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While Asian countries such as China and Taiwan used to be undisputed leaders on the electronic manufacturing services market (EMS), there have been significant changes in the industry that have allowed Europe to emerge as a new attractive market for original equipment manufacturers (OEMs). This article looks at the factors that have contributed to this change and created a more favourable environment for the growing popularity of European EMS providers.
Why Europe is Becoming a More Popular Market for EMS?
More effective logistics with Europe than with Asia
The ability to reach customers quickly gives OEMs an advantage over their competitors, which is not possible without efficient logistics. At the same time, transportation must also be cost-effective, otherwise, the expenses generated by product distribution can make outsourcing production too expensive.
For instance, maritime transport from China can take up to eight weeks. This time can be extended by unexpected economic or social events, such as temporary Covid-19 lockdowns. In the meantime, Europe and the United States have had to establish their own distribution centres and warehouses to handle goods delivered from Asia more effectively.
Altogether, these factors make scheduling supplies from such distant regions quite a challenge. The problem is exacerbated when OEMs have to return goods to the EMS providers if any engineering changes are required. Therefore, there are more and more scenarios where OEMs can save more money on contract manufacturing by choosing the European market, which is not affected by such transportation problems.
Decreasing discrepancies in employee wages compared to Asia
A shift in employment is taking place in Asia, making Europe an attractive location for electronics manufacturing.
First of all, Asian countries, chosen primarily for their low labour costs, are now raising their employees’ wages. The growing manufacturing costs combined with the higher transportation expenses mentioned above are making outsourcing to Asia less and less profitable.
In addition, technological progress requires more qualified employees, especially more experienced professionals in the areas of engineering, sales, and purchasing. The shortage of such professionals in China has also led to an increase in their salaries, which have recently surpassed those in some European countries, including Poland.
At the same time, Asian workers tend to change jobs frequently for other high-paying jobs, which destabilises the production environment. The constant change of personnel threatens product quality in particular.
Meanwhile, the ongoing automation of production in Europe and the US is helping to significantly reduce manual labour and associated costs.
Social and cultural cohesion
Excessive distances between OEMs and contract manufacturers have always led to communication problems, partly due to significant differences in time zones and partially from the variation in social and cultural attitudes. Mere misunderstandings can escalate into operational disruptions that can compromise product quality or the company’s reputation. Choosing a local EMS provider helps prevent many such problems.
One of the potential issues that can arise when outsourcing to Asia, and which is likely to be avoided when working with a European contract manufacturer, is the infringement of intellectual property rights, which is taken very seriously in the EU.
Another advantage of local EMS providers is a better understanding of local industry standards. For example, companies such as Poland-based Assel have certifications that enable OEMs to more easily comply with European market regulations for medical devices. However, the medical device market in the EU is a bit specific and there could be differences in comparison with the Asian market. For example, the post-market surveillance (PMS) is the requirement in the whole EU, while there is no single unified PMS system in Asia, so each country has its own regulatory authorities and requirements.
Outsourcing to Europe – a new market trend
Although Europe has been associated with high manufacturing costs for decades, market transformation has changed the trend and made it a promising place to outsource electronics manufacturing. To learn more about the benefits of working with a European EMS provider Assel, visit asselms.com.