EMS comes together in 2011
17 February 2011
Marco Pisano, Electronics Programme Manager at Intellect, believes that one of the first trends to emerge in 2011 could be consolidation in the European EMS market.
The number of EMS companies appearing in industry directories has declined from 1136 in 2005 to 808 in 2010. Just over 50 EMS companies in Europe have a turnover of more than €50M accounting for 67% of the total industry turnover and 55% of the workforce. On the opposite side of the spectrum, there are more than 500 SMEs with less than €2M turnover.
Finally, to have a complete picture we need to include companies – approximately 100 – that are subsidies of international groups, albeit headquartered in Europe. As a result, we currently have members looking to buy smaller companies and OEM members looking to sell in order to focus on their core businesses such as system integration or product design.
Such consolidation is long overdue. Despite being a long-term growth sector, there are too many EMS companies in the UK and Europe. On the positive side, this means a dynamic and entrepreneurial market. But, on the other hand, very few UK- headquartered contract manufacturers have achieved the scale required to challenge global markets.
The reasons for the lack of consolidation in the past two years include the recession, which has focused companies on costs and new business rather than strategy, and the credit crunch, which has made capital scarce for potential acquirers.
Things may change at last as several finance institutions are approaching Intellect to understand the UK electronics industry structure and the future of the market. Hence some of the smaller deals could be funded by private equity, which seems to be taking more of an interest in the EMS world.
The upshot could be an industry that is finally equipping itself to confront global competition, where large global EMS companies dominate production in Eastern Europe but with stronger players emerging in Western Europe, though still dominated by small and medium sized, local companies.
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