Risks Keep a Lid on Sanmina
Sanmina's business model has a number of attractive characteristics. For one, it can service customers looking for help in the initial stages of product development, providing the early design and engineering schematics needed before a product goes into production.
This business feeds into Sanmina's traditional manufacturing business, where it mass produces a wide array of electronics products, from printed circuit boards to more complex computer components like disk enclosures.
The company has also been moving its EMS capabilities into nontraditional industries like defense, automotive and medical, where there is more room for growth in market share.
However, Sanmina also has its share of problems. In recent years, the company has been losing market share in its core computing and communications end markets, which represent about 70% of total revenue.Although analyst sources giving Sanmina's market share in the traditional EMS market vary, a number show a consistently declining share to percentages in the high teens in 2007 from levels above 23% in 2000. This negative trend has yet to show any sign of reversing in the near future. Management has attempted to offset these declines by focusing on driving growth in other areas, specifically its original design manufacturing, or ODM, business. However, Sanmina's three-year effort to establish this unit came to a halt last fall when the company announced it would exit the business, stating it is a manufacturing company, not a product company.
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