OEM Electronics Manufacturing Services (EMS) and OEM Contract Electronics Manufacturing Services (CEMS) are highly specialist service providers in the subcontract manufacturing sector – often referred to as OEM electronics suppliers, quite interchangeably with EMS and CEMS. The spectrum of capabilities is very wide, ranging from highly specialist suppliers who do nothing but build complex PCBa (Printed Circuit Board Assemblies) through to general manufacturers capable of providing limited electronics assembly and wiring services, alongside their product build capabilities.

Despite the confused naming conventions, this classification of subcontract companies provide the full spectrum of manufacturing and associated services, such as design (at the ODM end of the scale), BOM (Bill of Materials) and supply chain management, production and test engineering, product management, logistics and even warranty/return support in some cases.

The services of EMS centre on the assembly and test of PCBa, the production of electronics modules and the finished building of entire products, generally referred to as Box Build. Behind the market entry of most new and established products into the market place lies a professional EMS/CEMS supplier. These services free the OBM (Original Brand Manufacturer, the customer) from the need to build factories, complex production lines and expensive but lightly used capabilities and teams in-house.

EMS Sector Overview

The EMS sector in China has been growing and specialising for more than two decades. Services offered go beyond mass and moderate volume production of PCBa (including full testing and programming), extending into large scale logistics management, purchasing and integrating wider supply chain to result in full service OEM Private Label suppliers to the argest brands – Foxconn being a famous example. The industry is on track to sustain the projected growth of 7.5% per annum, projected for the 2018-2024 period – despite pandemic disruptions.

The electronics industry is very diverse, both in sectors and skillsets. It serves the full spectrum of industries, from military/governmental, through industrial equipment and the automotive sector, to medical systems and consumer goods. However, growth in the sector is largely the result of steadily rising demand from automotive and consumer products. It also results from the increasingly ubiquitous nature of electronics in an increasing range of goods – electrical gives way to electronic (for example in a domestic oven) and isolated gives way to connected (as every product becomes IoT). This growing demand for electronics and connectivity, sensors and data, the demand for low cost and the increase in smart product and automation, combined with steadily elevating customer requirements, drive the development of EMS suppliers ever higher.

EMS Sector Terminology

Tiers

The EMS sector is usually defined in terms of tiers, which generally define the size and/or complexity of skills a supplier offers. These tiers assignments also result from revenue levels – as larger suppliers are generally more complex and often (superficially) more broad-skilled. The most important factor for an OBM or OEM in selecting an EMS partner is to find a good business and scale fit – the giant factories struggle to deal with smaller clients efficiently, and smaller factories cannot compete at the thin end of margins expected by larger clients.

In our experience, EMS-CEMS suppliers who would generally be defined as Tier 3 or Tier 4 will have very similar skills and expertise to those who sit in Tier 1 or Tier 2. As a rule, a good Tier 3 or Tier 4 supplier is a) owned and managed by ex Tier 1 staff who are entrepreneurial and b) has ambitions to develop its client base, competences and revenues to jump up the tier scale. This often makes them more hungry for work that extends their capabilities or client base. Matching the EMS to the client is critical for all parties.

In the New Product Introduction sector (NPI), smaller EMS companies frequently offer a more partnerly approach and are more committed, as each customer represents a step on their road to growth and Tier 1. When two companies achieve a mutually beneficial partnership, both can win.

From the high volume industries and sectors – industrial, medical, consumer, OBMs need highly skilled, competitively priced and super reliable electronic manufacturing services. OEMs decided to work with an EMS for a variety of reasons – operational (reducing CAPEX), technical (hiring skills they cannot justify in-house), facilities/team flexibility (fulfilling intermittent demand), but whatever the drivers of choice, they should be part of a well-thought-out overall business strategy.

OBMs generally know, or quickly discover that an approach based on collaboration with a Tier appropriate EMS achieves significant benefits that directly drive product quality and customer/market experience – and equip them to react fast to market conditions and agile strategies. Total costs are always lower for early stage OBMs, and usually remain so throughout the product and market growth process if the EMS supply chain is tightly managed, providing a value that most OBMs could not build from scratch.

Reduction of Hazardous Substances (RoHS)

Electronics industries use a wide range of toxic and environmentally harmful materials. The adoption of RoHS standards seeks to reduce the environmental and user, product and process toxicities. Formerly controversial (because of the technical difficulties and increased costs), this is now mainstream and normalised. The quantity of waste electrical and electronic equipment (WEEE) produced worldwide grows at a steady pace – and RoHS seeks to make these waste streams (in particular) less hazardous and easier to control/reprocess.

To address the challenges in this, restrictions apply in the the use of certain hazardous substances in electrical and electronic equipment through the RoHS Directive and in parallel, the WEEE Directive promotes the collection and recycling of such equipment.

RoHS Directives restrict (which in most sectors translates as ‘bans’) the application in product or process of ten substances: lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyls (PBB) and polybrominated diphenyl ethers (PBDE), bis(2-ethylhexyl) phthalate (DEHP), butyl benzyl phthalate (BBP), dibutyl phthalate (DBP) and diisobutyl phthalate (DIBP).

All products with an electrical and electronic component, unless specifically excluded, have to comply with these restrictions.

ISO 13485

International Organization for Standardization medical product certification. Defines and requires a comprehensive quality management system (QMS) for the design and manufacture of medical devices.

ISO 9001

International Organization for Standardization quality management certification. Validates a supplier’s ability to consistently meet both customer needs and regulations in standardised quality management system operation.

High-mix low-volume (HMLV) manufacturing

HMLV production environments are those where batch and production run sizes are relatively low. EMS providers that offer HMLV manufacturing capability are able to adapt to product changeovers being more common, requiring the EMS to reconfigure production lines and staffing quickly. HMLV providers can handle changing requirements and smaller clients without the stress that a large-run and stable lines factory would experience.

HMLV service providers need precise production setups and experienced production line staff, to be able to offer this flexibility. This type of supplier is generally a good fit for moderate to low volume products, products that require only intermittent production and products whose design is subject to change as production volumes rise and the product  beds-in to the market.

EMS service sector specialisations

Medical: OBMs from the healthcare equipment sector need ISO 13485 certified suppliers, as well as precise process control, reliable record keeping and materials pro and above average quality standards at the electronic manufacturing provider.

The requirements relating to bonded stores and chain of custody of both materials and products are very stringent and require specialist setup in the EMS.

Aerospace (non military): Brands building electronics products for the aerospace sector require EMS that complies with ISO standards ISO 9001:2015 and AS 9100 D which has additional items unique to the Aerospace sector.

Similarly to medical products, requirements relating to bonded stores and chain of custody of both materials and products are very stringent.

Industrial automation and oilfield equipment: A broad segment of industry related devices, mainly used for control and automation of flow, supply and manufacturing  processes. This sector has stringent requirements for reliability and robustness, fire and explosion hazards and environmental needs that require more than ‘normal’ from EMS suppliers.

Consumer products: This sector places the lowest technical requirements on EMS providers – although standards in RF emissions and susceptibility and cosmetics (for box build suppliers) are high.

Skills/Services offered by EMS Providers

The primary service supported by EMS providers is the Printed Circuit Board Assembly (PCBa) capabilities. Steady development in component package systems, assembly methods and testing capabilities results in fast, high-quality assembly, with high precision part placement and verification capabilities, reliable and repeatable soldering and increasingly robust connector systems.

PCBa supply services must be supported by high level and flexible capabilities in sourcing, logistics, test engineering, quality control and assurance, process management, production engineering and more.

The typical up to date and sophisticated Surface Mount Technology (SMT) assembly line requires a high investment that must work continuously to justify that funding – putting it out of reach for most OBMs. Use of a capable EMS allows that cost to be shifted onto a per-product OPEX burden that can be accessed at need and otherwise represent no cost. An HMLV EMS will have a variety of customers, allowing them to maintain modern, fast, and flexible production facilities.

SMT technologies are the norm in digital electronics and offer a wide spectrum of advantages over the Plated Through Hole construction methods they’ve largely replaced;

  • Smaller component footprint results in reduced track widths and clearances, allowing greatly increased density of placement and much more compact PCBa and less materials use.
  • Both sides of the PCB can be fully populated.
  • Routing of PCB layouts is simplified as holes consume much less of the board.
  • SMT PCBa uses very low mass parts, which offers improved mechanical characteristics such as resilience under shock and vibration.
  • Better RF and EMC performance.
  • Requires automated assembly, which is very much faster and consequently reduces labour costs compared with PTH.
  • Lower material use generally results in lower component costs – and shrinking component footprints continue to improve this.

Increasingly, EMS companies also perform finished product assembly processes, adding cable harness manufacture, box build and product testing and validation processes. This can provide the customer/OBM with a turnkey service, allowing them to not be directly involved in the production process. An OBM can expect the following assembly services:

  • PCB assembly (SMT, PTH (Plated Through Hole), flex and rigid PCB and board treatments such as RF shielding, conformal coating etc.)
  • Flying probe and pin jig (bed of nails, ‘full nodal access’) test services and test equipment specification/construction
  • Test data logging and auditable serial number records (for higher value products)
  • Box build
  • Electromechanical assembly – motors, actuators, user interface devices etc.
  • After-sales services like warranty, refurb, repairs, upgrades etc.

An EMS partner with full spectrum electronics and product manufacturing capabilities, integrating all required services under one roof, with one process flow, allows OBMs the security of a turnkey service, should it be required.

Engineering Support: EMS providers require technicians and engineers of the highest standards in their fields, time-served in product management, manufacturing process control and product testing. With such skills in-house, a capable EMS can provide their OBM clients/partners with product management support across the entire production life cycle. BOM and work process control, component value engineering, ECO (Engineering Change Order) management and support with working towards product certifications, such as CE, Tick, ETL, TUV or UL are very powerful capabilities. EMS suppliers will generally offer design for manufacturability (DfM) or design for test (DfT) services.

New Product Introduction (NPI): A critical process in the provision of EMS services is NPI. A capable service provider will offer a deep review of a new product before beginning setup of factory and supplier management processes. This will include thorough Process Failure Mode Effects Analysis (PFMEA assessment), process flow and production engineering planning, trial production and component part verification. This includes the design, construction and programming of tooling/jigs/fixtures and test gear.

Supply Chain Management: Using the product design data and BOM, the EMS will prepare suppliers. Pre-purchase costs in preparation for manufacture will be covered in the financial agreement. Optimal supply chain management is a critical capability within EMS services, as the BOM is generally 75-85% of the product cost. Capable EMS partners know that the key to maintaining attractive product pricing is aggressive cost control in sourcing.

Testing and validation: While the EMS may use equipment from the client for specialist test functions, in-house provision of basic functional and ICT testing is their responsibility. Often this will require input from the developers, to assess the precise go-no-go characteristics – but the engineering of test gear is a specialist task that is best performed by the EMS. Without a high quality, reliable and repeatable product test there can be no certainty that the outcome is within spec – which is a grave market danger.

Specific Benefits of Working With an EMS

Reduced CAPEX in equipment/space, reduced fixed overhead OPEX in team development. OBM companies rarely have their own well established production facilities, factory ready premises, qualified production and engineering manufacturing personnel or infrastructure to support complex new processes. EMS providers invest huge funds in facilities, technologies and their team knowledge base – so their clients do not have to. They can very effectively amortise these costs over a steady flow of customers and products and keep these facilities busy and agile, with continuous workflow. OBMs require partnership with an EMS provider, to avoid these setup expenses.

Skilled workforce: Developing capabilities, operational flexibility and responsiveness to customer needs necessitates a workforce with many specialisations. This requires a strong recruitment and retention process and great staff development, if the team is to remain optimal. Those fixed OPEX costs are all part of the service from an EMS – and beyond the reach of most new product development companies.

This aggregation of skills allows the client to focus on product development and its market engagement process – taking away significant burdens and adding their cost as a modest per-product cost increase.

Supply Chain and Inventory Management: EMS providers need expertise in managing procurement and use various approved vendors. They can also solve short term bottlenecks by grey market purchases – services that can be hard for others to access. They need expertise in scheduling and planning production and use well established ERP systems and methods. Most will also operate a digital (or paper) Manufacturing Execution System (MES) platform that regulates and maintains scheduling on the production lines. Balancing a line, ensuring JIT stock and labour and scheduling precisely are tough tasks for the amateur.

By these means, capable EMS providers are responsive to the requirements of their clients and agile in handling issues as they arise (or before). This relies heavily on close management of supply chains and logistics – labour intensive tasks that are best performed with expertise.

By commissioning these services from their EMS, OBMs avoid the need to invest in complex IT systems, supply chain management expertise and long-term staff expertise.

Productivity and cost control: Delays in manufacturing mean delays in delivery and the reputation and market status damage can be very hard to recover from. A rigorous EMS provider reduces the risk that product will not be delivered to market on time, with all the profile and revenue implications that this would entail.

An EMS service provider has advantages of scale in many aspects of procurement and logistics. This can provide leverage in purchasing power to hold down prices and in securing supply in the face of shortages – which are all too common in periods of stressed supply chains. The client benefit from access to the EMS economies of scale is savings in the unit cost of the product, which can be the difference between market traction and failure.

China: The right place for electronics manufacturing

The ongoing growth of the penetration of electronics into every product sector and all industries has driven development of the EMS sector in China more than any other region. OBMs have wide options in seeking partnerships with EMS providers, but the infrastructure and environment development in Mainland China has stratified and diversified the service offering in the region to such a degree that it is the right place to work. China suppliers remain cost-efficient, as efficiency/automation and capability gains continue to offset rising labour costs and improving labour conditions in the country. Increasing capability results in the ability to accommodate the most complex products – and the scale of regional activity allows EMS providers to offer the best engineering capabilities.

Summary

The novel coronavirus (Covid-19) pandemic has influenced both supply and demand in the EMS sector. Disruptions in the supply chain and lack of travel ability reducing hands-on with suppliers caused difficulties which remain. But they also enforced an attitude shift – in the realisation that on-site visits were an expensive element whose importance has been overestimated. Growth in the sector in China was interrupted by the pandemic, but has subsequently returned as the world has adapted to the new reality and stopped waiting for the return to the old normal.

This is both opportunity and a threat to the EMS sector. Suppliers have responded by increasing their focus on client relations and crisp communications, to offset some of the ill effects of travel restrictions.

The EMS sector in China is increasingly diverse in capabilities, increasingly deeply specialised and is maintaining its competitive cost base as a result. Whether you’re a startup taking a first dip into the product manufacturing sector, an established mid size company expanding its product base or a large, high capability company looking to reduce product actualisation costs, there is an EMS partner in Mainland China to suit your needs and serve in assisting your progress to market – and the process of developing and maintaining those relationships is less arduous than it seems.