Electronics Production | March 30, 2007

Pie Charts: EMS Consumption in<br>Germany, Austria &amp; Switzerland

According to UK analyst firm MHM, low volume local production/R&D opportunity increasingly important in developing EMS and R&D in German region.
According to MHM, as local production was found to be most popular among mid-tier OEMS, it is increasingly important to have a toehold in this market which ranks as the number one for Electronics Equipment Consumption. MHM's survey of 50+ OEMs in Germany, Austria and Switzerland shows that “Engineering led EMS" is the model.

MHM's survey of EMS and R&D consumption shows the opportunity represented by mid-tier OEMs in Germany, Austria and Switzerland is thought to be around 30% of the total - around $838M. Just over $400M of this can be addressed utilising some type of Engineering led EMS (ie around half are also buying design services).

The relatively small mid-tier market expands significantly when the top-tier is added in. If some type of local production is present in Germany then the TAM - still considering companies only who outsource at least one element of design - is 50% of $2793 ie $1396M.

In addition there is a proportion of business, given out by European OEMs but built and shipped outside Europe, likely to be very small in the mid-tier OEMs but significantly larger for top-tiers. This would add around 17% to the total.

As PCBA was often outsourced so are the components that go onto the PCBA. Box Build was outsourced at 38% of companies while distribution and service & repair was found to be nearly all in-house.

-Small accounts
-37% of companies outsource materials purchasing
-PCBA outsourced in 80% of companies, 65% (of the 80%) outsource 100%
-Box Build outsourced at 38% of companies, 54% (of the 38%) outsource 100% Box Build
-Distribution and Service & Repair nearly all in-house

Integrated Outsourcing
Some 50% of companies outsource one or more elements of R&D. The most popular R&D outsourcing areas are:
- Most Often Outsourced - Prototyping, system and test development
- Some Outsourcing - Qualification, digital, PCB layout, optical, embedded software, IC, analogue and media

Patchy R&D outsourcing, but often outsourced:
- Prototyping
- System
- Test Development
- Qualification
- Digital
- PCB Layout
- Optical
- Embedded Software
- IC
- Analogue
- Signal Integration

When the same analysis was applied to one or more outsourced EMS element the ratio of companies outsourcing one or more element rose to 80%.

Cost Base Preferences
Surprisingly around 23% of companies interviewed would not consider Eastern Europe or Asia, preferring to have outsourced production locally in Western Europe - normally Germany, Austria and Switzerland.

With regard to the country, within CEE region, that would be considered by the OEM, today Hungary and the Czech Republic were most popular followed by Slovakia, Latvia, then others.

Romania was most popular for R&D.

When percentage of mentions of region preferred is analysed local comes first then Asia then CEE. More than 40% wanted local production.

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