In Q2 2016, the EMS companies under study reported a year-over-year revenue decline of 1.1%. The decline was due to Ingram and Avnet. Ingram’s earnings declined because of the strengthening US Dollar and its exit from the North American mobility distribution business in Q4 2015. Avnet’s earnings declined year on year due to underperformance in the Electronics Marketing business division.
In contrast, on a sequential basis, the EMS companies under study reported revenue growth of 5.0%. The jump was mainly due to Arrow and Ingram, which experienced quarter-over-quarter revenue increases of 9.1% and 8.4%, respectively.
Globally, the EMS industry is turning to online resources for collecting design information and identifying suppliers, resulting in better buying decisions. In a recent survey of 3,268 electronics industry professionals, it was found that online sources are becoming a critical component of the way that supply chain professionals, engineers, designers and corporate management at original equipment manufacturers (OEMs) find the data they need. The study was conducted globally, and included Europe, Asia and the US.1
Within the EMS industry, the market for electronics contract manufacturing (ECM) services is expected to total US$561.2 billion in 2016, up from US$515.6 billion in 2015. During 2016-2021, the market is expected to witness a compound annual growth rate (CAGR) of 8.6%, reaching US$845.8 billion by 2021.2
The electronics assembly services market declined 2.4% in 2015, and this has impacted the overall EMS industry. Moderate growth of 5.6% was reported in the automotive sector, while all other sectors expanded between 1.5% and 3%. Not surprisingly the computer sector declined 14.6%, reflecting the ongoing shift from laptop to mobile. The number of assemblies that are too low in volume and high in complexity to be outsourced make up a relatively large proportion of assemblies.3
Keeping this low growth in mind, EMS companies are now looking at key strategies ahead of the next peak production season. The companies aim to increase operational performance and flexibility to meet expected growth, while streamlining operations to reduce costs and increase competiveness. The focus is on increasing automation. In recent years, automation has become more cost effective and more processes can now be automated. The business case for automation is compelling because labor is a fixed cost. Also, automated processes for assembly run faster than manual processes, bring consistency to operations and minimize performance variation.4
In company news, Ingram was involved in multiple acquisitions during Q2 2016. On June 14, 2016, it acquired the outstanding shares of RRC Poland Spolka Z.o.o, a Polish value-added distributor specializing in IT enterprise solutions. On May 31, 2016, it acquired the outstanding shares of Ensim Corporation, a leader in enabling the distribution of cloud applications. And on May 17, 2016, it acquired the outstanding shares of Discan Limited, a leading provider of technical services to the information technology industry in the UK and Ireland.
1. EMSNow, May 2016
2. EMSNow, April 2016
3. Manufacturing Market Insider, June 2016
4. Manufacturing Market Insider, May 2016