Electronics manufacturing industry Globally to reach US$ 650B by 2024

The global electronics manufacturing market is poised to grow steadily from its current value of USD 1,622 billion to USD 1,756 billion by 2020.

Definition / Scope
Market Overview
Top Market Opportunities
Market Drivers
Market Restraints
Industry Challenges
Regulatory Trends
Other Key Market Trends
Market Size and Forecast
Market Outlook
Distribution Chain Analysis
Key Market Players
Strategic Conclusion
References

Definition / Scope

Electronics production equipment is classified into semiconductor equipment and circuit board assembly equipment. These two categories combined are referred as active electronic components while passive electronic components include resistors, capacitors, diodes, etc.

Electronics sub-segment with examples is presented below:

Consumer electronics
- Mobile
- TV
- Refrigerator
- AC
Industrial electronics
- Automation systems
- UPS systems
- PLC
Communication
- DTH
- Set Top Box
- CCTV
Medical
- X-ray
- MRI

Market Overview

Electronics manufacturing services (EMS) is a term used for companies that design, manufacture, test, distribute, and provide return/repair services for electronic components and assemblies for OEMs. The concept is also referred to as electronics contract manufacturing (ECM).

Communication segment represents 28% share of global electronics production of USD 1.8 trillion industries. The communication segment amounted USD 504 billion. Computer combined with information terminals constitute second largest share of 22% valued USD 396 billion. Semiconductor segment totals 18 % market share making the third largest lucrative division.

Market Risks

Intellectual property infringement from technology transfer

Though almost half of the world’s chips are designed in the US by ‘fabless’ companies, where much of the production, assembly, and packaging is done in the host country. In 2017, for instance, a total of USD 192.5 billion worth of chips was manufactured in China. The process deteriorates the protection of intellectual designs as technology is transferred in other countries and the international technology transfer act is not that much stringent. Therefore, the owners of such IP bear the risk of diluting their patent rights in a host country.

Import ceiling on devices made up of restricted substances

The following list provided the currently restricted substances and their restriction limit both in Chinese and European regions. Any electrical and electronics products subject to the Restriction of Hazardous Substances (RoHS) above the stated limits are not allowed to be sold in such regions where the law binds so.

Top Market Opportunities

Sensors

Over 15 million sensors are expected to be used in the automotive industry in 2019. There is an increasing trend for sensors applications in consumer electronic appliances. Manufacturers of consumer electronic appliances are incorporating more sensors in their devices to add additional features and keep ahead of other players in the highly competitive sensor market.

Sensors in automotive: In addition, automotive companies such as Audi, BMW, and Volkswagen among others are extending their R&D budgets every year to stay ahead in the competition. These vehicle manufacturing companies are increasing the number of sensors used in their vehicles to make them more comfortable and increase the overall automation.
Sensors in medical devices: The healthcare equipment manufacturers incorporate a variety of sensors for automation. Blood pressure machine, thermometer, X-ray machine, CT scanner and ultrasound machines used in the healthcare sector incorporate a wide range of sensors. Increase in investment in healthcare budget of developed nations, need of automated equipment to perform critical surgeries, and rise in trend of home-based digital healthcare equipment are the major factors that boost the growth of the healthcare segment in the sensor industry.

The market for medical electronics manufacturing reached USD 236 billion in 2018 from USD 210 in 2016. The revenue for such devices will account for USD 258 billion by 2020. Electronics such as batteries and capacitors were valued at USD 17.82 billion as of 2018. Therapeutics segment constitutes a 50% share in terms of medical electronics equipment.

Overall, the global sensor market is projected to reach USD 287 billion by 2025, growing at a CAGR of 9.5% from 2018 to 2025.

Huge opportunity in semiconductor segment

The automotive semiconductor market is expected to reach USD 48.78 billion by 2022, at a CAGR of 5.8%. Automotive chips currently account for about 8 percent of total semiconductor sales.

The growing demand from buyers for the cars that have electronically equipped systems such as remote control, braking systems, and safety alert, mapping application, LED lights, etc. has provided an increasing opportunity to semiconductor manufacturers. These driving forces highlight the upward trajectory for semiconductor providers.

Market Drivers

OEM Outsourcing

A key factor driving the growth of the market is an increase in outsourcing by OEMs. EMS providers have been greatly benefited by the increase in outsourcing by OEMs. With the rapid technological advances, the diversified portfolios, and the increasing price pressure in the market, OEMs are forced to focus on core competencies.

Hence, they started outsourcing their manufacturing and assembling requirements to EMS providers. This will help them achieve cost-effectiveness, access the latest design and engineering capabilities, and reduce the time to market.

IoT

Between 2015 and 2020, IoT integrated circuit sales are projected to rise by a CAGR of 13.3%, which is projected to reach USD 354.7 billion in four years. There so far are 26 billion connective devices globally and technology spending on IoT is predicted to reach USD 745 billion in 2019 and USD 1.2 trillion in 2022.

Market Restraints

Indirect tariffs such as delay in customs clearance reduce the competitiveness of electronics production particularly in the South Asian market since these markets are highly dependent on imports. In India, for instance, the average time to clear customs varies from 2-10 days for large firms and 14-21 days for SMEs.

Industry Challenges

Most of the leading electronics brands contract the manufacturing out to companies that specialise in that particular process. Those companies usually referred to as ‘fabless’ manufacturers design the product however, the fabrication process is majorly carried out in either China or in Vietnam. The market is fragmented where a large number of companies specialise in niche product differentiation while the consolidated few global giants market such products.

Humanoid replacing people workforce

A 2014 study reveals that the robot costs USD 25,000 and could replace up to four workers who earn USD 6,000 each a year at the Foxconn Chongqing factory in China. Nearly 1.7 million robots have been deployed in 345 million factories around the world for the manufacturing process.

Regulatory Trends

The Government of India has launched the National Policy on Electronics (NPE) which aim to reach a turnover of USD 400 billion attracting investment of USD 100 billion to promote ‘Make in India’ campaign while creating 28 million new employment opportunity.

FCC Part 15 (Intentional Radiators) in the USA comply with any such intentional radiator, a device that is intended to emit radio energy. This scope includes any WiFi and Bluetooth Enabled device.

Another compliance in the USA includes an Underwriter Laboratories that frame safety standards for electronics and components. While UL compliance is not required by law, most retailers will not buy products that are not UL certified. UL compliance among Chinese manufacturers is very rare in most industries.

The Low Voltage Directive (LVD) in Europe applies to electronics, and components, with an input, or output, ranging between 50 to 1000 volts AC, and 75 to 1500 volts DC. As such, the Low Voltage Directive is not applicable to most handheld devices but does cover, for example, phone and laptop chargers.

Similarly, the EMC Directive in Europe ensures that electrical equipment doesn’t interfere with other electronics, and signals, in its proximity. While the EMC Directive is applicable to a wide range of products, certification may not be mandatory for certain smaller devices, which are very unlikely to interfere with other electronics.

The RoHS directive applicable in most of the region including but not limited to Europe and China restricts the amounts of certain substances in electronics, including lead, cadmium, and mercury.

Other Key Market Trends

Manufacturing labor cost in India is roughly USD 1.72 per hour, among the lowest in the world. Electronic imports in India accounted for 11.4% of the total import value jumping from 23.4% to USD 52.9 billion in 2018. Total electronics manufacturing is estimated to reach USD 104 billion in 2020 in India.

The government of India has allocated USD 107.37 billion (INR 7.45 billion) incentives for electronic manufacturing. The demand for electronics in India is growing at a CAGR of 41% during 2018-2020 to reach USD 400 billion by 2020 from USD 147 billion in 2018. BY 2020, domestic production is forecasted to meet only 26% of the total demand in India.

Thailand is the 14th largest electronics exporter in the world with export value worth more than USD 60 billion in 2018. The country is also one of the largest exporters of Hard Disk Drives (HDD) in the world, fulfilling over of the global demand. ICs export accounts for 23% of Thailand’s total export. Domestic market consumes 25%-35% of total production and around 65%-75% of production is exported worldwide.

Total GMV of export that the Philippines shipped was USD 67.49 billion. Electronics export accounted for 57.2% of the total merchandise export. Of the total electronics export, semiconductor comprised 73.76% share amounting USD 27.71 billion in 2018.

Similarly, consumer electronics recorded export of USD 588.96 million while communication radar and automotive electronics reached USD 560.44 million and USD 113.07 million respectively. Medical/industrial instrumentation export was valued USD 56.09 million. Hong Kong was the largest importer of Philippines electronics accounting for 21.15% of total electronics export followed by USA and China each accounting for 13% share.

China exported USD 447 billion of electrical goods (transmission apparatus, storage units, ICs, parts of electrical apparatus, parts of automatics data process) in 2017. This export represents 19.75% of total USD 2.2 trillion Chinese export. Of the total electronics exports, USD 198.57 billion worth of machinery and electrical equipment were imported by the USA. The USA held a 46.14% import share of Chinese electronics.

In Europe (excluding MENA/CEE region), revenue from consumer electronics and computer combined totaled USD 1.9 billion (Euro 1700 million) in 2018. Likewise, Medical electronics amounted USD 2.25 billion (Euro 2000 million) while revenue from automotive electronics was recorded USD 2.02 billion (Euro 1800 million). Total revenue from all industries including aerospace, consumer, communication, computer, medical, communication, and industrial reached USD 13.83 billion (Euro 12300 million) in 2018.

In 2017, the average hourly rate for manufacturing workers in Vietnam was USD 2.55 comparing to USD 4.16 in Mexico and USD 5.21 in China. The rate in Vietnamese manufacturing has slightly increased in 2018 but less than that of Mexico and China.

Market Size and Forecast

The global electronics manufacturing market is poised to grow steadily from its current value of USD 1,622 billion to USD 1,756 billion by 2020. In 2016, total electronics production was valued at USD 1,457. Of which, communication was the largest sector making a revenue of USD 460 billion.

It is followed by computer segment including tablets that was worth USD 387 billion. Medical devices generated revenue of USD 210 billion during the same period. The revenue from each of the consumer, automotive, and military segment was worth below half than the revenue generated by the communication segment.

Similarly, in 2018, the growth pattern was identical as it occurred in 2016, communication industry leading the competition wave with USD 515 billion in total electronics products utilization followed subsequently by computer and medical. In 2020, electronics use in communication devices is estimated to reach USD 561 billion.

Likewise, revenue from computer electronics will account for USD 441 billion in 2020. Electronics devices consumption in medical, military, automotive, and consumer segment will positively grow but at a slower pace of less than 8% yearly rate.

Worldwide sales of semiconductor manufacturing equipment surged 14 percent from $56.62 billion in 2017 to an all-time high of $64.5 billion in 2018. For the second consecutive year, Korea claimed the largest market for new semiconductor equipment with $17.71 billion in sales, followed by China, rising to become the second largest equipment market for the first time with sales of USD 13.11 billion and displacing Taiwan, which fell to the third position with sales of USD 10.17 billion.

Market Outlook

The global electronic contract manufacturing and design services market size was valued at USD 391.4 billion in 2018 and is anticipated to expand at a CAGR of 7.9% from 2019 to 2025. Electronic Manufacturing Services (EMS) market is expected to reach USD 650 billion by 2024.

Distribution Chain Analysis

The worldwide electronics manufacturing industry is very lean. Excess inventory or transit time anywhere in the value chain can result in value loss, which can be a severe disadvantage in such a fiercely competitive industry. Key players always consider cost and speed – in production and logistics to maintain their competitiveness.

The electronics manufacturing industry is segmented in two primary ways – first along the electronics value chain and second along with the end-user segments. As seen in the figure, raw materials for electronics types of equipment are procured from cost advantage locations around the world after rigorous design and engineering phase.

Such component materials are transported either by owned logistics system or by outsourcing the transportation part to the third party. Then, the main devices are manufactured in the plant. The process follows handling outbound logistics to deliver finished products from the warehouse. Sales, marketing, and after-sales service are the competitive factors to retain B2B customers.

Key Market Players

Samsung Electronics Co Ltd

Samsung Electronics Co. Ltd. is a Korea-based company principally engaged in the manufacture and distribution of electronic products. The Company operates its business through three segments.

The Consumer Electronics (CE) segment is mainly engaged in the manufacture of visual display such as color televisions (TVs), monitors, printers and home appliances such as air conditioners, refrigerators, laundry machines, and others. The Information Technology & Mobile Communications (IM) Segment is mainly engaged in the manufacture of digital appliances such as computers, handheld phones (HHPs), network systems, digital cameras, and others.

The Device Solutions (DS) Segment is mainly engaged in the manufacture of health and medical types of equipment like semiconductor and display parts, including dynamic random access memories (DRAMs), flashes, thin film transistor-liquid crystal displays (TFT-LCDs) and others. The Company operates in 73 countries. It holds market capitalization of USD 232.10 billion. Moreover, the company earned USD 210.35 billion in revenue during 2018.

Panasonic Corporation

Panasonic Corporation was incorporated in 1935 in Japan. It is engaged in the development of diverse electronics technologies and solutions for customers in the consumer electronics, housing, automotive, enterprise solutions and device industries. The Company operates through five segments: Appliances, Eco Solutions, AVC Networks, Automotive & Industrial Systems, and Other.

The company’s business operates in more than 73 countries. It had earned USD 71.54 billion in revenue in 2018. The company’s market capitalization stands at USD 21.73 billion.

Intel Corporation

Intel Corporation was incorporated in 1989 and initially, it was engaged in designing and manufacturing products and technologies, such as the cloud. The Company’s segments are Client Computing Group (CCG), Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile Memory Solutions Group (NSG), Intel Security Group (ECG), Programmable Solutions Group (PSG), All Other and New Technology Group (NTG).

The Company delivers computer, networking and communications platforms to a set of customers, including original equipment manufacturers (OEMs), original design manufacturers (ODMs), cloud and communications service providers, as well as industrial, communications and automotive equipment manufacturers. It held market capitalization of USD 235.86 billion till date. It showed total revenue earning of USD 70.8 billion.

Sony Corporation

Sony Corporation (Sony) was incorporated in 1946. It had started its operation in the development, design, manufacture, and sale of various kinds of electronic equipment, instruments, and devices for consumer, professional and industrial markets, as well as game consoles and software. The Company’s segments include Mobile Communications (MC), Game & Network Services (G&NS), Imaging Products & Solutions (IP&S), Home Entertainment & Sound (HE&S), Devices, Pictures, Music, Financial Services and All Other.

For electronic components, Sony sells products directly to wholesalers and manufacturers. Sony markets its electronics products and services through its Sony Electronics Inc. and other subsidiaries in the United States. In Europe, Sony’s electronics products and services are marketed through sales subsidiaries, including Sony Europe Limited in the United Kingdom and CJSC Sony Electronics in Russia.

Sony markets its electronics products and services through its Sony (China) Limited, Sony Corporation of Hong Kong Limited and other subsidiaries in China. In Asia-Pacific, Sony’s electronics products and services are marketed through sales subsidiaries, including Sony India Private Limited, Sony Electronics of Korea Corporation, Sony Taiwan Limited and Sony Electronics Vietnam.

In overseas areas other than the United States, Europe, China and Asia-Pacific, Sony’s electronics products and services are marketed through sales subsidiaries, including Sony Brazil Ltda., Sony Middle East & Africa FZE in the United Arab Emirates, Sony of Canada Limited and Sony de Mexico S.A.de C.V.

Sony outweighed market capitalization of USD 61.11 billion till date. Also, the company generated revenue of USD 76.12 billion in 2018.

Toshiba Corporation

Toshiba Corporation is a Japanese company operating in a diversified electric/electronic manufacturing industry. The Company’s segments include Energy & Infrastructure, which includes nuclear power generation systems, thermal power generation systems, fuel cells, power generation, and instrumentation and control systems; Community Solutions, which includes broadcasting system, road equipment systems, water supply and sewerage systems, environmental system, elevators and light emitting diode lights; Healthcare Systems & Services, which includes diagnostic x-ray systems and computerized tomography systems.

Electronic Devices & Components, which includes small-signal devices, power devices, optoelectronic devices, storage devices, and semiconductor manufacturing equipment; Lifestyle Products & Services, which includes personal computers, televisions, refrigerators, washing machines and home appliance repair services, and Others, including information technology solutions, human resource, and payroll systems, and logistics service. Its total operating revenue in 2018 stood USD 2.08 billion and market capitalization reached USD 18.92 billion.

Other prominent players are:

Taiwan Semiconductor Mfg: Taiwan
Celestica, Inc.: Canada
Integrated Microelectronics, Inc.: Philippines
Benchmark Electronics Inc.: USA
Key Tronic EMS: USA
Venture Corporation: Singapore
Asteelflash, Sanmina Corporation
Creation Technologies: Canada
Foxconn: Taiwan
Flex: Singapore
Jabil circuit: USA
Sanmina: USA

Strategic Conclusion

Emerging economies such as India and Africa draw an increased demand for electronics products as disposable income, attachment towards augmented designs of home or automotive interior is burgeoning.

The global electronic contract manufacturing and design services market size was valued at USD 391.4 billion in 2018 and is anticipated to expand at a CAGR of 7.9% from 2019 to 2025. This surge in demand reflects the positive outlook for the global electronics manufacturing industry. Within the electronics industry, the communication segment is pulling the largest demand since 2017.