What is Electronics Manufacturing Services (EMS)?

The term “electronics manufacturing services” (EMS) refers to an overall industry and also to a specific class of subcontractor or company. EMS is also often used interchangeably with the more generic term “contract manufacturing (CM)”. In short, EMS companies provide a wide range of value-added engineering and manufacturing outsourcing services to original equipment manufacturers (OEMs), allowing them to improve operational efficiencies and focus on core activities like research and development (R&D).

The electronics manufacturing services (EMS) market is dynamic, and the demand for electronic components and outsourced manufacturing services is growing.

The industry is forecast to grow at a compound annual growth rate of 7.5% between 2018 and 2024, according to market research.

Growing demand for consumer electronics and innovative technological advancements allows manufacturers to capitalise on current opportunities. With rising customer demands and the need to control costs, manufacturers may need to partner with solution providers that offer industry expertise and experience.

As a global leader in high-mix low-volume manufacturing, we see first-hand the evolution the EMS industry is experiencing and the critical role we play in the electronics value chain. In this new guide, you'll learn about the driving factors of EMS, applications, challenges, and what to consider when outsourcing the manufacturing of your product.

Let's dive in... 

what-is-ems

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Chapter 1

Electronics Manufacturing Services Overview and Applications

The core of any electronics manufacturing service offering stems from design, manufacture, test and distribution. An EMS provider will perform these functions which may also include full systems assembly for original equipment manufacturers.

For example, offering systems integration or "box build" services - manufacturers can use a process to combine printed circuit board assemblies, wire harnesses, fabrication of enclosures, testing and more. 

 

EMS industry_5

The electronics manufacturing industry is broad and spans across government (aerospace & defence), consumer (smartphones, PC, etc.) and industrial products (robotics and automation), electronic components (connectors, semiconductors etc.), and health care (medical devices). As the EMS market continues to grow, four driving forces can be observed.

Electronics Manufacturing Industry Market Overview

According to Market Research engine, the major driving factors of the Electronics Manufacturing Services (EMS) market are: 

  1. Rising demand for automotive electronics -  the surge can be credited to the demand for safety systems.
  2. Growing demand for consumer electronics - new analysis from Frost & Sullivan, finds the growing demand for consumer electronics will increase the outsourcing trend.
  3. Advanced skill and focus on core competencies - companies are searching for solution providers that provide expertise in their specific field or market sector. 
  4. Proliferation of mobile devices - (The market for Android devices, iPhones and wearable technology is continually growing). Cisco's annual report on mobile traffic stated, "By 2020, 5.4 billion people around the world will have a phone."

Applications in the electronics manufacturing space are broad and diverse. Most processes can be applied in any industry for use in the global market. As specified, it includes commercial, industrial and consumer.

Let's look at a few applications... 

Electronics Manufacturing Applications

MedicalMedical OEMs look to their EMS provider to offer not only the best processes and highest quality standards, but the industry expertise and experience that can guide new product introductions seamlessly through development.

Industrial - Industrial applications use many technologies in a wide array of industries. The complete product lifecycle - from scope and specification, through prototyping and testing, to final assembly, these are services needed to bring a new product to market.

Aerospace and Defence - Safety critical solutions are needed for peak performance and high reliability for harsh environment applications. There will be an increased focus on electrification of aircrafts.

Telecom - Telecommunication and data processing is complex. Support is needed for various devices themselves, and the network infrastructure underpinning the technology.

BTG labs, a science-based technology company, shared Typical Applications for Electronics ManufacturingBTG Labs’ Surface Analyst™ helps electronics manufacturers build a product to stand up to elemental threats. 

For instance, if a manufacturer needed a way to ensure the protection of their circuit boards, their instrument would instantly reveal the cleanliness level of the surface. In doing so, "it creates a successful bond between the conformal coating and the circuit boards."

The manufacturer would cut down on failure and waste while experiencing successful coatings.

Chapter 2

Comparing an OEM to an EMS Provider 

The terms used in electronics manufacturing are as different as the roles they play.

OEMs - are known as original equipment manufacturers, EMS - electronics manufacturing services.

oems-ems-3

 

For further explanation, Wikipedia defines electronics manufacturing services (EMS) as a term used for "companies that design, manufacture, test, distribute, and provide return/repair services for electronic components and assemblies for original equipment manufacturers (OEMs). The concept is also referred to as electronics contract manufacturing (ECM)."

The market segments are commonly divided into Tiers based on their revenue:

  • Tier 1: >$5 Billion
  • Tier 2: $500M to $5B
  • Tier 3: $100M to $500M
  • Tier 4: <$100M

Continuing on...

Have you ever scrolled through an interesting article and you had to "google" the acronym because:

1. You never heard of it before or

2. You heard of it, but needed to know its meaning or definition.

Here's a great list of acronyms regularly used in electronics manufacturing services:

Electronics Manufacturing Acronyms You Need to Know

Chapter 3

Outsourcing Manufacturing: What You Need to Know 

Supply Chain

Evaluating outsourcing options begins with knowing your core competencies (the thing you do best). Once you completely understand that aspect, you'll be able to partner with a provider that offers more expertise and experience in other areas.

How do you know an EMS Company is right for you?

Ask questions. 

The process of selecting an EMS provider can be time-consuming and frustrating. But if you know the right questions to ask it can be less daunting.

Bonus: Get our 21 Questions to Ask Before You Choose an EMS Provider emailed to you as a PDF to easily save or print so you can access it anytime.

How to Begin the Process of Selecting an EMS Provider

1. Do they have an extensive history and experience in the industry?

Selecting a manufacturing partner is a tough choice. One major factor to consider is pedigree or credibility within the industry that you are seeking to penetrate or grow. EMS providers that remain successfully operational over many years and decades have often survived because of their ability to satisfy customers in particular markets, year after year.

2. Can they add value to you during the design process?

Most companies in the EMS space offer some level of support through Design for Manufacturing (DFM) processes. Original Equipment Manufacturers (OEMs) should be on the lookout for an exceptionally proactive EMS partner with industry leading toolsets, clear design guidelines, and a knowledgeable and accessible staff who demonstrates the skills required to help bring your product to market faster.

3. Is it obvious that they've invested in the latest advanced technologies and modern equipment?

From engagement at the design verification stage through production, you need to be able to count on a manufacturing partner who supports your business through use of advanced, automated software toolsets. When you've found the "right fit" manufacturing partner, they should serve as an extension of your in-house design team. This will allow them to leverage their tools to source and monitor the latest supply chain trend information and industry design guidelines, in a way that is most relevant to your products. This insight and continued investment in advanced software can even facilitate proper equipment investments for the future.

4. Are they up to code with all industry standards, and then some?

Leading-edge companies will demonstrate a high degree of certification to the latest standards and specifications across all key customer market sectors. Achieving and maintaining certifications in high-reliability sectors requires investment, time, and adherence to stringent processes and business controls; particularly in the Medical, Defence, and Aerospace markets. This in turn shows commitment to a focused group of industries, as well as a dedication to continuous improvement.

5. How comprehensive is their product testing offering?

Product testing should be discussed at the design stage to maximize the opportunity to test as much of the product as possible - at the best value. From optical inspection, X-ray, board-level testing, functional testing, through to full product and lifecycle testing, the EMS partner should demonstrate that they can provide a defect-free product. For certain products that must operate in particularly harsh environments, qualification testing at the prototype stage is highly recommended through ESS, HALT and HASS tests to accelerate product certification that would give the customer a competitive advantage. It is imperative to consider whether the EMS has these capabilities in-house, or if they rely on third parties. Especially if time-to-market is a concern.

6. Will they take care of your needs after order fulfillment?

In an ideal partnership with an EMS provider, you would rest assured knowing that a dedicated team is monitoring day to day operational orders, and working with you on key new products, as well as aligning their own business to match your strategic goals for the next three to five years. When both companies are aligned in this way, a stronger foundation and culture exists to support mutual, long-term success.

7. Are they a stable company?

Ask yourself, "Are the finances of the electronic manufacturer strong and stable?" Financial health is a measure of success, scalability, and even indicates a level of risk mitigation. Have they experienced transformational revenue growth? Was it tied to one new customer award or multiple successes that also align directly with their proclaimed growth strategy? These are important stability indicators during selection of an EMS provider.

8. Is their communication effective and transparent?

Communication with your EMS partner(s) of choice should fall under the three C's rule: Consistency, communication, and collaboration. The flow of information is paramount to the success of the partnership. This allows open and active dialogue to make business decisions easier and faster.

9. Do they have the proper certifications required to support your products and end-market(s)?

Proper certification is a must. It shows diligence and a company's continuous improvement and high standards.

10. Can they demonstrate their ability to quickly respond to all changes and revisions in a timely fashion?

Electronics Change (EC) management is reflective of the speed at which the companies will work. By maintaining constant communication, any changes, and the speed of implementation, can be maximized for customer benefit, and mitigation of cost or market impact.

11. Do they have a new product introduction process in place?

Bringing a new product to market is the life blood of any product company. Your EMS partner needs to understand how to support this process. They will add value from design reviews, product qualification, volume ramp, and cost awareness. Presence of a dedicated NPI team is an added bonus.

12. Are they a cultural fit?

Knowing your supplier talks the same business language as you and has experience in your market sector speaks volumes. The best manufacturer fit will understand the requirements needed to get the job completed on time, the certifications needed, and in some cases the legalities of working on specific products or programs. Look for manufacturers who can provide customer testimonials that further demonstrate their willingness for open and honest communications.

13. Can they supply you with references?

It is always positive when potential customers see active customers describing their great experiences dealing with a particular supplier. Open and truthful feedback can be a major player in making the right choice in partners.

14. Do they have a manufacturing footprint that is compatible with your short and long-term needs?

Whether you require local engagement or support for a global market, your electronics manufacturing partner needs to be the right fit for your immediate demand and long-term strategic goals. This will build the relationship both short and long-term.

15. Do they have a product lifecycle management and/or counterfeit prevention system in place?

In today's marketplace, both material obsolescence and counterfeit prevention are imperative for product success. Making sure your partner can help you identify future obsolescence, and that your product is 100 percent traceable to the extended supply chain, will give you peace of mind and security that your product will meet regulations long-term.

16. How do they handle traceability?

Traceability needs to come from approved extended supply chain partners that handle storing and recording all information to certification requirements. They will also need the ability to retain those records for the period of time required by the qualification standard or applicable law, which in some cases may be greater than 15 years.

Certificates of conformance to demonstrate traceability are not simple documents and require strong quality teams and systems that can respond effectively to sophisticated customer requests.

17. Does their production mix match those of your products?

When choosing a manufacturing partner, understanding the business portfolio and infrastructure setup allows you to make an informed decision. Questions to review during the process could be:

1. Are they producing volume products when you only need 100 per year?

2. Is the manufacturer set up for single piece flow or are they batch orientated?

3. Are they capable of multiple changeovers or do they have dedicated manufacturing infrastructure?

4. Do they have a strongly diverse, flexible supply chain or are they reliant on a legacy supplier in single marketplace?

18. Can they demonstrate an ability to get your products to market faster through collaboration?

As noted, collaboration and open communication is key. EMS companies provide a wide range of value-added engineering and manufacturing services. Look for evidence of successful customer collaboration activities, that resulted in products getting to market faster than planned - or faster than the competition.

19. Do they measure and monitor their service levels?

The creation of a service level agreement (SLA) should be a collaborative agreement that your manufacturing partner helps you create. Understanding what key performance indicators (KPI) matter most to your business should be supported by your manufacturing partner as well. They should understand areas such as turnaround time, quality levels, cost awareness, and on time delivery form.

20. Are they flexible and agile enough to respond to your business needs?

A great manufacturing partner will demonstrate the ability and desire to be flexible in order to support your business' needs while complying with a structure that meets your product certification. At the same time, they will make sure flexibility does not induce potential risk. Controlled flexibility could also be captured in any service level agreement as a best practice.

21. Do they understand your pain points and have demonstrable ways of alleviating those issues?

When selecting a manufacturing partner, the relationship that you form has to be symbiotic, as if you were dealing with an internal stakeholder. Communication must be open and honest to ensure that when a problem occurs, they can easily be remedied collaboratively.

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Benefits of Outsourcing Your Electronics Manufacturing 

One of the top reasons manufacturing companies outsource and use solution providers is to lower their costs. OEM's can focus on research and development while saving on capital investments. However, another reason is to gain or maintain competitive advantage by improving speed to market.

What are the other top benefits to outsourcing?

Top 7 Benefits of Outsourcing Your Electronics Manufacturing

  1. Converting your fixed costs investments to a variable cost model
  2. Risk reduction/mitigation
  3. Speed to market
  4. Improved productivity
  5. EMS providers offer more agility
  6. Greater experience and competence in manufacturing processes
  7. Much broader and more global supply chain (extension of the global network)

There are over 4,000 EMS providers. Only one is the right fit. They should provide the structure and support mechanisms of a large manufacturer, with the customised, intimate approach of a smaller speciality group.  

 How to Determine the Right Fit and Business Partner

 

 

TT Electronics Manufacturing Solutions Overview Video from TT Electronics on Vimeo.

The EMS you choose should tailor their services to meet your needs. They should see your vision and be willing to work side by side. 

Chapter 4

Challenges and Barriers - the Dark Side of Electronics Manufacturing  

We discussed the advantages of EMS, but there is always another side to the equation.

What are the Challenges Faced by Electronics Manufacturing? 

  1. There is a need for a robust product lifecycle management systems. Without one, manufacturers could make misinformed decisions that affect a product.  
  2. Labour costs are increasing
  3. There is a need for automation - Ping Qin, Vice President of Marketing, Suzhou RS Technology Co., Ltd says, "We need automation to deal with tasks that require high assembly precision and large assembly quantities." He continues, "Automated material delivery on production lines is essential. We need automation to replace manual labour in  harsh environments."
  4. Global competition 
  5. Issues with traceability and compliance
  6. Disposal of products (E-Waste) and their impact on the environment 
  7. Investment in the infrastructure and support systems to manage complex, highly regulated markets like medical, aerospace, and defence

The challenges are not new, but continue to grow. The integration of the electronics value chain and advanced technology will help break the barrier.

 

Chapter 5

What is High-Mix Low-Volume Manufacturing 

A manufacturing environment that is termed "high-mix low-volume" refers to a large variety of products, often produced in small quantities. The market advantages are two-fold, tailoring to customer demand and lower inventory requirements.

Customers’ expectations are changing for more customised products, which are transferring manufacturing into high-product-mix-low-volume scenario that puts more dynamics in the manufacturing systems.

As stated in the Journal of Advanced Manufacturing Systems, 

"Competitive advantage in high-mix low-volume manufacturing environments is driven by the organisation’s ability to effectively plan resource requirements. As the systems are under transformation stage, choosing an appropriate high-mix manufacturing strategy along with the sound tactical thinking is necessary for the 21st century manufacturing that will confer competitive advantage in cost, quality, delivery, responsiveness, technology and services." 

Building complex products in small quantities can be a challenge for OEMs. As such, many choose to outsource high-mix low-volume production to service providers with more experience or expertise in a particular field. Outsourcing production can result in less costly errors, free up internal engineering and R&D resources, and enable greater control of finances.

MPO, Medical Product Outsourcing, has a 7 step process to consider when selecting your EMS supplier: Guide to Outsourcing High-Mix Low-Volume Manufacturing

They agree, "A successful partnership can address the challenges of high-mix low-volume production while also boosting productivity and reducing costs."

Chapter 6

[Future] Electronics Manufacturing Trends and Opportunities  

National Association of Manufacturers (NAM) states, "Manufacturers have experienced tremendous growth over the past couple decades, making them more “lean” and helping them become more competitive globally." 

The electronics sector produces electronic equipment for consumer and industrial industries. The semiconductor industry has grown to become worth more than $400 billion globally, as of 2017. 

This rapidly evolving industry leads us to the top trends or opportunities in the industry.

1. We will continue to seek innovative automation solutions.

KUKA understands these growing needs well and is responding fast with new solutions to make robotic automation in this market easy and cost-effective. 

Here's an example of robotic automation in the electronics industry with the KUKA robot KR 3

 

 

 KUKA - Robots & Automation, Robotic Automation in the Electronics Industry | KUKA Talks Trends, via YouTube   

2. Rising demand for consumer electronics in both developed and developing nations

This will increase the demand for smart electronics. Here is another innovative technological advancement: 

The Robot Revolution: the New Age of Manufacturing

 

 

Wall Street Journal, The Robot Revolution: The New Age of Manufacturing | Moving Upstream, via YouTube  

3. There will continue to be the push for more eco-friendly manufacturing solutions.

"Being Green isn't just for hippies and disaffected Xers any more. As climate change statistics continue to mount, there's increasing pressure from all areas – consumers, businesses, and governments – to look into more eco-friendly manufacturing solutions. The various carbon cap or carbon trading plans being implemented are also helping to drive this push." source

4. As an industry, we will develop new methods to produce devices that consume less energy.

According to Pannam Imaging, "Reducing energy consumption is an effective way to cut costs, leading both businesses and consumers to opt for energy-efficient electronics. The pressure is on manufacturers to adopt green manufacturing processes while simultaneously producing electronics that are less expensive to use thanks to lower energy demands."

Conclusion 

Electronics manufacturing is fast paced and always evolving. Flexible solution providers that keep pace with rapid change will continue to experience success for their customers.

TT Electronics developed an entire global business process founded on the support of complex high-mix low-volume devices. We are inspired to help solve global electronics manufacturing challenges from design through fulfillment, for customers requiring support for their high-reliability products in high-mix low-volume markets. 

Author
Katelyn M. DeVan | Vice President, Global Marketing (Global Manufacturing Solutions Division)

Katelyn M. DeVan | Vice President, Global Marketing (Global Manufacturing Solutions Division)

Katelyn leads the marketing strategy for the Global Manufacturing Solutions division of TT Electronics, and also serves as a key advisor to the wider organization for market development strategies and initiatives.

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We are the Global Manufacturing Solutions group of TT Electronics plc. From design and engineering, to integrated manufacturing of electronic systems, we deliver a full suite of end-to-end solutions to aerospace, defense, medical, industrial and rail enterprises with highly customized, low volume high mix product requirements.

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