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New Trends in Contract Manufacturing of Electronics

Contract manufacturing of electronics is nowadays an essential player in the international production market. It is contractors who respond to the needs of both large groups and small and medium-sized enterprises, accelerating their development.

Thanks to the digitization of production tools and know-how, EMS companies support OEMs in producing electronics from small to massive series in health, aviation, automotive, and industry sectors. Thanks to the trust that OEMs placed in EMS, the contract manufacturing of the electronics industry is developing very dynamically, and new trends appear now and then. Let’s take a look at the most important ones in 2021.

The constantly growing market of electronic products and related services determines the growing demand for subcontracting. Electronic production, striving for miniaturization, requires electronics assembly suppliers to master new skills, such as design, testing, supply management, supply chain management, and optimization of the entire process management.

These are the characteristics of contractors sought and valued by OEMs. So far, China and other countries belonging to the Chinese cultural circle have led the way in the provision of contract assembly. Thanks to low labor costs, favorable tax rates, and fewer environmental restrictions, Asian companies offered good conditions for foreign investors.

Recently, however, there has been an apparent change in trends in the contract manufacturing of the electronics industry. As a result, OEMs are increasingly cooperating with EMS in their home markets.

That is possible thanks to the ability of local companies to adapt to significant technological and regulatory changes in the production of electronics. The most influential trends are factory intelligence, operational efficiency, securing the supply chain, and cybersecurity.

Factory intelligence

After mechanization, electrification, and, more recently, automation, the industry is now experiencing its fourth great revolution, with the emergence of smart factories. We are currently observing the industrial 4.0 process, which focuses on intelligent factories where people, machines, and products interact. This trend is driven primarily by data collection, artificial intelligence and augmented reality, and the ability to communicate between devices.

Currently, EMS companies should be both a user and a provider of solutions for Industry 4.0. Through the automation and robotization of processes, intelligent and comprehensive factories are created, which are assumed to be SMART, which significantly eliminates unnecessary costs related to electronics production.

Thanks to this type of solution, EMS from Europe and the USA are becoming more and more competitive on the global market. Considering the costs of transporting products from distant Asia, it may turn out that outsourcing electronic manufacturing to a domestic supplier will be associated with a lower price. OEMs are aware of this, so the trend for such a partnership is becoming more and more noticeable.

Operational efficiency

In production plants, the development and implementation of a lean management model are slowly becoming a standard. It is a solution characterized by the logic of continuous improvement. It releases added value and does not generate waste.

Professional suppliers of contract manufacturing electronics increasingly put their employees and specialists at the heart of the internal system, thanks to which the work is also much more efficient and faster. That is often a completely different approach to that of EMS from companies in Asian countries.

A holistic strategy that reflects the whole value stream improving production flows, a comprehensive approach to lean production, and the involvement of all levels of the organization allows EMS suppliers to achieve true operational excellence. In addition, they can ensure process stability by standardizing. There is no doubt that by OEMs, these are the desirable qualities of a potential production partner.

Securing the supply chain

The COVID-19 pandemic and the related disruptions in the supply chain have clearly shown how severe the consequences of dependence on Asian production facilities are. The transport difficulties and the temporary economic closures for many OEMs have proved to be very dangerous. Therefore, the need to verify the approach to manufacturing electronic products within the global and local market has led to looking for a safer solution.

The problematic situation in the world made OEMs realize that ensuring the continuity of the supply chain in the case of cooperation with a contract electronics manufacturer from outside Europe may be practically completely impossible in such cases. Therefore, EMSs should emphasize the improvement of procedures and methods that enable them to provide their principals with the security of the supply chain.


Cybersecurity is already a severe problem for connected, SMART, and intelligent factories, and this threat will only increase with the development of 5G connectivity. Thanks to 5G, networks no longer consist mostly of hardware but mainly specialized software.

Consequently, while 5G offers advantages such as greater bandwidth, it is also more vulnerable to cyber-attacks. Therefore, EMSs that implement automation and various internal processes must develop cybersecurity solutions in parallel.

The solution may be edge computing, which differs from cloud computing in that all or most of the process tasks such as encryption and machine learning take place on the device, not in the cloud. Moreover, unlike personal computers, the software is automatically updated, and security is managed centrally rather than the user’s responsibility.

Edge computing reduces processing time and uses less bandwidth, which can directly impact ensuring cybersecurity. OEMs pay more and more awareness to the possibility of securing sensitive data entrusted to EMS. Therefore, suppliers of contract manufacturing of electronics should consider processing as much data as possible outside the cloud to ensure the partner’s highest information security level.

The time of the industrial revolution

There is a clear correlation between the current trends in contract manufacturing of electronics and the events that have taken place in recent months around the world. OEMs count on flexibility, standardization, transparency, and preventing faults and interruptions in the supply chain.

Therefore, EMSs implement state-of-the-art solutions, constantly improving and taking more and more responsibility for the entire production cycle, from planning, supply management to support in introducing the product to the market.

The most noticeable trend, however, is that OEMs pay attention to local suppliers of contract production, thanks to which, in the coming years, we will certainly be able to notice the development of local partnerships and the entire EMS industry in Europe or the USA.

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