Europe EMS market to experience growth in 2014

Although a downturn was forecast for the final quarter of 2012, the decline was more significant than originally predicted as OEMs pushed back into 2013, or even cancelled orders, on the back of a weak economy and poor consumer confidence. 2013 so far has followed a similar path to 2012 and as we look forward to 2014 and beyond the EMS industry continues to face a period of uncertainty with limited visibility. The total European revenues in 2014 for the Electronic Manufacturing Services (EMS) are forecast, according to the latest figures from Reed Electronics Research (RER), to show a modest decline to Euro 25.5 billion, growth of 0.8% in Western Europe, offset by a decline of 1.4% in CEE as the major Group 1 companies have been impacted by falling PC sales and subdued demand for LCD TVs. The CEE will still represent the largest share of the market in 2013 at 57%. RER expects the European EMS industry to gradually gain momentum during the course of 2014, with growth accelerating in the later part of the forecast period and by the end of 2017, total European revenues will have grown to Euro 27.84 billion, with the CEE, North Africa and Other showing a Compound Annual Average Growth Rate (CAAGR) of 1.58% and reaching Euro 15.86 billion. Correspondingly we expect that EMS revenues in Western Europe to grow to Euro 11.99 billion with a CAAGR of 1.74% over the period 2012 to 2017. For EMS companies based in Western Europe, the most attractive sectors are those of Control and Instrumentation, Industrial and Medical and additionally the end-use sectors of Aerospace & Defence, Automotive and Energy, particularly Renewables. In the CEE and other low cost countries, the focus remains on the Computer, Consumer and Communication (3C) sectors but we will also see continuing and increasing transfer of production of low & medium volume/high mix electronic assembly from Western European EMS. In revenue terms the European EMS industry continues to be dominated by the major Group 1 Global EMS providers with a strong focus on high volume products and with the majority of their European manufacturing operations now located in CEE. Despite this transition, the leading Global EMS companies, apart from Foxconn have retained a regional manufacturing presence in Western Europe, albeit significantly scaled back from the levels seen before the 2009 global recession. Utilising these facilities in Western and Central Eastern Europe the Global EMS companies will provide competition for the leading indigenous European EMS companies in the growth markets of Industrial, Medical, Aerospace & Defence, Automotive and high-end Communications. With the majority of these facilities acquired through acquisition from European OEMs they have the same capabilities as the European counterparts but can draw upon the resources offered by a large global corporation, in particular access to the latest technologies and strong balance sheets to support growth. Consolidation whether through acquisition or bankruptcy will continue to change the structure of the European EMS industry over the next five years and across all industry Groups. However, in the period to 2017 RER does not envisage that there will be a mass exodus of companies. Although the major companies have in the past grown as a result of acquisitions, such moves in the future are expected to be more selective, with companies looking to expand into new geographical markets, to follow customers as they also look to enter new markets and to fill gaps in their service offerings. In the last two years there has been a further increase in the number of companies, typically in Groups 2 & 3 who have added a low cost manufacturing operation to their capabilities. This is consistent with the drive by OEM’s and by the competitive state of the EMS market and we expect almost all of the Groups 2 & 3 to have these low cost operations, either directly or through collaboration in the near future.