8 predictions for UK electronics manufacturing in 2019

The skills gap, the Internet of Things, the global components shortage and the fragmentation of the UK electronics manufacturing sector.

All are issues that are continuing to have an impact on pretty much every area of the UK Electronics Manufacturing Services (EMS) industry.

Yet despite the undeniable challenges of the past three to four years, the latest report from Reed Electronics Research (RER), released in January 2019, suggests that we could well still see year on year growth in UK electronics manufacturing.

So what does the future hold for UK EMS providers?

In this blog post we summarise eight of the key predictions from RER's 'The UK Electronic Manufacturing Services Industry 2016-2022'.

1. The components shortage will roll on

The difficulty in obtaining semiconductor and passive components remains a significant obstacle for UK OEMs, with many businesses continuing to report difficulties both in being able to supply existing products and in bringing new products to market.

For manufacturers and distributors, the instigation of product allocation and product obsolescence are still major issues. And there are signs that global component shortages will continue to have a dampening effect on UK electronics manufacturing output for at least the next 9-12 months.

2. Outsourcing is on the rise

Reliance on outsourcing looks set to remain a firm trend over the coming year, with many existing OEMs now choosing to hand over part (or in some cases all) of their electronics manufacturing operations in a bid to drive increased sales.

Many new start-ups are also opting to outsource to EMS providers from the very outset rather than choosing to manufacture themselves.

3. Cost savings will remain a key priority

While there is more awareness of the relevance of 'total cost', there are also indications that some OEMs will resort to pushing for lower unit prices, which in turn could could act as a drag on growth.

Companies with access to low-cost manufacturing operations are tipped to retain their strong position. However at this stage there are still a relatively small number of UK companies that have opted to establish their own low-cost facilities.

4. Manufacturing locations are on the move

There are signs of a shift away from operations in China and the Far East in favour of those based in Central and Eastern Europe (CEE). This re-shoring of production should benefit the UK EMS industry.

There also appears to be a greater emphasis on promoting the benefits of retaining manufacturing within the UK.

5. EMS partners will get involved much earlier

OEMS are increasingly relying on their EMS partners to assist with the design and development of products. The demand for prototyping work and New Product Introduction (NPI), for example, is on the rise.

Reducing the time to market (TTM) remains a priority. For many OEMs this will mean getting their EMS partners involved much earlier in the process and making sure that they're providing their outsourcing providers with accurate forecasting of product demand.

6. UK EMS revenues should expect to see growth

UK EMS revenues posted growth in the period 2016 - 2018. And based on current indicators, that year on year growth trend is forecast to continue through till 2022.

With exports being a key driver for growth in UK manufacturing, however, any escalation in global tensions could have a marked impact.

7. Developing sectors will offer new opportunities

Long-term manufacturing success is predicted to be led by six core sectors: Aerospace & Defence; Control, Energy, Industrial, Medical and Automotive.

For UK EMS companies these sectors look set to provide some significant opportunities, with demand centred on high mix, low to medium volume production that is supported through the complete product lifecycle.

8. Investment in technology will be key to success

As the uncertainty around the UK's exit from the European Union remains unresolved, there are signs that some electronics manufacturing companies are looking to scale back investment.

However, the willingness to invest in new manufacturing technologies is predicted to be a key contributor to UK EMS providers gaining new business and staying competitive.