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The State of the EMS Industry
December 31, 1969 |Estimated reading time: 4 minutes
By Sharon Starr, IPCA recently published study, 20072008 Analysis & Forecast for the EMS Industry, from IPC Association Connecting Electronics Industries® shows that the market for EMS continues to grow, although growth rates are slowing with the current economic downturn.
According to the 20072008 Analysis & Forecast for the EMS Industry report, the EMS industry continues to grow, though growth is decelerated by the macroeconomic downturn. EMS continues to outpace other segments of the electronics industry due to expanded outsourcing of electronics manufacturing and design by OEMs. The EMS industry in Asia is growing at a faster rate than other regions of the world. Part of the EMS industry's growth can be attributed to the expanding definition of its market. Many EMS companies today provide design services, global procurement, cost reduction programs, advanced technology access, dedicated plant setups and management, and system build, as well as traditional PCB assembly, test, rework and repair services.
Measuring the Growth of the EMS MarketThe report is based on IPC's comprehensive annual survey of the industry, with responses from 39 North American EMS facilities with net sales in 2007 of approximately $942 million, and 4 European EMS companies with net sales in 2007 of approximately $177 million. The survey is part of IPC's yearly efforts to identify the market size and trends in the EMS industry.
The report covers trends in the served available market (aggregate volume of EMS company sales) as well as in the total available market (current EMS business plus additional OEM business that could be outsourced to EMS companies). It cites one forecast that estimates global EMS/ODM market growth at an average compound annual growth rate (CAGR) of 13.5% until 2012. Despite the migration of electronics manufacturing to other regions, the North American market is expected to grow at an average annual rate of 4.9% during this period. Three factors affect market size and the market profile for EMS suppliers in North America the organic growth of each market, trends in outsourcing by OEMs, and the movement of manufacturing to other regions.
Companies participating in the survey are segmented into categories based on annual sales. Small companies are those earning less than $20 million in annual sales; medium companies have between $20 and $100 million in sales; large companies are those with sales greater than $100 million. According to the report, the estimated number of EMS companies in North America grew from 1,614 to 1,728 from 2006 to 2007.
Activities that Contribute to GrowthTo maintain and grow their market share, EMS companies are expanding, mainly through strategic acquisitions. This allows EMS companies to add to their regional or global reach, expand their technology, serve more customers and end markets, penetrate deeper into existing markets, and increase their niche expertise.
Our survey asked companies to identify revenue received from their 2007 activities in assembly services, test, board assembly design services, product design services, prototype, and repair services. Companies were also asked for their spending on PCBs and components. Eighty-one percent of revenue comes from assembly services, both systems and boards. On average, the North American companies in this year's survey sample generated 68% of their assembly revenue from PCB assembly and 32% from system build. Although the term varies in meaning, inherent in the definition of system build is a finished or nearly finished product furnished by an EMS company. The percent of system build has remained about the same for small companies in the IPC survey. Mid-size companies anticipate growth of system build in 2008 by 5%. For large companies, system build is gradually increasing as a percent of sales.
Trends in Capital Spending The participating North American companies' aggregate investments in capital equipment, and those investments as percentages of sales, are shown in the full report, with breakdowns by type of equipment purchased. In 2007, it is estimated that approximately 51% of all investment in capital equipment was for automated assembly equipment. However, for 2008, aggregate investments in automated assembly equipment are estimated to decrease to 34%. Analysis & Forecast for the EMS Industry reveals a slight increase in total dollars spent on automated assembly equipment, but a large decrease in that spending as a percentage of all capital equipment purchases in 2008 compared with 2007. We also review the percentage of lead-free assembly equipment purchased as a percent of sales by company size segment.
End Markets AnalyzedThe overall picture of the markets served by EMS companies in North America shows that the biggest proportion of sales come from the industrial electronics sector, with instrumentation and medical electronics a distant second, and communications third. Large companies in the sample have a significantly higher share of the industrial electronics and medical markets. A look at the percentage of revenue by markets served among small EMS companies offers a different perspective. EMS companies with annual revenues under $10 million derived a nearly equal percentage of their business from the industrial, instrumentation/medical, communications, and government/military electronics sectors in 2007, with a significantly higher percentage of military business than large companies. This suggests that small companies might suffer less from a precipitous drop in demand from one market sector than will large companies.The report also covers sources of EMS business in relation to new and existing customers, as well as new and existing products.
Understanding the DataIPC's 2007-2008 Analysis & Forecast for the EMS Industry contains data obtained directly from EMS companies. It is a tool designed for readers to better understand the current state of the EMS industry and trends in North America and Europe. Along with the information reported above, the report contains general business metrics of participating companies such as sales growth and size, years in business, plant size, plant space per employee, revenue and plant size, sales per employee, and sales per employee by size of company. The sources of revenue and services offered in both North America and Europe are given along with EMS production activities and markets served.
Sharon Starr, IPC director of market research, may be contacted at (847) 597-2817; starsh@ipc.org. To obtain a copy of 20072008 Analysis & Forecast for the EMS Industry, visit www.ipc.org.