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February 13, 2013

IHS Predicts Consistent Outsourced Manufacturing Market Growth Until 2016

By Rory Lidstone, TMCnet Contributing Writer

The outsourced manufacturing industry is expected to achieve moderate revenue growth this year in the face of ongoing weakness in the global economy. This is because many original equipment manufacturers (OEMs) will increase outsourcing activities to expand across multiple industries, namely consumer electronics, industrial electronics and automotive electronics.

In terms of numbers, revenue for the worldwide outsourced manufacturing industry in 2013 is forecasted to hit $404.5 billion — an increase of 4.5 percent over 2012's $387 billion. This is according to the IHS (News - Alert) Outsourced Manufacturing Intelligence Service from IHS, an information and analytics provider.

This year's growth is actually less than 2012, which saw outsourced manufacturing revenue increase by a full five percent. However, growth is expected to continue over the next three years, hitting $451.9 billion in 2016.

"Outsourced manufacturing is giving OEMs across multiple industries the capability to expand into new, fast-growing markets, including smartphones, tablets and industrial electronics," said Thomas J. Dinges, CFA, senior principal analyst for the IHS Outsourced Manufacturing Intelligence Service, in a statement. "Because of this, the OEMs will continue to take advantage of the flexibility provided by outsourced manufacturing."

Dinges went on to add that a "major economic dislocation" — two examples being the sovereign debt crisis in Europe and the U.S. response to realigning its long-term spending — could easily interrupt growth this year.

Two seemingly contrary elements are likely to be responsible for the manufacturing outsourcing market's growth: OEM customers looking to lower costs and outsourced manufacturing suppliers looking for improved cash flow. This will likely see OEM customers looking for what could be considered fair pay for outsourced manufacturing, while suppliers may turn to inventory reduction to achieve a stronger balance sheet.

There isn't expected to be any one major player in the market this year, but IHS predicts consumer-oriented companies will drive the majority of growth.

In October, IHS iSuppli reported that the consumer cloud grew substantially in 2012, predicting that 1.3 billion global consumers will adopt the cloud by 2017.

Edited by Jamie Epstein
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