The future of electronics production

The war in Ukraine and the ongoing pandemic are making electronics production unpredictable. A recent study has more carefully examined the selection criteria and opportunities of EMS providers, with surprising results.

For years, the EMS industry has stumbled from one crisis to the next. The industry is being bothered by allocation problems, economic weaknesses, the coronavirus and now an explosion in energy costs due to the war in Ukraine. Yet the EMS market has enormous potential. According to Fortune Business Insights, it is expected to grow from USD 504.22 billion this year to USD 797.94 billion around the world by 2029.

in4ma market research reports that, in Europe, 2021 marked an all-time high for the market, with over EUR 44 billion following a year-on-year increase of nine percent. However, despite the overall recovery as of 2020, only 56 percent of the companies surveyed in 2021 showed higher revenue growth compared to pre-pandemic figures.

For smaller companies in particular, it is increasingly difficult to persist on the market, as the requirements of OEMs are constantly growing and production orders go to larger companies. In addition, investment volumes are growing due to the higher level of vertical integration required, and the increasing price pressure is causing profit margins to fall.

Price is becoming less important

Bids are less and less determined by price, according to this year’s survey by Katek of 570 European manufacturing service providers in the electronics industry, IT & services, automotive, mechanical engineering & industrial engineering, industrial automation, telecommunications and renewable energies & environment sectors. Sustainability and CO2 emissions also play a subordinate role. Instead, the clients’ focus is increasingly on the technological know-how as well as the industry knowledge and references of the EMS partner. For example, nearly 40 percent of those surveyed complained about the lack of expertise of EMS service providers, especially in product development.

The automotive sector, meanwhile, places particular value on having a production site in Europe, followed by a good price. Know-how and supply chain management are no less important. Meanwhile, in the “IT & services,” “mechanical engineering & industrial engineering” and “renewable energies & environment” sectors, technological expertise tops the bill in terms of requirements.

Opportunities for the electronics industry

According to the survey from Katek, the electronics industry will see its salvation in the next five years in the strengthening of Europe as a production site and in increasing automation thanks to artificial intelligence. The digitization of processes ranked just behind. For example, for those responsible in the “IT & Services” and “Telecommunications” departments in particular, it plays just as important a role as a European location.