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Despite two years of component shortages and hopelessly snarled logistics, the global electronics manufacturing services (EMS and ODM) industry grew 14.8 percent in 2021 to reach a new revenue record of $683 billion, according to New Venture Research’s annual study. Growth for the original device manufacturing industry was quite a bit higher than for the EMS industry, achieving an 18.9 percent increase while the EMS market only grew by 13.8 percent.

Foxconn, at $214.5 billion, continued its dominance as the leading EMS firm, outdistancing its closest contender by more than four times. The top 10 leaders account for 74.5 percent of total industry production revenue.

EMS companies are among the largest consumers of electronics components and therefore are at the front of the line when devices are in short supply. Although few industries were satisfied with their component supplies over the past few years, EMS providers received enough parts to achieve double-digit growth in 2021.

Table of the top 10 companies in the EMS market

Source: New Venture Research

The contract manufacturing market was sustained by strong demand for notebooks, smartphones, servers and enterprise storage systems that supported cloud computing and social networking while workers endured isolation by their governments and employers. Capital spending in wireless infrastructure and enterprise LANs was strong and driven by the build-out of 5G wireless networks (soon 6G) in many regions in 2021 by OEMs such as Cisco, Ericsson, Huawei, Nokia, and Samsung, and supported by wireless carriers like AT&T, China Mobile, Deutsche Telekom, Mobile T, NTT DoCoMo, Reliance Jio, SK Telecom, Verizon and Vodafone.

The pandemic-caused downturn in CM revenue was not as severe in 2021 as it was in 2020, New Venture Research reported, resulting in some recovery in certain industries such as transportation and retail. The information technology industries — computing and communications — drove revenue growth as replacement sales took over. Indeed, all industries grew for EMS and ODM companies in 2021, although the medical sector did not profit as much as first assumed because suppliers shifted their attention from high-cost product assemblies to more low-cost emergency hardware.

The highest-growth applications were in the computer industry, as demand surged for the latest versions of notebooks, servers and the replacement of older computers. These equipment purchases were spawned in the Covid-19 pandemic as workers were quarantined and relied on video and Zoom calls for most of 2021.

chart of EMS market growth through 2021

ODM/EMS revenue growth 2016-2021; Source: New Venture Research

For the 12th year in a row, the industry was profitable, at $16.2 billion, the highest ever recorded (for 36 EMS public companies and 14 ODM public companies), increasing by $4.4 billion from 2020, New Venture found.

Foxconn accounted for almost one-third of all the profit ($5.0 billion) made by the EMS industry in 2021, and EMS companies accounted for approximately 66 percent of the CM total revenue. Five EMS companies and no ODM companies lost money in 2021.

Second in line was Quanta Computer which earned $1.3 billion, followed by Luxshare Precision which ranked third in total earnings with $1.1 billion. Delta Electronics earned $959 million; Pegatron, $896 million; and Jabil, $696 million.

Communications dominates EMS markets

The largest EMS market in size is the communications segment —  thanks to smartphones — which have almost replaced PCs. The traditional computer market is not far behind, with steady demand for business machines, servers and specialty tablets. The consumer market ranks third, sustained by strong demand for digital TVs. The industrial market ranks fourth in size, followed by the automotive and aviation/defense/other transportation segments, and lastly by the medical equipment market. These markets accounted for approximately $1.4 trillion in total assembly revenue in 2021.

New Venture Research forecasts demand for electronics should continue to grow at a CAGR of 6.8 percent over the next five years. Communications and medical products will be growth leaders.

pie chart of top industry segments served by EMS

EMS industry market segments; Source: New Venture Research

By 2026, the total industry is expected to reach $1.8 trillion in annual assembly value (COGS) as consumption and replacement of electronic products continues, the firm added. Subsequently, outsourcing remains a critical element in electronics industry innovation and expansion. The trend toward moving price-sensitive manufacturing to low-cost regions will continue to impact the industry.

This shift has been largely accomplished, said New Venture Research, although some migration will continue unless tariff impositions reverse the market growth, which seems likely.

However, OEM customers are increasingly insisting that their CM partners manufacture products near the regions where the products are sold, which includes more business for Mexico and Eastern Europe. For certain high-volume products like smartphones and PCs, OEMs need to leverage the lowest cost in manufacturing and labor cost differentials between regions are becoming less significant when weighed against the total cost of production — including transportation and logistical obstacles.

Author: Barbara Jorgensen

Barb Jorgensen is editor-in-chief for supply chain publication EPSNews and has covered electronics manufacturing, procurement and business for more than 25 years. Barb spent most of her career with Electronic Business magazine and EBN; freelanced; and then founded online publication EPSNews with two industry veterans—Bolaji Ojo and Gina Roos. EPSNews was acquired by AspenCore in 2017.