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© robyn-mackenzie-dreamstime.com Analysis | July 24, 2014

Seems that everybody wants a piece of the German EMS market

Growth in the recent years within the electronics industry has been predominantly related to a series of new products and applications primarily stemming from the communication, consumer, industrial, information technology, medical and transportation electronic segments.
Naturally, this growth has trickled down to Electronics Manufacturing Services (EMS) providers that has lead them to adjust their operations by focusing on capturing and creating value by delivering innovation, reliable fulfilment and speed in an environmentally respectful manner. However, such organic growth and readjustments of business values is limited due to technological, organizational and geographic competencies.

Thus, creating for market consolidation to take place.

As mentioned in the last edition, market consolidation among EMS providers is taking place within the value chain whereby players are able to offer either a selection of services (engineering, assembly, box build, after sales, low volume/high mix, high volume/low mix) or the entire product life cycle spectrum. Additionally, value-added services such as logistics or warehousing are minor features attempting to differentiate oneself from the competition. Nonetheless, a fundamental element of nourishing the speed of growth is through geographic expansion into key markets.

Inviting opportunities for EMS providers lie at the heart of Europe. Germany is not only home to the world’s largest automotive producers but consists of a relatively large industrial economy of mid-market businesses. More importantly Germany accounts for the largest electronics and EMS market in Europe holding a 30% market share.

Given the size of the German EMS market and its growing opportunities, recent M&A activities signal a trend towards many International and European players trying to get their foot into the German market. The acquisition of BuS Elektronik by the Dutch Neways Electronics International that was exclusively executed by MP Corporate Finance on the buy-side is a perfect example displaying market entry into Germany. The strategic fit along with complementary service offerings and an extended customer portfolio are clear benefits for Neways. Other examples of market entry into Germany can be observed by Scanfil’s acquisition of Schaltex Systems and Selcom/4k Invest’s add-on of the Paderborn-based operations of Flextronics.

Alternatively, for EMS players with a presence in Germany attempting to increase capacity with sustaining low levels of production cost can view CCS Group’s strategy to be effective, whereby merging with AKATech Group enables for production sites to be located in Slovakia, which is in close proximity to the DACH region. As a result, regardless of the strategy, M&A observations reveal that it is imperative for EMS players to attain a piece of the German EMS market in order to remain competitive.

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