UK EMS: The Way Forward
10 September 2008
Intellect’s Henry Parker introduces this issue of Outsourcing Insight with a look at future prospects for contract manufacturing in the UK.
Globalisation, and the new wave of competition from emerging economies, has affected UK electronics manufacturing more than many industries. The first half of the decade saw a wave of closures and job losses, as much of the large volume manufacturing moved offshore to China and Eastern Europe. This trend has not, as some would have us believe, brought about the demise of the UK Electronics Manufacturing Services (EMS) sector. It is true that many of the truly global ‘Tier One’ EMS providers have indeed left these shores. What has been less well noticed manner in which the ‘Tier 2 ‘, or more localised, EMS providers have adapted to new realities and competition with an equally new business model, centred on production of low-volume, hi-tech products for the defence, aerospace, security and industrial market. This realisation has greatly contributed to the UK’s retention of a 14% market share of overall electronic equipment production, second only to Germany in Western Europe. This share is worth approximately £17bn. There is every indication that this sector is, after some hard times, beginning to grow again.
It is obvious that outsourcing and off shoring production is key part of many OEM’s procurement strategy. They often demand such options as a precondition for doing business. However, it has become increasingly clear to both EMS providers and OEM’s that off shoring is not the answer to everything. Many have begun to realise that the total acquisition cost of off shoring/outsourcing is actually greater than they have envisioned. In many cases the distance, language, cultural differences difficulties in supply chain management and often, sheer weight of bureaucracy can offset the unit cost benefit. While offshore production is here to stay, and certainly has benefits, EMS providers and OEM’s need to formulate effective criteria for making the decision to do so in first place.
It is also true that many OEM’s see key benefits in keeping production within the UK. Today’s UK EMS provider is flexible, providing fast turnaround times and the capability to react quickly to design changes. Far more than most, the UK EMS sector has strength in depth when it comes to innovation. These two attributes allow us to maximise the benefits of commercialisation, moving quickly from prototype to mass production, whilst at all times maintaining and enhancing the quality of the products we manufacture
Against this backdrop a range of challenges continue to beset the industry in the UK. Brussels has emerged as the key originator of a raft of regulation (WEEE, RoHS, EuP, REACH to name but a few) that has forced the sector to significantly alter the processes it uses in a range of areas. Recruiting staff is a challenge for many, as is covering the cost of up skilling existing members of staff. The emergence of the ‘grey market’ and concurrent upsurge in counterfeit components has driven up costs.
All of these trends require UK electronics manufacturing, in all its various guises, to stick together and to speak with one unified and representative voice. Intellect, more than any other organisation or trade association, is that voice. Our dedicated interest group for EMS Providers, the Electronics Manufacturing Services Association (EMSA) is the only dedicated forum, with a national scope, for the sector to network, monitor market trends and formulate collective strategies to deal with issues that affect the sector as a whole. We are committed to giving our members a voice, which can only help to ensure the future health of what is still a robust and vibrant division of UK plc. Not only that, Intellect membership gives you access to procurement and purchasing decision-makers from all defence prime contractors, as well as major multinationals like BT. If you are not already working with us, this access could lead to significant business development opportunities and help you to one of those contract manufacturers projecting double digit growth for 2008.
Henry Parker is Programme Manager for Technology Markets at Intellect, and runs its tailored programme for the UK electronics manufacture and design community. Intellect is the UK trade association for the IT, telecoms and electronics industries. Its members account for over 80% of these markets and include blue-chip multinationals as well as early stage technology companies. These industries together generate around 10% of UK GDP and 15% of UK trade.
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