2017 EMS Industry Recap & The Changes Ahead

By Jerry Damron, President & Global Solutions Executive
Damron Corporate Solutions International (DCSI)

I have been involved in executive recruiting and corporate organizational development within the electronics manufacturing industry for over 25 years. What I am seeing right now is a huge shift in the industry and if what I suspect is real, it means big changes for the Electronics Manufacturing sector as we know it.

I am hearing more and more from executives within top tier EMS providers that their company is trying to move out of traditional EMS – or more specifically, move away from the high volume PCBA business. The irony is that this is what the EMS industry was founded on. Astute EMS sales professionals sold OEMs on the concept that they, the EMS provider, had the ability to populate boards and carry out full volume assembly and manufacturing, faster and cheaper than the OEM could. They sold the concept of themselves as EMS providers, making the investments in the latest equipment so that the customer would not have to.  However, it now seems that has backfired for the larger players who now appear to want out of the business they helped define.

The problem for smaller providers came when the bigger tier providers won business at a loss. With razor thin margins, to losing margins to start, it became incredibly difficult to compete, at least if price was a customer’s biggest concern. Now many of the very providers that sold themselves as the best and lowest cost solution, are looking to re-brand themselves away from being core PCBA services providers. As this is happening, larger OEM accounts that are dependent upon unrealistically low assembly costs are now forced to look elsewhere for the same service. To make matters worse is the state of our current country’s administration and the volatility coming from within.

Despite the political unrest in our nation’s capital, the building of a wall on the Mexican border, and the threat of nuclear war with North Korea, I have still seen strength in the electronics manufacturing industry. It is a totally different kind of growth though as many providers have put the brakes on increasing offshore manufacturing in lower cost geographies. With fewer tier one EMS options for high volume assembly, top OEM’s have to turn to smaller EMS providers, most of whom cannot offer the lower cost PCBA, which will likely result in inflation for consumers.

I believe the future of EMS will continue to change fairly dramatically. I sense we will see a merger or two among the top tier players in the next 12 -18 months, which will create opportunities for smaller providers to pick up market share. I anticipate this to contribute to inflation, which will place increasing demand upon Supply Chain Management, Materials/Procurement and Logistics professionals to help manage costs. I suspect manufacturing will stay strong domestically but will require a new formula to stay profitable. It should be exciting to experience.

DCSI is an international executive solutions firm that specializes in helping build companies and advance careers within the electronics high technology industries. To learn more visit www.dcsiconsultants.com.