The contract manufacturing industry is expected to grow this year despite continued economic weakness worldwide, according to a new report from industry analyst IHS.
In a report from its Outsourced Manufacturing Intelligence Service, IHS pegs the industry growth at 4.5% this year, to $404.5 billion. That’s slower than the 5% growth the industry saw in 2012, but IHS predicts steady, though unremarkable, growth for contract manufacturers worldwide over the next three years. By 2016, the group says revenue will rise to nearly $452 billion as original equipment manufacturers seek to boost production to serve customers in consumer electronics, industrial and automotive markets.
“Outsourced manufacturing is giving OEMs across multiple industries the capability to expand into new, fast-growing markets, including smart phones, tablets and industrial electronics,” said Thomas J. Dinges, CFA, senior principal analyst for the IHS Outsourced Manufacturing Intelligence Service. “Because of this, the OEMs will continue to take advantage of the flexibility provided by outsourced manufacturing.”
Dinges added that a “major economic dislocation” could easily derail market growth, pointing to the sovereign debt crisis in Europe and the U.S. response to realigning its long-term spending trajectory.
IHS also noted two key trends to watch in contract manufacturing: customers’ desire to lower costs and suppliers’ drive for improved cash flow. And the group says the next big driver for contract manufacturing is still to be determined. Recently, industrial and higher-mix customers have spurred growth, but growing demand for smart, consumer-oriented gadgets may create a shift as those manufacturers contemplate new ways to produce their products.