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EMS Industry: No Relaxing Now
December 17, 2014 |Estimated reading time: 1 minute
With technology and business environment always changing, the EMS industry has found itself in an ever-transitioning mode over the last several years. Certainly, the industry today isn’t what it was five years ago, and the rate of change is likely to accelerate in the next five years or so.
The EMS industry is expected to grow from US $273.9 billion in 2013 to US $373 billion in 2018, a compounded annual growth rate (CAGR) of 6.4%, according to New Venture Research. This growth trajectory will be slightly faster than that of the worldwide electronics assembly valued at CAGR of 6.0% over the same period.
Given that the EMS industry accounts for only 22% of the worldwide electronics assembly per New Venture Research, it has ample room for an even faster growth depending on its ability to convince OEMs to outsource more than what they do now. The EMS providers’ persuasive power lies in its ability to satisfy the demanding and changing requirements of OEMs.
By the end of June 2014, the combined revenues of the nine largest EMS companies slightly declined year-on-year according to Walt Custer’s quarterly report. Despite the reduction, Celestica, Jabil, Flextronics, and Sanmina all managed to increase their gross margins in the same period from an average of 6.7% last year to 6.9%, indicating a shift of focus on margins based on Lincoln International Q2 2014 Report.
In terms of business model, EMS companies are veering away from the realm of pure-play EMS. They are creating more value for their OEM customers by expanding their solution offering, and in the process augmenting their revenues and margins.
Arthur Tan, president and CEO of Philippines-headquartered EMS provider Integrated Micro-Electronics Inc. (IMI), said, “IMI is moving away from making only what we are good at toward leveraging our experience and expertise to venture into new growth areas.”
Parsing “EMS,” he added that the company is shifting away from the electronics and toward manufacturing and services.Read the full article here.Editor's Note: This article originally appeared in the December 2014 issue of SMT Magazine.