The European Manufacturing Services (EMS) industry is alive and well and living in Central and Eastern Europe (CEE)! Thanks to a combination of strong foreign investment and lower operating costs, together with reduced manufacturing in Western Europe, CEE now accounts for more than half of the total EMS output.
Reed Electronics Research (RER) has been analyzing the global electronics industry for over thirty years and has just published its eighth in-depth overview of the EMS industry since 1993. RER's latest overview of the EMS industry shows that, for the first time, CEE has overtaken Western Europe in EMS output. RER forecasts that revenues for the total EMS industry in Europe reached Euro25.7 billion in 2006; CEE accounts for 50.4% of that. CEE countries provide a cost effective base for manufacturers, particularly now that so many leading EMS companies are scaling back operations in Western Europe.
Other Key Findings Hungary accounted for 57% of the total EMS revenue in CEE in 2006, followed by the Czech Republic (23%) and Poland (10%). Favourable operating costs have attracted a wealth of investors; "Tier 1 Global Suppliers" Foxconn, Flextronics, Jabil, Sanmina-SCI, Elcoteq, Solectron and Celestica dominate. Among them, they've got the 3c markets (consumer, communications and computer) sewn up, representing a massive 90% of the total CEE EMS revenue for 2006.
Eastern Europe is expected to show strong growth in consumer and mobile (CAGR 7.5%), communications (CAGR 11.1%) and computer (CAGR 11.9%) in the period to 2011. Furthermore, CEE will see additional increases in medical, automotive and control, and industrial sectors as further lower margin products are transferred to lower cost countries by EMS companies in the West.
While performance in the UK and France in the period to 2008 will undoubtedly be compromised by the closure of Tier 1 facilities, EMS revenues throughout Western Europe are expected to show modest growth in the period to 2011, with medium sized companies in Germany the major driver.
In 2006 an estimated 49% of Western European EMS revenues were from outside the 3C markets. By 2011, this is expected to rise to 56%, resulting in increased competition across all sectors of the industry as companies look to gain higher margin business.
