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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector -- Ignore unavailable to you. Want to Upgrade?

To: patroller who wrote (1724)	9/13/1998 12:37:00 PM
From: Creditman	Read Replies (1) \| Respond to of 2542

Patroller, sorry, I disagree with you on the existence of "excess capacity". While there continues to be a trend towards outsourcing, especially the sale of OEM factories on "supply back" deals to ECMs, it is clear to me that price competition is intense among ECMs. Several have told me that when and if they ever attempt to raise prices to a customer, that customer shops other ECMs and invariable is offered a LOWER price. This lack of pricing power is clearly indicative of an excess capacity condition. I know more about the circuitboard ECMs than the full blown assemblers but I am pretty sure that lots of new capacity has been added in recent years; automated machines and lines, new factories, etc. Every time one of those supplyback deals goes down the acquiring ECM frees up more capacity that can be offered outside; adding shifts and installing equipment in empty parts of the acquired factory, for example. Right now the"big players" enjoy cost advantages over their small and mid-sized competitors and those smaller firms are in danger of being killed off. Maybe when that happens supply and demand will be more balanced.