry to take full advantage of both.
To wit: It is clear that parts shortages began in the third quarter last year and are steadily mounting as demand intensifies. Component suppliers are reticent to bring massive amounts of new capacity online, and even while the SEMI equipment order books show dramatic year-over-year gains, much of that capacity won’t come into play until 2011. So problems with parts availability and even allocation will be here for some time to come.
For the past several quarters, EMS companies have been turning in improving results, but aren’t missing the opportunity to call attention to parts shortages as a reason why revenues aren’t even better than they were. In a way, the maneuver says, “Hey, we did great, but look at what we could have done,” implying that analysts should build that “potential performance” into their outlooks. It’s like getting a A- on an exam, then suggesting to the teacher how well you would have done had you had actually bought the textbook.
Then there’s health care. The ink wasn’t yet dry on the bill before AT&T said it would cost the company $1 billion in charges. That’s some mighty fast accounting from a company that still can’t get my $200 cellphone bill straight. Expect in the coming months lots of companies to “bury” operating inefficiencies and less-than-stellar financial results in their “health care” accounting.
Hey, I told you I was going to be cynical today.