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© ra2studio dreamstime.com Analysis | November 28, 2014

EMS-industry: Modest growth for 2014

Weaker than originally anticipated growth in the Eurozone and the emerging markets will result in the European EMS Industry posting only modest growth in 2014, extending the period of market stagnation to three years.
The rapidly deteriorating geopolitical situation combined with the economic slowdown, in Europe and globally, in the second half of 2014 will continue to subdue demand and result in the current market stagnation in the European EMS industry continuing into 2015.

Against this backdrop of low growth we estimate that in 2015, the total European EMS revenues are forecast to reach Euro 26.07 billion with the greater part Euro 15.11 billion achieved by companies in Central and Eastern Europe (CEE), Middle East and North Africa, (MENA) and other countries and Western Europe Euro 10.95 billion.

Growth is expected to gain some traction over the period to 2018 when we expect that total European revenues will reach Euro 27.81 billion with CEE/MENA showing a compound average annual growth rate (CAAGR) of 2.4% to total Euro 16.27 billion. Similarly, we expect the EMS revenues in Western Europe to grow to Euro 11.55 billion at a CAAGR of 1.4% over the period 2013-2018.

Although made up of over 1,000 companies, the industry is dominated by a small number of Global players with the Top 3 – Foxconn, Flextronics and Jabil – accounting for around 44% of revenues in 2013, with nearly 90% from plants in CEE focused on the Computer, Consumer and Communication (3C) sectors. In response to weaker end market demand and the migration of some production to Asia, output has been scaled back in recent years. Any escalation in the transfer of volume production to Asia could have a marked impact on overall EMS revenues in the region and Europe overall.

Over 80% of the total sales (Euro 20.2 billion) are achieved by 97 companies who are less than 10% of the total number. We are expecting that there will be further consolidation across the industry due to the downward price pressure, slow economic growth and requirement to broaden and deepen the design, development and aftercare services to customers.

For EMS companies based in Western Europe, the most attractive sectors are those of Control & Instrumentation, Industrial, Medical, Aerospace and Defence, Automotive and Energy, particularly Renewables. In the CEE and other low cost countries, the focus remains on the transfer of production of low and medium volume/high mix electronic assembly from Western European EMS.
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A more detailed analysis - presented by Peter Brent - will be available during the TEC Gothenburg. Information regarding the event; please follow this link.

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