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First-Half Revenue Declines 7.6% Vol. 26, No. 9 September 2016 First-Half Revenue Declines 7.6% Based on first-half results of 20 of the largest contract manufacturers, Chart 1: First‐Half Growth Year on Year neither the EMS model nor the 0.0% ODM approach exhibited growth this year so far. Combined first-half ‐2.0% sales of 11 large EMS providers ‐2.2% declined 8%, whereas the aggregate ‐4.0% sales of six large ODMs dropped 10.3%. Apparently, both groups ‐6.0% were buffeted almost equally by the macroeconomic headwinds swirling ‐8.0% ‐7.6% about the global economy. But that ‐8.0% is not the end of the story of the first ‐10.0% six months. ‐10.3% There is a third class of contract ‐12.0% manufacturer—the hybrid 11 EMS Providers 6 ODMs 3 Hybrid Providers 20 CMs Combined provider—that does substantial amounts of both EMS and ODM The companies with the strongest group was Pegatron, of which EMS business. In conformity with the improvement in terms of year-to-year accounted for approximately 91% of its total decline of the ODM group, gain were Kinpo Electronics revenue. Pegatron has emerged as one of the combined sales of three large hybrid (148.5%), Amtran Technology world’s largest contract manufacturers, CMs dropped in the first half. The (38.3%), Inventec (9.1%), Sanmina having risen to second biggest in terms of hybrid group’s revenue declined (7%), and Celestica (4.5%). total first-half revenue (see Table 1, p. 2). only a minor 2.2% year over year, Foxconn’s gross revenue declined While Pegatron has been known as an more than 50 percentage points from $63 billion to $58 billion, a drop ODM, much of its recent growth has been better than the performance of the of 8.7%. The most negative result fueled by its Apple assembly business, other two groups (Chart 1). If this occurred among the ODM group, which has expanded the EMS piece of comparison can be generalized, it which experienced a 10.3% decline Pegatron’s revenue pie. Reportedly, would seem that the hybrid model rate for the first half of 2016. Pegatron has built iPad Mini tablets and did a better job of withstanding the The biggest player in the hybrid some versions of the iPhone for Apple. vicissitudes of the first half. Hybrid companies benefited from the rebound in demand for smart Some articles in this issue phones and tablets, plus a Cover Story…………………………………………………………………………………….1 resurgence from traditional First‐Half Revenue Declines 7.6% industries such as medical, First‐Half Decline for Asian Group…………………..…………………………………….….3 industrial, and transportation, where Some Quarterly Results ..…….……………………………………………………………………4 ODMs have only a minor Company News…………………………………………………………..………….…………………5 manufacturing presence. Foxconn Dissolves Japanese Unit………………..……………………………………….……7 Table 1: Q2 and Six-Month 2016 Results for 20 of the Largest Contract Manufacturers (M US$ or %) Qtr.- Q1–2 Q1–2 Q1–2 Q1–2 Primary Head- Reports 2Q2016 1Q2016 2Q2015 Yr.-yr. 2Q2016 1Q2016 2Q2015 Yr.-yr. Company qtr. '16 '15 '16 net '15 net business quarters in US$ Sales Sales Sales chg. Net Inc. Net Inc. Net Inc. chg. chg. sales sales profit profit Hon Hai EMS Taiwan No 28,585.4 29,766.6 –4.0 31,525.7 –9.3 548.2 856.8 832.6 58,352.0 63,936.1 –8.7 1,405.1 1,803.7 Quanta ODM Taiwan No 6,437.7 6,132.3 5.0 8,135.2 –20.9 108.5 112.4 109.3 12,570.1 14,693.0 –14.4 220.9 226.7 Pegatron ODM/EMS Taiwan No 6,964.0 7,966.1 –12.6 7,063.1 –1.4 123.6 127.6 150.9 14,930.1 15,828.3 –5.7 251.2 353.1 Compal ODM Taiwan No 5,360.8 5,488.7 –2.3 6,450.7 –16.9 53.8 49.8 48.8 10,849.6 12,782.2 –15.1 103.6 113.2 Flex EMS Singapore Yes 4,332.3 5,772.7 –25.0 5,566.2 –22.2 77.9 61.3 110.9 10,105.0 11,517.8 –12.3 139.3 246.0 Wistron ODM/EMS Taiwan No 4,545.3 4,185.2 8.6 4,734.3 –4.0 19.1 11.9 2.5 8,730.5 9,550.7 –8.6 31.0 25.6 Jabil EMS Florida Yes 4,310.8 4,403.6 –2.1 4,358.6 –1.1 5.2 78.9 70.5 8,714.3 8,668.0 0.5 84.1 123.4 Inventec ODM Taiwan No 3,358.2 2,963.1 13.3 2,939.4 14.2 43.8 38.3 37.9 6,321.2 5,793.4 9.1 82.1 84.4 Sanmina EMS California Yes 1,669.5 1,611.2 3.6 1,539.3 8.5 29.5 30.4 24.5 3,280.6 3,066.8 7.0 59.9 39.2 Celestica EMS Canada Yes 1,485.5 1,353.3 9.8 1,417.3 4.8 36.2 25.6 24.2 2,838.8 2,715.8 4.5 61.8 43.9 Cal-Comp EMS Thailand No 688.3 966.0 –28.7 1,225.3 –43.8 7.5 12.4 9.8 1,654.3 2,617.8 –36.8 19.9 28.0 Electronics Qisda ODM Taiwan No 977.1 987.0 –1.0 1,076.3 –9.2 24.7 16.0 23.3 1,964.1 2,112.7 –7.0 40.7 43.2 Universal Scientific EMS China No 756.8 904.4 –16.3 890.1 –15.0 13.0 33.7 25.4 1,661.2 1,660.4 0.0 46.8 56.5 Industrial Plexus EMS Wisconsin Yes 667.6 618.7 7.9 669.6 –0.3 26.1 16.8 23.8 1,286.3 1,320.9 –2.6 42.9 47.4 Benchmark EMS Texas Yes 579.3 549.2 5.5 664.0 –12.8 12.7 11.1 21.2 1,128.6 1,285.0 –12.2 23.7 35.4 Electronics Shenzhen Kaifa EMS China No 552.0 637.5 –13.4 656.8 –16.0 23.4 6.2 8.2 1,189.4 1,372.5 –13.3 29.6 14.4 Venture Corp EMS Singapore No 507.7 468.4 8.4 490.9 3.4 32.2 26.6 26.8 976.0 934.6 4.4 58.9 50.5 Kinpo ODM/EMS Taiwan No 1,020.9 879.0 16.1 371.1 175.1 13.1 13.9 18.8 1,899.9 764.4 148.5 27.0 32.6 Electronics Ability ODM Taiwan No 92.5 86.2 7.3 160.0 –42.2 1.6 (0.9) 6.2 178.7 308.6 –42.1 0.7 10.0 Enterprise Amtran ODM Taiwan No 208.4 121.0 72.2 151.3 37.8 10.9 31.9 3.9 329.5 238.3 38.3 42.8 6.3 Technology Total/avg. 73,100.1 75,860.2 –3.6 80,085.2 –8.7 1,211.2 1,560.7 1,579.5 148,960.2 161,167.3 –7.6 2,772.0 3,383.5 Total/avg. without 44,514.6 46,093.5 –3.4 48,559.6 –8.3 663.0 703.9 746.9 90,608.2 97,231.2 –6.8 1,366.9 1,579.8 Hon Hai Results in non-US currencies were converted to US dollars by applying a three-month average exchange rate for the corresponding quarter. Average exchange rates were based on monthly 2016 and 2015 data from the US Federal Reserve. Company net profits shown here are attributable to shareholders. Net profit totals are approximate because not all companies follow the same accounting standard. Wistron is another large player iPhone 5C and iPhone 6, according to comprise the smallest of the three groups operating as both an ODM and an people who are familiar with the matter. into which the 20 CMs are divided. Sales EMS provider, the latter function The third and final company placed of the hybrid CMs totaled $25.6 billion, or accounting for approximately 21% of in the hybrid group is Kinpo 17% of the combined sales of the group of revenue. Although the company has the Electronics, of which the New Kinpo 20. By far the largest share of total sales— reputation of being a major notebook Group accounts for 70% of EMS 60%—belonged to the EMS group, ODM, Wistron has a history of doing revenue. The New Kinpo Group is a while the ODMs generated 23% (Chart 2, business on both sides of the outsourcing subsidiary of the holding company p. 3). street. Wistron has reportedly been Kinpo Group, which owns and First-half sales of the 20 CMs selected to become part of the supply manages 23 subsidiaries (for example, amounted to $149.0 billion, a decrease of chain for Apple, Inc.’s next-generation, the Compal Group and the VIBO 7.6% year over year. MMI believes that larger iPhone and was expected to start Services companies), seven of which this figure can be used as a proxy for the shipping the product in August this year. are publicly listed corporations. By board- and system-level outsourcing space, Previously, Wistron helped assemble first-half revenue, the hybrid providers since these 20 companies account for the Apple’s Manufacturing Market Insider, September 2016 2 vast majority of revenue from the space.
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