Strong order books expand at German factories and Mercury Systems while Xiaomi faces margin pressure
The stock of unfilled orders at German manufacturers stretched to nearly nine months of production, and Mercury Systems nearly doubled its quarterly order intake. Meanwhile, rising memory prices compressed gross margins in Xiaomi's phone business.
Economics & Markets··Midday
Order backlogs grow across German industry
Manufacturing accumulated a substantial backlog of work midway through the year in Germany, signaling sustained demand across multiple industrial sectors. According to Destatis, the seasonally adjusted stock of unfilled orders grew by 0.8 per cent in June compared to May, representing an annual calendar-adjusted expansion of 9.3 per cent. This accumulation pushed the overall range of coverage to 8.9 months, meaning factories have enough contracted work to operate for nearly three quarters at their current production pace. The computer, electronic and optical product sector led the monthly growth with a 4.6 per cent increase in orders, while consumer goods advanced by 3.2 per cent.[1]
Mercury Systems books new military contracts
The trend of robust industrial demand carried over to specific defense hardware suppliers. American defense electronics manufacturer Mercury Systems reported that it booked 660 million dollars of new orders during its fourth fiscal quarter, marking a 93.1 per cent surge from the same period a year earlier. The volume of incoming orders reached 2.28 times the revenue recognized during the quarter, driving the company's total order backlog up by 38.4 per cent to surpass 1.9 billion dollars. Chairman and chief executive Bill Ballhaus stated that the quarter exceeded internal expectations, generating 290 million dollars in revenue alongside its highest-ever bookings and backlog.[2]
Hardware makers absorb higher component prices
While solid order books provide revenue visibility, hardware makers simultaneously navigate increasing component costs that affect their profitability. Chinese technology group Xiaomi Corporation reported a second-quarter group revenue of 108.9 billion yuan with an adjusted net profit of 6.2 billion yuan. However, the gross profit margin in its core smartphone and connected-device segment faced noticeable pressure, narrowing to 8.5 per cent on the phone side. The company attributed this specific margin compression to a substantial rise in the prices of key components, primarily memory chips, which offset the benefits of an average selling price of 1,351 yuan, its highest yet, across its 31.2 million smartphone shipments.[3]
