The Past and the Future of the European EMS Industry

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The electronics manufacturing services (EMS) industry in Europe is still in a growth stage of its life cycle. This does not mean that there is enough space for everybody. Looking back over the past 10 years, we have seen tremendous changes in the number of companies, counting every separate legal entity.

Sweden and Italy have seen 22% of their EMS companies disappearing. In Great Britain, it was 25%; in France, 32%; and in Belgium, even 40%. Simultaneously, Hungary and Slovakia got 16% more EMS companies; Czech Republic, 27%; Bulgaria, 33%; and Romania, even 37%.

We all know the reasons: profit margins in the EMS industry are low. OEMs expect the EMS to pull down their pants and show their price calculations in order to squeeze a little more. As material prices today are, more or less, global prices, the focus lies on labor costs. Most of the companies who opened up in Eastern Europe are offsprings of Western European companies or international EMS/ODM manufacturers who want to get a foot into the European market.

Some of these companies now start complaining about the local governments increasing the minimum wage levels significantly. But let us be realistic, a 19% increase in Romania still is much less in absolute terms than a 4% increase in some Western countries, and still leaves labor costs in Romania at just 25% of the labor cost in the West. If the cost advantages were not valid anymore, new EMS companies would not pop up in the East.

Still more than 80% of all EMS companies are located in Western Europe and only 20% in the East. These 20% are getting close to having 50% of the production value of EMS in Europe. Growth rates in the East are double as high as in the West, and it is just a matter of time until the Czech production value will be bigger than the German revenues in the EMS industry. There are about 61 Czech EMS companies, whereas there are 424 in Germany. Nearly 20% of all EMS manufacturers in Germany booked losses in their P/L in the years 2013 to 2015; in Scandinavia, it has been even worse.

Entrepreneurs who are not willing to make dramatic changes will eventually have to leave the market. A first step towards change is to understand the market, to understand the own position with benchmark figures, and to throw gut feelings overboard for real facts and numbers. Many of these facts will be available in the next in4ma EMS Market Analysis Europe, which will be available in early November.



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