Outsourcing forecast: "strong resurgence".

"We definitely see a strong resurgence in the industry." Those words were uttered by senior project manager Matt Chanoff at the latest Technology Forecasters Inc. (TFI, Alameda, CA, www.techforecasters.com) Quarterly Forum for Electronics Manufacturing Outsourcing and Supply Chain held at the Cisco facilities in San Jose, CA.

Chanoff commented that the year 2003 marked the official turning the corner that we in the electronics manufacturing business have been anticipating these past few years. TFI's research indicated that the total available market (TAM) for electronics manufacturing outsourcing increased nearly 5% in 2003 from 2002's negative growth. And total electronics manufacturing services (EMS) revenue moved right along with the TAM--from 2002's almost 10% drop to a respectable 8% growth in 2003.

Worldwide gross domestic product (GDP) had a slight uptick as well--from 2002's 2.8% to 3.3% in 2003. According to TFI, some of the strongest growth came from both China--the world's primary manufacturing region--and the U.S.--still the world's primary electronics market.

Chanoff also noted particular strength in the U.S. equipment sector; an upward trend in Japan's electronics and export sectors; and the lessening impact of the dot.compost and telecom bubbles that helped ignite this nastiness in the first place.

But, as Chanoff pointed out, even though the landscape is shifting toward the positive, the environment is still pretty gnarly. We're not in Kansas anymore. We're in Shenzhen. And we've got long-term impacts of that fact to consider--like the process of China becoming an actual market for goods. We've also got quite a few short-term impacts to deal with as well--such as cultural differences, China meeting World Trade Organization (WTO) requirements and the competition between the original design manufacturer (ODM) and the EMS provider.

Seems that everyone in recent years has underestimated the impact of the ODM to the EMS business. According to TFI, Chinese ODMs have the edge over U.S. EMS companies. TFI's research indicates that many OEMs are focusing on product range and, therefore, picking up ODM designs. So, despite TFI's positive forecast of a compound annual growth rate (CAGR) of 11.6% for EMS from 2002-2007, ODM CAGR is almost twice that at 21.9%. Although on much steadier ground than in recent years, the EMS business is still contending with a gnarly environment, indeed.

--Lisa Hamburg Bastin, Editor-in-Chief