What is the outlook for electronic manufacturing services?
Electronic manufacturing services (EMS) provide contract design, assembly, testing and other production assistance to original equipment manufacturers (OEMs). As devices grow more complex amidst market changes, EMS partners bring expertise helping companies manufacture innovative connected products. Positive near and long-term trends point towards strong demand outlooks across electronics sectors relying on EMS providers.
Key EMS Industry Trends
Several developments drive increasing EMS adoption:
Miniaturization
End-products integrate more functionality within compact formats through advances like:
- Smaller semiconductor nodes
- High-density interconnect PCBs
- Miniature multilayer packages
This expands production intricacy where EMS expertise proves vital.
Connected Products
Intelligence and connectivity permeate across once simple devices through:
- Embedded processors/controllers
- Sensors, data interfaces and wireless
- Security elements
- Network functionality
EMS supports manufacturing intricate connected electronics.
Design Complexity
Increasingly sophisticated components raise production and test difficulties, including:
- High-pin-count dense packages
- High-speed multi-Gbps SERDES interfaces
- Tight fault coverage requirements
EMS leverages know-how dealing with such complexity.
Current Industry Growth Metrics
Recent years exhibited steady EMS industry expansion:
| Metric | 2021 Figure | 2022 Estimate | Growth Rate |
|---|---|---|---|
| Revenue | $556B | $589B | 6% |
| Production | 1.8B units | 1.9B units | 6% |
| Employees | >7M | >7.4M | 5% |
Strong demand bringing sales, output volumes and staffing upward indicates ongoing business growth. And dedicated capacity investments further support future needs.
Segment Outlooks
Positive projections shape top application segments utilizing EMS:
Communications Infrastructure
- Deploying 5G cellular networks drives rollout of towers/equipment
- Double-digit annual growth over multiple years forecasted
- EMS supports telecom/datacom product manufacturing
Automotive Electronics
- Surging electrification, ADAS, autonomy use more electronics content per vehicle
- Semiconductor content expected to approach $900 per car by 2028
- Complex components needing EMS manufacturing expertise
Industrial Automation
- Factory modernization adopts more sensors, analytics, networking
- Global discrete/process automation projected to reach $330B by 2027
- EMS efficiencies key assembling specialized equipment
Regional Differences
Geographic variations occur across EMS industry sectors:
| Region | Key Trends | Growth Rate |
|---|---|---|
| China | Huge internal rising wages reduce, more advanced production increases | 8-12% |
| Americas | Supply chain localization investments adding capacity near customers | 5-7% |
| Europe | Stricter compliance needs greater traceability in production flows | 4-6% |
Though slowing from historic figures, China remains crucial given enormous volumes while American and European markets grow on reshoring efforts.
New Technologies Adoption
Innovative offerings enter EMS capabilities applying emerging developments:
| Technology | Application | Benefits |
|---|---|---|
| AI/ML | Data-driven optimization identifying process improvements | Higher yields, lower costs |
| AR/VR | Immersive training simulations develop staff skills | Increased quality, rapid learning |
| 3D Printing | Produce custom jigs/fixtures, component fabrication | Improved changeovers, design flexibility |
Leveraging such technologies keeps EMS shops at the leading edge able to handle new demanding OEM requirements.
Challenges Facing Providers
EMS companies also face headwinds including:
- Tariffs/trade wars disrupting transnational production flows
- Component shortages impacting output volumes and revenue
- Rising inflation driving up input prices
- Geopolitical instability causing demand fluctuations
Firms must remain adaptable dealing with volatile market changes while protecting profitability.
Longer Term Outlook
Despite some cyclical uncertainty, positive secular momentum continues driving electronics production – and correspondingly EMS demand – higher over the coming decade. Connected technologies transform previously discrete products into smart networked platforms needing complex contract manufacturing skills. As OEMs concentrate on design and brand strengths while leveraging EMS efficiencies on the production side, they cement strategic partnerships supporting integrated supply chains. Cloud-based visibility solutions connect brands digitally with EMS providers enabling data transparency for risk mitigation. Ultimately positively expanding markets across most electronics segments bode well for continued healthy EMS industry growth into the foreseeable future.
FAQ
What percentage of electronics are built by EMS companies?
As of 2022, outsourced manufacturing with EMS partners produces around 65-70% of global electronics equipment, a figure projected to reach 80% by 2030 as OEMs concentrate more on core competencies.
Do EMS providers need expertise across all manufacturing areas?
While leading EMS companies offer broad capabilities spanning design to post-sales service, mid-sized players often specialize in specific niches matching core strengths to target certain applications. Even larger firms build centers of excellence around strategic focus segments.
Does EMS scale equally for prototypes versus mass production?
Successful EMS providers understand distinct prototyping requirements centered on flexibility versus ultra-lean high-volume assembly. Engineers collaborate iteratively perfecting new products while aggressive automation suits predictable runs. An ability to support the full development lifecycle wins customer loyalty strengthening partnerships.
Can using EMS raise intellectual property risks?
Responsible EMS companies implement strong organizational barriers safeguarding customer data through non-disclosure agreements, firewalls limiting data access, and related information security controls per legal agreements and industry standards. Regular audits validate conformance.
What percentage savings does EMS production offer versus DIY manufacturing?
Typical EMS cost benefits range 15-30% below OEMs??? own production expenses once factoring quality, salaries, overhead, assets/depreciation and time efficiencies. Scaling benefits multiply at higher volumes. Careful benchmarking during partner selection maximizes value creation.