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26 SMT007 MAGAZINE I JANUARY 2026 Building a New European Manufacturing Model Europe's EMS and PCB sectors are not simply col- lections of factories, materials, and machines. They are deeply interconnected communities of engi- neers, operators, entrepreneurs, and family-run businesses. 72% of EMS companies generate less than €10 million per year, and those under €2 mil- lion account for just 1.2% of total revenue. Many of the small and mid-tier firms that have been the backbone of the European industrial base now face a difficult truth: The industry is returning to an era in which scale, specialization, and strate- gic focus are primary. The market that emerges in 2026 and beyond will not reward generalists, nor will it protect companies waiting for the next demand surge. Customers are consolidating, tech- nologies are accelerating, regulatory contexts are shifting, and global supply chains are reorganizing around resilience rather than lowest cost. Despite all this complexity, there was some mea- sure of optimism. Most analysts expect 2026 to bring a return to modest growth as inventories nor- malize and AI-driven demand continues to build momentum. But this recovery will not absolve the structural challenges now facing the sector. Mar- gins must be protected through disciplined pricing, overhead management, and modernization. Auto- motive, while still a major revenue driver, carries significant volatility and must be navigated with caution. Strategic positioning, particularly deci- sions about entering aerospace and defense, scal- ing through M&A, or specializing in high-reliability niches, will shape competitive trajectories far more than chasing volume or relying on legacy customer bases. For EMS and PCB management teams, the mes- sage is clear and immediate. The industry is not simply cycling; it is transforming. The winners will be those who recognize that the downturn of 2024 was not an anomaly but a catalyst. The next decade will reward companies willing to invest in the materials and processes demanded by AI- era infrastructure, to navigate the requirements of defense and aerospace production, and to form alliances that strengthen supply chain positions. What lies ahead is not a return to the old normal but the construction of a new one, where technol- ogy, geopolitics, and industrial policy converge to define what electronics manufacturing in Europe will become. SMT007