Although the global electronics contract manufacturing industry is set to return to growth in 2010 after a painful 2009, the market still faces uncertainites in 2010, according to iSuppli Corp., a major company in technology value-chain research.

Worldwide revenue generated by the two segments of the contract manufacturing business, including electronics manufacturing services (EMS) providers and original design manufacturers (ODMs), is set to rise to US$280.8 billion in 2010, up 7.8% from US$260.5 billion in 2009. In 2009, the revenue declined by 13.4% from previous year due to the global economic recession and the resulting electronics downturn.

Contract manufacturers assemble a variety of electronics goods for both enterprise and consumer brands, from Apple Inc.`s iPhone, iPod and iPad, to Cisco System`s routers, and Hewlett-Packard (HP)`s PCs.

Adam Pick, principal analyst for EMS and ODM at iSuppli, said: "Things are definitely looking up for the EMS/ODM market in 2010. However, we`re holding our breath until the second half of 2010 given certain industrial and macroeconomic issues that could inhibit the outsourcing cycle."

On the positive side, orders for the leading EMS and ODM providers are recovering. Senior managers at contract manufacturers are indicating that the typical seasonal downturn in the first quarter will be mitigated by stronger-than-normal demand signals from their OEM customers.

Despite these gains, however, Pick doesn`t foresee the kind of sharp rebound for the entire contract manufacturing business that some experts are predicting for 2010.

Some analysts believe the global contract manufacturing business is due for a V-shaped recovery, similar to that of the 2003 to 2005 time frame, when the industry enjoyed a surge in outsourcing.

"However, conditions are different in 2010, with the contract manufacturing market experiencing a dichotomy of growth. ODMs are set for a growth rebound due to their penetration of booming markets like mobile PCs and LCD-TVs. In contrast, with their focus on traditional segments like networking and telecom, some EMS companies are likely to experience slower growth," Pick said.

Global ODM revenue is set to rise by 10.8% in 2010, while the EMS market will expand by only 5.2%, iSuppli forecasted.

At the economic level, Pick expressed concern about high unemployment, waning stimulus efforts and more than a trillion dollars in lingering residential and commercial mortgage resets. These factors could slow or reverse the latest uptick in personal and corporate spending on electronics products made by EMS and ODM providers.

Learn more at iSuppli Corp.'s website www.isuppli.com.