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Revenue for Contract Manufacturers to Grow 8.5 Percent in 2011

The global electronics contract manufacturing industry will grow 8.5 percent to $376.7 billion in 2011, but electronics manufacturing companies will face profit margin pressures, according to researcher IHS iSuppli.

The electronics contract manufacturing industry, which consists of electronics manufacturing services (EMS) providers and original design manufacturers (ODMs), will have single-digit annual growth through 2014 when industry revenue will total more than $472 billion.

While the industry will grow sales, it is "grappling with reduced profit margins" for some consumer product segments because of intense competition, according to Thomas Dinges, principal analyst for outsourced electronics manufacturing at IHS.

ODMs tend to build price-sensitive notebook computers and other consumer electronics equipment, and many ODMs had declining margins last year. The average gross margins for the ten largest ODMs declined by 1.16 percent in 2011, according to IHS iSuppli. Dinges said ODMs and EMS providers that have a more balanced product portfolio that doesn't focus on computers and consumer electronics equipment had better margins.

China will also have an impact on profit margins in 2011 because much of electronics manufacturing occurs in China and wages and material costs there are increasing. Industry margins in 2011 are apt to be flat or even decline, according to IHS iSuppli.