What’s Happening in the European EMS Market?

Eastern Europe was once a trendy place from an electronics manufacturing services (EMS) perspective. Top-tier EMS companies set up factories in Poland, Bulgaria, Romania, and other nearby places to serve the mature European and emerging African and Middle Eastern consumer markets while reducing long-distance transportation costs associated with Asian shipments.

Unfortunately, weaker than expected end-market growth and an ongoing economically stagnant euro zone will keep European EMS companies under tough revenue and profit pressure, according to recent reports.

As a result, the European EMS industry is expected to post only modest growth in 2014 (the numbers are still being tallied), and the period of market stagnation could extend to three years, according to “The European EMS Industry – A Strategic Overview of the European Electronic Manufactuirng Services Industry 2013-2018” report released at the end of last year.

For 2015, total European EMS revenues are forecast to reach €26.07 billion, with the biggest share expected to come from companies operating in Central and Eastern Europe (about €15.11 billion). The Middle East, North Africa, Western Europe, and other neighboring countries are predicted to generate the balance of revenue, about €10.95 billion.

It will be a while before “growth” comes back into the vocabulary. 2018 is when total European revenue could climb to €27.81 billion, noted the research report.

For Western Europe's EMS companies, the control and instrumentation, industrial, medical, aerospace and defense, automotive, and energy win as attractive sectors. However, in Central and Eastern Europe and other low cost countries, the focus will be on the transfer of production of low and medium volume/high mix electronic assembly from Western European EMS companies, the report found.

A similar Research and Markets report released in December said 16 countries in the region–about half from Eastern Europe (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, and Slovenia) and the remaining ones falling under the heading of “Former Soviet Union” countries (Belarus, Estonia, Latvia, Lithuania, Moldova, Russia, and Ukraine)–accounted for €55 billion of electronics production in 2013, the last year for which data is available. The printed circuit board (PCB) market was estimated at slightly under €2.2 billion while total PCB production in the region is estimated at only €333 million, according to the report.

Poland, one of the largest electronics producers in the region, has grown faster during the 2011-2013 span than any other Eastern European country, according to Research and Markets. Poland's 2013 electronics production is estimated at €6.8 billion.

Despite the gray shadow of market stagnation, some companies are taking advantage of the region's strengths and extending their footprint in Europe. 

For example, Kimball Electronics, a contract electronic manufacturing services company specializing in durable electronics for the medical, automotive, industrial and public safety markets, announced in January that it will expand capacity in Europe with a new operation in Romania.

The 6,000 square meter facility will be near the Timisoara airport and include multiple production lines. Production employment should ramp up in the third quarter of  2015, the company said.

“This year we will celebrate our 15th anniversary since establishing our operations in Poland and we have been very pleased with the accomplishments of our team there,” added Don Charron, Kimball's chairman and CEO. “The addition of Romania is a natural fit in our strategic plan to support the growth initiatives of our customers and we are confident that we will build a capable and competent team here too.”

Where does Europe fit in your manufacturing strategy? How has it changed in recent years? Tell us in the comments section below.

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