NEW YORK -- Weaker than originally anticipated growth in the Eurozone and the emerging markets stymied the European EMS industry in 2014, extending the period of market stagnation to three years.
The geopolitical situation in Eastern Europe and elsewhere in the world, combined with the economic slowdown in the second half of 2014, will continue to subdue demand and result in the current market stagnation in the European EMS industry continuing into 2015.
Against this backdrop, total European EMS revenues are forecast to reach Euro 26.07 billion this year, Reportlinker says, with the greater part -- some Euro 15.11 billion -- achieved by companies in Central and Eastern Europe, North Africa (CEE/MENA) and other countries. For its part, EMS in Western Europe is expected to total Euro 10.95 billion.
Growth is expected to gain traction through 2018, when total European revenues will reach Euro 27.81 billion. CEE/MENA will return a compound average annual growth rate of 2.4% to Euro 16.27 billion. EMS revenues in Western Europe will grow to Euro 11.55 billion, a CAAGR of 1.4% over 2013 to 2018.
Although made up of over 1,000 companies, the industry is dominated by a small number of global players with Foxconn, Flextronics and Jabil accounting for around 44% of revenues in 2013, with nearly 90% from plants in CEE focused on the computer, consumer and communication (3C) sectors. In response to weaker end-market demand and the migration of some production to Asia, output has been scaled back in recent years. Any escalation in the transfer of volume production to Asia could have a marked impact on overall EMS revenues in the region and Europe overall. Over 80% of the total sales (Euro 20.2 billion) are achieved by 97 companies, the report says.
"We are expecting that there will be further consolidation across the industry due to the downward price pressure, slow economic growth and requirement to broaden and deepen the design, development and aftercare services to customers," Reportlinker added.
For EMS companies based in Western Europe the most attractive sectors are those of control and instrumentation, industrial, medical, aerospace and defense, automotive and energy, particularly renewables. In the CEE and other low cost countries, the focus remains on the transfer of production of low- and medium -volume/high-mix electronics assembly from Western European EMS.