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The average profitability of the global automotive supplier industry remains stable at an astonishingly high level: 6.5% EBIT margin for 2012 and for 2013.
The most profitable sectors for suppliers are chassis, powertrain and tires, whereas the interior business in particular saw a further decline in margins. Industry prospects remain reasonably positive for the coming years, with stable EBIT margins of approximately 6% possible. However, business complexities and risks continue to increase, keeping up the pressure on the individual suppliers over the next few years. These are the key findings of the “Global Automotive Supplier Study 2013”, a joint study by Roland Berger and Lazard.

Stable profitability at high level

“The global supplier industry managed to stabilize average profitability in 2012 at a high level of 6.5% EBIT margins – this is only slightly below the record set in 2010,” says Felix Mogge from Roland Berger Strategy Consultants. And assuming that the last quarter of this year does not see any major crises, the same level of profitability will be seen throughout 2013. “This performance is remarkable given the current market challenges, especially the ongoing weak volumes in many European sales markets,” adds Dr. Eric Fellhauer from Lazard.

There are several key drivers of this stable situation: car production, which is still strong when viewed from a global perspective; a favorable segment mix; an even higher vehicle technology level; better capacity utilization worldwide and moderate development in raw material prices.

Strong differences in performance across the supplier landscape

While powertrain and chassis suppliers are maintaining their above-average profitability with EBIT margins of around 7%, suppliers of interior components faced a further margin decline in 2012 (down to 4.4%). “And there is another clear message,” says Marcus Berret from Roland Berger Strategy Consultants. Suppliers that focus on innovative product functionality rather than on process know-how continue to generate higher profits than their more process-focused peers.

Looking at regional differences, suppliers headquartered in Europe and NAFTA maintained the high profitability levels they had achieved in the previous two years. The Asian picture is more diverse: “While Japan stayed below the global average with an average EBIT margin of 5.3%, Chinese and Korean suppliers are still leading the field – but the significant drop of about 3 percentage points compared to 2010 shows that competition is getting tougher for them.”

Profitability levels also vary significantly by company size. Small suppliers with less than EUR 1 billion in annual revenues have seen a substantial margin decline of about 1.5 percentage points compared to 2010’s record margins, while very large multinational suppliers managed to maintain that level. This is a clear indication that small suppliers are facing more difficulties in meeting the challenging requirements from their customers, e.g. regarding global engineering and delivery capability.

Growing business, but risks and complexities on the rise

Looking ahead, automotive suppliers will generally benefit from further increasing vehicle demand, the resulting growth of the global automotive component market as well as from technology upgrades, especially in powertrain and chassis.

At the individual company level, however, the business environment of automotive suppliers is characterized by an increasing number of risks. “We expect continued weakness in European component demand, and as a result, both OEMs and especially suppliers will need to adjust capacity. This trend will be further accelerated by OEMs shifting their production to the markets where the vehicles are sold. This will continue to create significant problems for Eurocentric suppliers,” says Berret.

Further risk factors include the heavily increased dependency on the Chinese car market (which is showing clear signs of maturity), even more pressure on suppliers to engineer and produce parts globally resulting in increased management complexity especially for small and mid-sized players. Added to this are the growing dependency of suppliers on fewer larger-scale component projects as well as continued pressure from OEMs to reduce prices and to push through less favorable economic schemes.

This means that individual suppliers have to monitor all possible risks extremely carefully and quickly reach the right strategic conclusions. Given a business environment with significantly more risk factors and uncertainties than in earlier years, suppliers that make strategic errors will lose their competitiveness within just 2 or 3 years.

Read more: http://evertiq.com/news/32550

Once again we see reports uncovering labour violations at Apple suppliers in China – this time it’s Jabil that’s under the spotlight.
A new undercover investigation by China Labor Watch (CLW) has revealed a series of ethical and legal labour violations in a factory in Wuxi, China owned by U.S. electronics manufacturer Jabil Circuit that is currently producing the soon-to-be-released cheap iPhone for Apple.

Among the infringements uncovered by CLW include millions of dollars in unpaid overtime wages; over 100 hours of monthly mandatory overtime, three times in excess of legal limits; more than 11 hours of standing work every day with no rest outside of 30-minute meal breaks; illegally inadequate pre-work training; hiring discrimination; and more.

Read more: http://evertiq.com/news/32508

Criminal proceedings by the Serious Fraud Office have commenced against Gyrus Group and Olympus Corporation.
Gyrus Group Ltd, a UK subsidiary of Olympus Corporation, and Olympus have been charged with offences of making a statement to an auditor which was misleading, false or deceptive. Gyrus Group faces four charges and Olympus faces one charge.

The alleged offences are said to have taken place between April 2010 and March 2011 and arose from a global fraud case for which Olympus Corporation was prosecuted in Japan.

As a result of the global fraud prosecution in Japan, Olympus as well as three former executives Tsuyoshi Kikukawa, Hideo Yamada and Hishashi Mori were sentenced in July 2013.

The first hearing in this case will take place at Westminster Magistrates‘ Court on 10 September 2013.

Gyrus Group Ltd, formerly Gyrus Group PLC, was a Berkshire based medical systems company and was acquired by Olympus in 2008.

Read more: http://evertiq.com/design/32489

In the post-PC world, and in the midst an ecosystem war, Microsoft has finally bought Nokia. This deal is less about the devices themselves, and more about the Windows Phone platform.
In order to have any relevance in this new era, Microsoft must develop a strong ecosystem – at 4% market share, it still has a long way to go. The acquisition enables Microsoft to re-double its efforts with Windows Phone, and use the Lumia brand to truly innovate with the platform.

Microsoft is now able to control the full user experience, which will help avoid OS fragmentation (as has been the case with Android) and make it easier to attract developers to the platform. Microsoft is also now much better placed to win back some of the enterprise customers it has lost as a result of BYOD and consumerisation. It is now able to offer a full portfolio of hardware, software and services to customers.

The question that arises from the acquisition is what Microsoft intends to do with the Windows Phone platform now that it owns an OEM. Its long history with partners suggests that it is unlikely follow Apple’s lead and only allow its platform to be used on Nokia devices.

In order to grow market share, Microsoft will need to keep Samsung and HTC on board, and will need to alleviate any concerns that emerge as a result of the acquisition. Microsoft can use Nokia to really drive innovation on the platform, as Google is doing with Motorola. However, in order to succeed it will need to ensure it maintains good relationships with its partners.
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Autthor: by Adrian Drozd, Research Director, ICT Europe

Read more: http://evertiq.com/news/32477

Aiming to expand its business in the Middle East, Casio established Casio Middle East FZE in Dubai in March 2013 as its first sales and marketing company in the region.
Casio has been supplying products to countries in the Middle East through sales agents since the mid-1970s. In 1994, Casio set up a representative office in Dubai to function as a contact point for customers.

In recent years, markets in the Middle East, particularly the six member countries of the Gulf Cooperation Council (Arab United Emirates, Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia), have been thriving against the backdrop of robust economic growth and an expanding youth population. Accordingly, Casio regards the region as a strategic growth market and is pursuing business expansion there.

Starting in October this year, it will work together with sales agents in each of the countries and carry out sales and marketing activities tailored to these countries By promptly supplying products and services suitable for the lifestyles and cultures of local people, the company intends to popularize Casio products and expand its business in the region.

Read more: http://evertiq.com/news/32464

German machinery and tool orders fell short three percent in real terms of last year’s result. Domestic business surged by ten percent, international business slumped by nine percent.
According to the less volatile three-month comparison, May to July 2013, incoming orders fell by four percent on a year earlier. Domestic orders dropped by three percent, foreign orders by five percent, the German Engineering Association (VDMA) reports.

“In a rather reluctant economic environment, July saw German investments in machinery and plants up ten percent compared with the previous year. Such movements are by no means unusual, in particular after a row of weak months. There is good reason to be sceptical whether July marks the beginning of the long-awaited turning point. However, at least the contracting foreign demand could be largely compensated,” VDMA Chief Economist Dr. Ralph Wiechers said when interpreting the result.

Read more: http://evertiq.com/news/32448

The eternal topic of conversation amongst the manufacturers of printed circuit boards is the huge success of distributors of Chinese circuit boards on the European markets.
The majority of local manufacturers believe the reason to be the cheaper price. But that is not the whole truth. If we have a look at what sales arguments the majority of distributors have, we will see that all of them offer the complete service package (proto, small series, large series, and different technologies) in a single place, from a single supplier. Such a strategy makes the process of buying printed circuit boards very convenient for customers and excludes local manufacturers from direct contacts. At the same time, it can be seen that distributors are forced to use European manufacturers for fast proto deliveries. Otherwise they are not competitive in terms of the speed of delivery. It can be concluded that European factories should avoid cooperating with distributors, thereby creating the following positive consequences:

1. Distributors will lose part of their main sales argument, i.e. the policy of “getting everything you need in one place” is no longer possible.

2. European manufacturers will be able to establish direct contacts with the customers themselves, which would expand their customer portfolio and make them less vulnerable in terms of a sudden reduction in their customer database, i.e. while previously it was the distributors who was accumulating dozens of customers and acting as a single customer for the manufacturer, now the manufacturers will be able to win the majority of customers by themselves.

3. By reasonably using the difference between the sales price of a manufacturer and the sales price of distributors, it will be possible to reduce the price for customers. Why should customers pay extra money to distributors, if it is possible to order express deliveries directly from European manufacturers?

There can be just one conclusion: we should stop cooperating with distributors in terms of express deliveries, which will breathe new life into the process of the manufacturing of printed circuit boards!

Read more: http://evertiq.com/news/32441

FLIR Systems has been awarded an indefinite delivery, indefinite quantity contract from the U.S. Naval Surface Warfare Center, Crane Division.
FLIR will support Naval Air Systems Command’s UH-1 program and the Vertical Takeoff Unmanned Aerial Vehicle program.

The contract is valued at USD 136.6 million and is for FLIR’s commercially developed, military qualified BRITE Star II gimbaled electro-optical/infrared imaging systems, BRITE Star I upgrades, and related spares and services.

Work under this award is expected to be performed out of FLIR’s facility in Wilsonville, OR, and is expected to be completed by August 2018.

“This contract award was the result of our team’s continued effort to bring highly advanced commercially developed solutions to government markets,” said Andy Teich, President and CEO of FLIR. “Our innovative technology, high reliability, timely delivery, low total cost of ownership, and global customer support drive our success in these markets. We are proud to have been selected to provide the U.S. Navy with these highly tactical solutions.”

Read more: http://evertiq.com/news/32437

The sun is finally rising on the global solar business, with growing demand in developing regions helping to ignite the first increase in industrywide capital spending in three years in 2014, according to IHS.
Global capital spending by producers of photovoltaic (PV) modules, cells, ingots, wafers and polysilicon is expected to rise by 30 percent in 2014 to reach $3.0 billion. This will mark the first time that expenditures have increased since 2011, when they grew 8 percent.

The projected growth will bring to an end a two-year period when spending dropped—by a stunning 72 percent in 2012, and by an anticipated 36 percent this year in 2013. During this period, PV industry capital spending will plunge by a gut-wrenching total of $10.6 billion, falling to $2.3 billion in 2013, down from $12.9 billion in 2011.

Solar industry players engage in capital spending in order to purchase manufacturing equipment and facilities used to produce PV raw materials or products. Spending has fallen in recent years because of massive overcapacity and oversupply, which has sent prices down throughout the supply chain.

However, a sustained increase in capacity from emerging economies is set to spur the 2014 recovery.

“South America, Africa and the Middle East now are leading the world in solar capacity additions—and they also are leading the capital expenditure segment of the PV business out of its slump,” said Jon Campos, solar analyst at IHS. “The overcapacity in PV production mainly has been concentrated in the developed solar regions of the United States, European Union and China. But as demand expands in new areas, PV manufacturers are gaining interest in producing their wares in these regions, resulting in new factory openings and boosting local capital spending.”

Dawn arrives for solar spending in emerging economies

After going up 23 percent in 2013, solar capital spending in emerging economies is expected to rise in the low 40 percent range for every year through 2017. In contrast, following zero growth in 2013, the established markets are expected to shrink by 5 to 10 percent during every year through 2017. Among all the emerging economies, the largest percentage increase in capacity is occurring in South America, Africa and the Middle East.

Emerging markets account for 7.9 gigawatts (GW) of the world’s total announced capacity for PV materials and products from ingots through modules, with the potential to climb to nearly 11GW by 2017. Capital investments for the foreseeable future will largely remain in the areas of crystalline wafer production, cell and module equipment.

Ending capital punishment

The expected increase in capital spending comes as a welcome and long-anticipated change from the dismal conditions that have plagued the market in recent years. The solar shakeout has peaked and an inevitable return to reinvestment in equipment and technology is due in the near term.

“Our research is showing a return to market equilibrium with regard to supply and demand,” Campos said. “Overcapacity seems to be correcting itself, and from the last few financial announcements, a handful of solar companies have returned to profitability and widened margins. The last piece of the recovery puzzle is capital spending and investment in high-efficiency technology.”

Spending spree

Beyond the rise in demand from emerging countries, other factors are contributing to the recovery in capital spending.
PV suppliers are engaging in new technology upgrades in order to enable higher efficiency and lower dollar-per-watt production costs. Equipment is also critical in allowing PV manufacturers to differentiate their products. Such differentiation can improve profitability and margins.

Current and potential trade conflicts concerning Chinese PV products could drive production to other locations, such as South America, Southeast Asia, Africa and the United States. In particular, U.S. states like Mississippi and Michigan are attractive regions for PV production because they provide cheap electricity and affordable land to manufacturers.

Read more: http://evertiq.com/news/32408