Foxconn to rule EMS market in 2011, thanks to Apple

Powered by accelerated growth at Apple, Foxconn Technology Group is poised to take over half of global EMS industry revenue by 2011, up from 44.2 percent in 2009, according to iSuppli Corp. "Foxconn's customers are some of the hottest companies in the electronics business today, most notably Apple Inc.," explains to Thomas Dinges, iSuppli associate. He says, as Apple and others have gained share, so has Foxconn.

Foxconn was the dominant EMS provider in the first quarter of 2010 with revenue of $17.1 billion, dwarfing the next player Flextronics International, which posted a revenue of $5.9 billion during the same period.

Foxconn's revenue in the first quarter surged 54.1 percent from $11.1 billion during the same period in 2009. Part of Foxconn's revenue boom is because of the industry wide strength of the digital consumer business as well as a strong recovery in computing-related products. Furthermore, the company dramatically outperformed the 27.5 percent year-over-year revenue increase for the Top 10 EMS providers in the first quarter, reflecting the strength of its customer base.

iSuppli last week noted that Apple had issued increased production targets for the iPad to its Asian suppliers. iSuppli now predicts that Apple will ship 12.9 million iPads in 2010, an amount that will nearly triple to reach 36.5 million in 2011. On the other hand, global iPhone shipments are expected to rise to 53.5 million in 2011, more than double the 25.1 million in 2009. To support this massive increase in production, Apple is gearing up its semiconductor purchasing. By 2011, Apple will become the world's second-largest purchaser of semiconductors through direct and indirect channels. Indirect channels include purchases through EMS providers, such as Foxconn.

With Foxconn controlling nearly 50 percent of EMS industry revenue, the company's strong performance is driving the overall market. The company's revenue increased by 3.4 percent in 2009, while the overall EMS industry contracted by 11.9 percent. Foxconn was the only Top 10 EMS provider to achieve annual growth in 2009.

The only negative for Foxconn is in its gross margin performance. The company's gross margins dipped to 8.7 percent in the first quarter, down from 9.5 percent a year ago.