Vtech 2003 Annual Report Download - page 21

Annual Report 2003 19
Review of Operations
CONTRACT MANUFACTURING SERVICES
REVENUE IN LAST 5 YEARS
99 00 01 02 03
150
125
100
75
50
25
49.5
66.7
127.1
94.7
US$ million
92.8
New design
centre
Another important factor supporting
customer retention was VTech’s ability to
generate cost savings. We held operating
costs in check, while using our economies
of scale to negotiate improved materials
prices, which account for over 75% of total
costs.We passed the majority of these
savings on to customers, further cementing
the strong relationships we have.
Outlook
Market observers forecast modest growth
in the EMS market in the calendar year 2003.
We regard this as optimistic.The world
economy is still weak and our forecast is for
little growth in the overall market.
VTech nevertheless aims to increase CMS
business volumes in the financial year 2004.
A Vice President of business development
has been recruited to spearhead various
initiatives, including leveraging the
extensive relationships of our material
suppliers to further expand our customer
base.
The scope of our product design service
will be expanded.The new design centre in
Shenzhen, PRC, has fully established itself
and is now able to take initial concepts to
a design stage, adding an important
dimension to the CMS business.
We also plan to enter more segments of the
market. Having gained TL9000 certificate
for telecommunication products in August
2002, we intend by July 2003 to attain
QS9000 and ISO13488 certifications, which
will give us entry to the production of
automotive parts and medical equipment
respectively.
While expanding our revenue, we will also
seek to contain or further reduce costs.
Material prices are not expected to rise in
the foreseeable future, given the weak state
of the global economy, and we plan to
squeeze more cost from the supply chain
by shortening manufacturing cycle times.
Entering
more
market
segments