EMSNOW Interview: Randall Sherman on the 2021 MMI Top 50 EMS

New Venture Research publishes the MMI Top 50 EMS each year, an eagerly awaited report on the status of the industry. EMSNOW caught up with Randall Sherman to get his thoughts on this year’s research.

New Venture Research released its annual EMS Top 50 report recently. What are the key takeaways from this year’s listing?

randallThe takeaway is that the EMS industry grew by at least 4.6% (according to the results of the MMI Top 50 EMS companies worldwide (see www.mfgmkt.com). Naturally, transportation revenue (both aerospace and automotive) was down but it was over shadowed by the growth in medical production and the replacement and upgrade purchases by customers in the communications (smartphones) and computer (notebooks and servers) markets. There doesn’t seem to be any reason for a slowing down and all indications are that the overall industry will grow positively between 2021-2025.

Were there any surprises in terms of new companies on the list or ones that may have not made the list this year?

There are always new ODMs popping up every year. This year it was SKP Resources with revenue of $512 million in 2020. Also, Pegatron and Wistron had massive increases in revenue demand resulting from Apple and smartphone OEMs like Samsung, Huawei, Xiaomi, Oppo, and others. We were surprised at the strong demand for computer and communications equipment that is promoting shorter life cycles (that is, replacement every two years as opposed to every 3-4 years).

We hate to see mid-tier EMS companies get bumped down and off the Top 50 list as they represent the core of the EMS industry and not just another Asian manufacturer throwing its weight into commodity products.

How is the “Foxconn effect” playing out? Is it still the most significant industry driver or has that diminished some?

The Foxconn effect is still very dominant and becoming more so. It has programs and alliances in almost every market sector. With the upcoming demand for EV parts assembly, Foxconn could very well dominate this market just like  when it captured the PCBA market. Of course, others like Pegatron are looking at this too with supplier deals that include wireless communication modules, ECUs, automotive panels, wiring harnesses, structural parts, voltage transformers, and charging piles. The company has become a supplier of Tesla electronic control units and home charging stations, as well as a supplier of in-vehicle tablet computers for Audi and Toyota vehicles.

How was the distribution of factories and revenues by region last year?

Of the Top 50, the APAC region controls 80% of the assembly market while the Americas serve 19% and the EMEA region, nearly 2%. Keep in mind that the Top 50 survey contains only Tier 1 and Tier 2 suppliers and there are hundreds more in the lower tiers, balancing this out.

Did you note any evidence of reshoring?

The trend to off-shore or near-shore has subsided and if anything, consolidated as competition intensifies.

What did you see as the main growth drivers in terms of industry sectors in 2020?

Outsourcing is broadly accepted in all industries, but other factors like time-to-market and microelectronics are giving EMS companies a decided edge. A lot of the TAM for volume products is being controlled by Japan, Korea and China. The low-volume/high mix industries are being served by mid-tier suppliers and make up a substantial market in the Americas and EMEA.

What impact do you see the semiconductor shortage issue having on the industry for 2021-2022?

It is worrisome but it is all about inventory and supply chain management. Top tier EMS firms have the best practices in this area but mid-tier suppliers usually manage to find parts through innovative sourcing techniques. The IC semiconductor industry is position for great growth over the next five years and everyone (especially China) is intent on capitalizing on it.