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42 SMT007 MAGAZINE I SEPTEMBER 2023 Weaknesses European EMS companies continue to spe- cialize in high-mix and low-volume orders. is focus helps to explain the European EMS industry's revenue relative to competitors in Asia. According to in4ma, 80% of European EMS companies have annual revenues of less than €10 million. Among the global top 20 EMS, there is not a single European company. Volume is important in the EMS industry as profit margins are notoriously thin; volume offers a path to greater profits that can be rein- vested in the business. Today, only the larger EMS companies are well-positioned to invest in new technologies, further vertical integra- tion, and higher capacity. Most companies lack sufficient cash as well as skilled labour to buy and leverage the latest equipment. e financial picture is further complicated by prime rates, inflation, and labour cost increases. Whereas in the past, most companies have been able to compensate labour cost increases of about 2% annually with productivity increases, this is nearly impossible with wage increases averag- ing 5% to 5.5% today. Opportunities Like the PCB industry, EMS companies are welcoming the renewed interest in sup- ply chain resiliency and are keen to see the EU and Member States take action to bolster the electronics manufacturing ecosystem. Sur- vey participants selected government sup- port for industrial resiliency just outside the top five opportunities. e top five opportuni- ties, however, shared a common theme: tran- sition. All five speak to significant changes tak- ing place in the electronics industry and across the economy. e EMS industry, for example, sees significant opportunities in the transition to the factory of the future, which is critical to its globally competitiveness. As discussed earlier, the factory of the future—comprising a suite of technologies, processes, and talent—offers tremendous Germany, Czech Republic, Hungary, France, and Poland are the top five EMS producing countries in the EU. Despite solid growth in recent years, the EU imports roughly 90% of required EMS products and services, and this proportion reaches 97% for consumer applica- tions and telecommunications. EMS SWOT Analysis, Consensus Views Strengths Much like European PCB fabricators, EMS companies also enjoy strong relationships with their customers and suppliers in Europe. ese relationships led to trust and longstand- ing business activity, in turn leading to contin- uous product innovation and global competi- tiveness. Importantly, the EMS industry rep- resents about 41% of electronic goods manu- facturing in Europe; OEMs manufacture the remaining 59%. While OEMs are responsi- ble for a greater share of electronics manu- facturing than EMS companies, the trend is toward greater reliance on EMS companies. As a result, EMS companies have seen nearly 5% annual growth and an increasing expansion into activities normally undertaken by OEMs or other third parties. ese activities include product development, design services, com- ponent sourcing, system manufacturing, final system assembly, logistics, and aer sales ser- vices. e European EMS industry also boasts a skilled workforce and prototyping capa- bilities, but unlike the PCB industry, many stakeholders believe Europe has sufficient state-of-the-art electronics assembly capa- bilities. Stakeholders would like greater capacity, but the market demand must exist to justify investments. Notably, the EMS sector is far more interconnected with the global supply chain than their PCB coun- terparts. This is not surprising as EMS companies of all sizes must have global sup- ply chains to source components, parts, and chemistries.