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SEPTEMBER 2023 I SMT007 MAGAZINE 43 operational and capability benefits for EMS companies and their customers. e factory of the future promises to increase productiv- ity and quality, while reducing costs. It also empowers manufacturers to strengthen col- laboration with their customers to ensure the product is meeting specifications. Investments in the factory of the future are also helping to drive product and process inno- vation, both of which EMS companies cite as top opportunities. On the product side, com- panies report that semiconductor advance- ments are placing daunt- ing new requirements on EMS companies. Electronic assemblies must incorporate increasingly sophisticated chips with greater function- ality, performance, and secu- rity—oen in smaller pack- ages. e design and manu- facturing obstacles are chal- lenging every segment of the industry, but EMS compa- nies, leveraging their techni- cal expertise and global sup- ply chains, are increasingly well positioned to partner with their OEM customers to ensure that product requirements are achieved using the latest technologies. Process innova- tion is critical to product innovation to ensure that the products can be manufactured at a price point and with the quality and reliability that customers expect. e migration to the factory of the future is also aligned with the EU's drive for economy- wide digitization and for an ambitious set of environmental goals. Factories will increas- ingly integrate automation, sensors, big data, and AI and the result will be a greater stew- ardship of natural resources. ese twin tran- sitions will also create a need for greater use of electronics across the economy, which Euro- pean EMS companies are eager to meet with the right government incentives. Threats e low-volume disadvantage, coupled with other economic realities, are making it more difficult for many small EMS companies to remain solvent. As a result, the industry is see- ing a wave of closures, as well as consolidation through acquisition. In4ma reports 100 fewer European EMS companies over the last eight years. is trend is likely to continue as EMS companies face a host of external pressures, many of which are driven by their reliance on global supply chains. Although the shortage of chips has been most acute, companies report shortages in many components, parts, and materials. is led to a hoarding of supplies which might have to be devaluated as prices have fallen for sev- eral of these components. Moreover, measuring true demand and supply remains a challenge, making Euro- pean EMS companies heav- ily reliant on global sources and especially vulnerable to supply chain disruptions. e industry is concerned about workforce shortages. Aging workers are retiring, and companies cannot attract new workers in sufficient num- bers to replace those retiring and to facilitate the growth of their businesses. Cost pressures weigh heavily on hiring and labour costs are much higher in Europe than low-cost regions in Asia and the Americas. Companies are also concerned about the breadth and scope of government regula- tions. ey are especially burdened by report- ing obligations related to their global supply chains. Companies are worried by the patch- work of regulatory requirements across the EU and the way the EU's laudable, but broad drive toward the circular economy may disad- vantage the region's manufacturers. e green transition necessitates a stronger and more The factory of the future promises to increase productivity and quality, while reducing costs.