The Current State of the Electronic Manufacturing Services Industry

The global EMS industry was valued at USD 463.1 billion in 2020 and is expected to reach USD 796.5 billion by 2028, growing at a compound annual growth rate (CAGR) of 7.0% during the forecast period (2021-2028) [^1^]. The industry is highly fragmented, with a large number of players ranging from small, specialized firms to large, multinational corporations.

Top EMS Companies	Revenue (USD Billion)	Market Share
Foxconn	181.9	39.3%
Pegatron	44.8	9.7%
Wistron	28.1	6.1%
Jabil	27.3	5.9%
Flex	24.2	5.2%

Table 1: Top EMS companies by revenue and market share in 2020 [^2^]

The EMS industry serves a wide range of end-markets, including consumer electronics, automotive, healthcare, aerospace and defense, and industrial equipment. The consumer electronics segment, which includes smartphones, laptops, and wearables, accounts for the largest share of the EMS market.

Factors Driving the Growth of the EMS Industry

1. Increasing Demand for Electronic Devices

The growing demand for electronic devices, particularly in emerging markets, is a key driver of the EMS industry’s growth. As consumers become more tech-savvy and reliant on digital devices, the demand for smartphones, laptops, tablets, and other electronic products continues to rise. According to a report by the International Data Corporation (IDC), the global smartphone market is expected to grow by 7.7% in 2021, reaching 1.38 billion units shipped [^3^].

2. Outsourcing of Manufacturing Processes

OEMs are increasingly outsourcing their manufacturing processes to EMS providers to reduce costs, improve efficiency, and focus on their core competencies, such as product design and marketing. This trend has been fueled by the growing complexity of electronic devices, which requires specialized manufacturing capabilities and expertise. By partnering with EMS providers, OEMs can take advantage of their economies of scale, global footprint, and supply chain management capabilities.

3. Technological Advancements

Rapid technological advancements, such as the Internet of Things (IoT), 5G networks, and artificial intelligence (AI), are creating new opportunities for the EMS industry. These technologies are driving the development of new electronic devices and applications, such as smart home devices, connected vehicles, and industrial IoT solutions. EMS providers that can adapt to these technological changes and offer innovative manufacturing solutions are well-positioned to capture a larger share of the market.

Challenges Facing the EMS Industry

Despite the positive outlook for the EMS industry, there are several challenges that companies must navigate to remain competitive and profitable.

1. Supply Chain Disruptions

The COVID-19 pandemic has highlighted the vulnerability of global supply chains, with many EMS providers facing disruptions in the supply of raw materials and components. The pandemic has also led to shifts in consumer demand, with some end-markets, such as automotive and aerospace, experiencing significant declines. EMS providers that can diversify their supply chains and adapt to changing market conditions will be better positioned to weather these disruptions.

2. Geopolitical Risks

The EMS industry is highly globalized, with many companies operating in multiple countries and regions. However, geopolitical risks, such as trade tensions, tariffs, and political instability, can disrupt supply chains and increase costs for EMS providers. For example, the ongoing trade dispute between the United States and China has led to tariffs on a wide range of electronic components and finished products, forcing some EMS providers to relocate their manufacturing operations to other countries.

3. Margin Pressure

The EMS industry is highly competitive, with many players vying for market share and contracts from OEMs. This intense competition, coupled with the increasing cost of raw materials and labor, can put pressure on EMS providers’ margins. To remain profitable, companies must continuously improve their operational efficiency, invest in automation and digitalization, and expand into higher-margin services, such as design and engineering.

Opportunities for Growth and Innovation

Despite the challenges, the EMS industry presents significant opportunities for growth and innovation.

1. Expansion into New End-Markets

While the consumer electronics segment currently dominates the EMS market, there are opportunities for growth in other end-markets, such as healthcare, automotive, and industrial equipment. These markets require specialized manufacturing capabilities and expertise, such as cleanroom manufacturing for medical devices and functional safety compliance for automotive electronics. EMS providers that can develop these capabilities and establish strong partnerships with OEMs in these sectors can capture a larger share of the market.

2. Investment in Advanced Manufacturing Technologies

The adoption of advanced manufacturing technologies, such as 3D printing, robotics, and AI-powered quality control systems, can help EMS providers improve their operational efficiency, reduce costs, and enhance product quality. These technologies can also enable new manufacturing processes and product designs, such as personalized medical devices and lightweight automotive components. EMS providers that invest in these technologies and develop the necessary skills and expertise will be well-positioned to capture new growth opportunities.

3. Expansion of Services and Solutions

EMS providers can expand their value proposition by offering a wider range of services and solutions beyond traditional manufacturing. These may include design and engineering services, supply chain management, post-manufacturing services (such as repair and refurbishment), and end-to-end product lifecycle management. By becoming strategic partners to their customers and providing a comprehensive suite of services, EMS providers can differentiate themselves from competitors and increase their profitability.

Frequently Asked Questions (FAQ)

1. What is the difference between EMS and ODM?

EMS (Electronic Manufacturing Services) providers focus on manufacturing electronic products based on the designs and specifications provided by their customers (OEMs). In contrast, ODM (Original Design Manufacturer) companies design and manufacture products, which are then sold under the brand name of their customers.

2. What are the key factors that OEMs consider when selecting an EMS provider?

OEMs typically consider several factors when choosing an EMS partner, including manufacturing capabilities, quality control processes, pricing, global footprint, financial stability, and the ability to scale production based on demand. Additionally, OEMs may also evaluate an EMS provider’s expertise in specific end-markets, their ability to manage complex supply chains, and their track record of successful partnerships.

3. How has the COVID-19 pandemic affected the EMS industry?

The COVID-19 pandemic has had a mixed impact on the EMS industry. While some end-markets, such as consumer electronics and healthcare, have experienced increased demand, others, such as automotive and aerospace, have seen significant declines. The pandemic has also disrupted global supply chains, leading to shortages of raw materials and components. However, the crisis has also accelerated the adoption of digital technologies and highlighted the importance of resilient and agile manufacturing operations.

4. What are the key trends shaping the future of the EMS industry?

Some of the key trends shaping the future of the EMS industry include the increasing adoption of advanced manufacturing technologies (such as 3D printing and robotics), the growing demand for IoT and 5G-enabled devices, the expansion of EMS providers into new end-markets and geographies, and the increasing focus on sustainability and circular economy practices.

5. How can EMS providers ensure the quality and reliability of their products?

EMS providers can ensure the quality and reliability of their products by implementing robust quality management systems, such as ISO 9001 and IATF 16949, and investing in advanced testing and inspection equipment. They can also work closely with their customers to understand their quality requirements and expectations, and establish clear communication channels to address any issues or concerns. Additionally, EMS providers can leverage data analytics and AI-powered tools to monitor and optimize their manufacturing processes in real-time, reducing the risk of defects and errors.

Conclusion

The electronic manufacturing services industry is poised for significant growth and transformation in the coming years, driven by the increasing demand for electronic devices, the outsourcing of manufacturing processes by OEMs, and rapid technological advancements. While the industry faces challenges, such as supply chain disruptions, geopolitical risks, and margin pressure, there are also significant opportunities for growth and innovation. EMS providers that can adapt to changing market conditions, invest in advanced manufacturing technologies, and expand their services and solutions will be well-positioned to capture a larger share of the market and drive long-term success. As the industry continues to evolve, it will play a critical role in shaping the future of electronics and enabling the digital transformation of businesses and society as a whole.

[^1^]: Electronic Manufacturing Services (EMS) Market Size, Share & Trends Analysis Report, Grand View Research, 2021
[^2^]: Top 50 EMS Companies 2020, Manufacturing Market Insider, 2021
[^3^]: IDC Forecasts Worldwide Smartphone Market to Grow by 7.7% in 2021, International Data Corporation, 2021