Past and Future of the European EMS Industry

(Moreover, how it was Analyzed)

BY DIETER G. WEISS, IN4MA, GERMANY

Ten years ago, a Danish management consultant, Klaus Pildal started his market research defining the EMS industry in Europe. He did a great job to list about 1,300 EMS companies and analyze their revenues and headcount. On top of this, Pildal wanted to give an overview of the technical capabilities of these companies in order for the OEM to have a better view of their potential suppliers. His reports were hard to sell and about four years later, work on the report was suspended.

More recently, Dieter Weiss of Weiss Engineering in Germany performed EMS market analyses for D-A-CH on behalf of a big German electrical association. Weiss’s contract ended more than two years ago as the association changed it’s strategy on market statistics. He still felt, that the EMS industry needed valuable market information and started in4ma (information for manufacturers), a market analysis division within Weiss Engineering. Weiss was supported by many EMS companies, whom he had supplied EMS statistics for twelve years. His task was to extend his previous work for all companies working in the electronics industry in Europe. Weiss remembered a nine-year-old Excel file, authored by Klaus Pildal which listed 1,300 EMS companies and he thought it would be an easy task to update this list.

■ Chart 1: Development of EMS companies in the UK since 2006 (25% vanished, 3% entered the market).

It took less than a week to realize, that he was wrong. The EMS industry had undergone a dramatic change within a period of 8 years. More than 250 companies had left the market; some went into receivership, were bought by a competitor and integrated into the existing organization or just closed down. Sweden and Italy had seen 22% of their EMS companies vanish; in the UK the percentage was 25%, in France 32% and in Belgium even 40%. Chart 1 shows an example for the UK.

The EMS industry had undergone a dramatic change within a period of 8 years. More than 250 companies had left the market; some went into receivership, were bought by a competitor and integrated into the existing organization or just closed down.

On the other hand, new companies had emerged into the market. In Hungary and Slovakia the number of EMS companies increased by 16% in the Czech Republic by 27%, in Bulgaria by 40% and in Romania by 42%. Two different trends were visible. EMS companies in the West of Europe diminished; in the East, new companies were founded.

It is remarkable that 80% of all EMS companies are still located in Western Europe and only 20% in Eastern Europe. The reason is a historical one, as most of the companies in the West have a longer history and Western companies looking for low labor cost countries established the majority of their companies in the East after the fall of the Iron Curtain.

For the last 14 years, Weiss had been sending a questionnaire to more than 500 EMS companies in Austria, Germany and Switzerland (D-A-CH).

The Czech Republic and Romania are good examples of this; the growth in the number of EMS companies is shown in Chart 2 and 3.

■ Chart 2: Development of EMS companies in the Czech Republic since 1991.

It took Weiss more than two years to update and verify all data, analyze the EMS market by country, work through all the public registers, learn key words in different languages used in the balance sheets and P/L accounts, like revenue and headcount, understand the different legal requirements for publishing company reports and find the different sources. Many data required a fee payment, the biggest cost block being professional data files of internationally well-known companies. He had to learn as well, that some of the data in such an expensive file are useless as they are not correct.

Luckily, there were other sources available. For the last 14 years, Weiss had been sending a questionnaire to more than 500 EMS companies in Austria, Germany and Switzerland (D-A-CH). The questionnaire is very detailed, but every year more than one hundred EMS companies contributed their data. In return, they receive a report about the market development free of charge. For ten years, a large industry association sponsored this work. Today the research is wholly independent. The benefit to in4ma is a very fast overview of the newest developments and growth rates in the market.

■ Chart 3: Development of EMS companies in Romania since 1993.

Because the survey is open to non-members of associations, meanwhile more than 110 of the D-A-CH EMS companies, representing more than 53% of the total revenues in the German speaking countries are participating in the in4ma statistics. As in4ma communicates with all EMS companies every year, it acts as an annual check, on the status of the companies. Accordingly, Weiss corrects his address files and looks for further changes.

In November 2017, in4ma published the first report covering all of Europe. This report for the first time had detailed data on all the different countries in Europe, revenues, headcount, development over a period of four years, TOP 25 in Europe and Germany, TOP 10 for UK, France and Italy and TOP 5 for the other countries. It summarized 1576 EMS/ODM companies in Europe (Chart 4). It also indicated that there were still about 180 more companies, which have not yet been analyzed. The total production volume of all European EMS companies so far is calculated to be 35.26 Billion euro. The biggest single EMS in Europe is Foxconn CZ s.r.o. in Pardubice/Czech Republic, with a share of about 12% (4.285 Billion euro 2016) of European production. Foxconn manufactures in six different factories in Europe and generates a total share of 20% of European EMS revenues. Germany is still the biggest EMS producing country, followed by the Czech Republic and Hungary.

For many countries, Weiss knows profit margins and their evolution, the production code (NACE code) the companies have used to define their business and the founding year in addition to revenues and headcount.

The in4ma EMS European market analysis report shows the structure of the EMS companies by revenue groups, indicates which groups had different revenue development over the last four years and which countries were winners and which had been losing revenues.

Europe by country (there are about 180 more)

It gives a detailed overview of the European EMS industry, allowing suppliers, manufacturers and OEM customers to plan their business based on facts, not on assumptions. As far as known, there is no bigger EMS database in the market, which is not only covering the big players but as well the majority of the market, which in Europe are medium sized and small companies. For many countries, Weiss knows profit margins and their evolution, the production code (NACE code) the companies have used to define their business and the founding year in addition to revenues and headcount.

For the biggest single market in Europe, Germany, he has many balance sheet and P/L data and is working in present on a separate report to analyze material costs, labor costs, net profits, return on sales, return on equity, return on assets, inventories, split into raw material, work in process and finished goods, days in accounts payable, days in accounts receivable, analyzing the data as well in relation to revenue size. This report, not only for the EMS companies but as well for capital investors such as shareholders and banks, will give excellent benchmark figures to the industry.

For many countries, Weiss knows profit margins and their evolution, the production code (NACE code) the companies have used to define their business and the founding year in addition to revenues and headcount.

As a rule, in4ma is careful in respect of forward looking statements. The EMS companies themselves know much better how the market will develop for them, as they know their order book, they know the building plans of their customers and they have a sales plan. When Weiss published an outlook and prognosis for 2017 and 2018, he used the feedback of the EMS companies to get to future growth. Currently, he is collecting the forecasts of more than 110 EMS companies in Europe, with about 15% of the European production value. Whereas their prognosis is in line with Weiss’s prognosis for 2017 and 2018, for 2019 they are already predicting further growth of more than 5%. This would bring the European EMS production value for 2019 to more than 40 Bill. Euros.

In the German speaking countries, Weiss organizes an annual EMS workshop in Munich, which is always well attended by the owners and managing directors of EMS companies in D-A-CH. On top, many EMS companies booked him in the past to give company internal workshops in order to give the sales and marketing department, the controllers and the management a better view of the market. Global SMT is looking at possibilities to organize such a workshop in the UK to support the UK EMS industry.

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