in4ma: the state of the EMS Industry in 2024

2024: A Year of Decline and Uncertainty

Weiss painted a sobering picture of the EMS industry this year, revealing that 70-75% of companies have reported lower revenues compared to 2023, with a majority expected to close the year at a loss. He attributed this downturn to lingering effects of the so-called “fake chip crisis” and ongoing market instability.

“Approximately 40-50% of EMS companies in Europe are likely to record losses in 2024,” Weiss explained, underlining the severity of the situation. A major issue, he noted, is the lack of visibility in key markets, particularly the automotive sector, where uncertainties surrounding the transition to electric vehicles have significantly disrupted demand. For example, a sudden cut in EV subsidies in Germany earlier this year caused sales to plummet overnight.

A Mixed Outlook for 2025

Despite the challenges, Weiss remains cautiously optimistic about the industry's recovery. He predicts an overall market improvement beginning in the first quarter of 2025, although the pace will vary by sector and company.

The aerospace and defence industries have been notable exceptions, showing consistent growth even in 2024. Companies like Switzerland’s Cicor and Norway’s Kitron have excelled by focusing on these thriving markets. “These industries are blooming,” Weiss remarked, emphasising their resilience and strategic importance. However, other sectors, including industrial electronics, medical electronics, and the broader automotive market, continue to face headwinds.

A Crisis in European PCB Manufacturing

Weiss also shed light on the critical situation in the European PCB (printed circuit board) industry. He pointed to recent closures, such as Würt’s factory in Schopfheim, Germany, and the liquidation of S2P in Italy, as indicators of a broader decline.

“The EMS companies are increasingly sourcing PCBs from cheaper non-European suppliers. While this may reduce costs in the short term, it risks creating a dangerous dependency on non-European manufacturers,” he warned.

Weiss expressed concern about the potential long-term impact on pricing and supply chain stability if the European PCB industry continues to shrink.

Eastern vs. Western Europe: Contrasting Dynamics

Weiss highlighted the stark differences between the EMS markets in Western and Eastern Europe. The Western market is mature and homogeneous, having evolved over more than five decades. Established players like Zollner Elektronik, which will celebrate its 60th anniversary next year, exemplify this stability.

In contrast, Eastern Europe’s EMS market is heterogeneous, characterised by the dominance of large multinational corporations like Flex, Foxconn, and Jabil, which have established substantial operations to capitalise on lower labour costs. For instance, Foxconn operates six factories in the region, generating over EUR 7 billion annually.

Despite this, Weiss sees a bright future for smaller, locally owned EMS companies in Central and Eastern Europe. He noted that these companies, particularly those with revenues between EUR 10 million and EUR 30 million, are often more profitable than their Western European counterparts. This profitability, coupled with a growing focus on regional specialisation, positions them well for future growth.

Looking Ahead

The interview concluded on an optimistic note, with Weiss emphasising the resilience and potential of Central and Eastern European EMS manufacturers. While 2024 has been a year of turbulence, the industry is poised for recovery, driven by strategic adjustments and a focus on high-performing sectors.

As the EMS industry navigates these challenges, the insights shared by Weiss serve as a valuable guide for understanding the current landscape and preparing for the opportunities ahead.