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.

How to Begin the Process of Selecting an EMS Provider 

  1. Do they have an extensive history and experience in the industry?
  2. Can they help you through the design process?
  3. Are they using the latest, integrated, advanced technologies and modern equipment?
  4. Are they up to code with all industry standards? 
  5. How comprehensive is their product testing offering?
  6. Will they take care of your needs after fulfillment?
  7. Are they a stable company? Are the finances of the electronic manufacturer reliable?
  8. Is their communication effective and transparent?
  9. Do they have the proper certifications required to support your products and end-market(s)?
  10. Do they know how to handle all changes, revisions on a timely basis? 
  11. Do they have a new product introduction process in place?
  12. Are they a cultural fit?
  13. Can they supply you with references?
  14. Do they have a manufacturing footprint that is compatible with your short and long-term needs?
  15. Do they have a product lifecycle management and/or counterfeit prevention system in place?
  16. How do they handle traceability?
  17. Does their production mix match those of your products? Are they producing volume products when you only need 100 per year?
  18. Can they demonstrate an ability to get your products to market faster through collaboration?
  19.  Do they measure and monitor their service levels?
  20.  Are they flexible and agile enough to respond to your business needs?
  21. Do they understand your pain points and have demonstrable ways of alleviating those issues?

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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