European EMS revenues stagnate

The current economic crisis and low growth will continue into 2013 and although significant downside risks remain based on the latest indicators a modest recovery should begin in the later part of the year which should gain traction in 2014. In-line with the general recovery in Europe, EMS revenues after stagnating in 2012 and 2013 are expected to show modest growth in 2014 and then show low single-digit growth in the period to 2016. Growth in CEE and North Africa will outpace Western Europe and although the 3C segment – computing, communications and consumer – will continue to dominate, the region will increasingly benefit from the transfer of EMS revenues that is taking place in the Automotive, Medical, Control & Instrumentation, Industrial and Telecommunications (AMCIT). We expect to see the low volume/high mix sectors of AMCIT to grow in Western Europe by between 2.6% to 3.5% over the period to 2016. Competition in these sectors will be fierce, in particular, between the leading European-owned EMS providers but also the global Group 1 companies who look to exploit their existing European manufacturing and design capabilities. Group 1 EMS companies, typically with global operations and sales turnovers in billions of Euro have continued to migrate the remaining production of 3C products to lower cost countries. There has been an increase in the number of Group 2 and Group 3 EMS companies operating lower cost manufacturing plants as they seek to provide greater value to their customers. All of these three groups have retained some manufacturing and the greater part of the design, development and sales teams in Western Europe to maintain relationships with the OEM’s based in that area. In total we estimate that there are more than 950 companies across all groups of EMS company, with the majority Group 4 which in our definition are small privately-owned companies operating nationally and possibly in niche sectors. We expect to see further consolidation of the number of EMS companies in Europe over the period to 2016 with this taking place across all 4 Groups.