NEVADA CITY, CA – Sales in the contract electronics manufacturing industry grew increased significantly in 2021, achieving a new record of $683 billion, up 14.8% from the previous year.

Growth for the ODM industry was higher than that of EMS, jumping 18.9% versus the EMS market increase of 13.8%, added New Venture Research in its annual electronics manufacturing services report, "The Worldwide Electronics Manufacturing Services Market – 2022 Edition," released today.

The highest-growth applications were found in the computer industry, with a surge in demand for the latest versions of notebooks, servers, and replacement of older computer ancestry. These equipment purchases were spawned in the Covid pandemic as workers have had to stay indoors and accept isolated except for video and Zoom calls for most of 2021. Figure 1 shows total revenue by supplier type for 2016–21.

Figure 1. The Worldwide CM Market ($M), 2016–2021. Source: New Venture Research

The CM market was sustained by strong demand for notebooks, smartphones, servers, and enterprise storage systems that are supporting the spread of cloud computing and social networking while workers endured stay-at-home isolation by their governments and employers. Capital spending in wireless infrastructure and enterprise LANs was strong and driven by the building out of the 5G wireless networks (soon 6G) in many regions in 2021 by OEMs such as Cisco, Ericsson, Huawei, Nokia and Samsung, and supported by wireless carriers like AT&T, China Mobile, Deutsche Telekom, Mobile T, NTT DoCoMo, Reliance Jio, SK Telecom, Verizon and Vodafone.

The pandemic-caused downturn in CM revenue was not as severe in 2021 as in 2020, resulting in some recovery in certain industries such as transportation and retail. The information technology industries – computing and communications – drove growth in revenue as replacement sales took over. Indeed, all industries grew for EMS and ODM companies in 2021, although the medical sector did not profit as much as first assumed because suppliers shifted their attention from high-cost product assemblies to more low-cost emergency hardware. Therefore, the limited recession that happened was quickly forgotten as people strived to return to normal. 

For the 12th year in a row the industry was profitable, at $16.2 billion, the highest mark recorded, based on 36 EMS public companies and 14 ODM public companies. Profits increased $4.4 billion from 2020, NVR said. Foxconn accounted for almost one-third of all profit ($5 billion) made by the EMS industry in 2021, and EMS companies accounted for approximately 66% of the CM total revenue. (Five EMS companies and no ODM companies lost money in 2021.) Second in line was Quanta Computer at $1.3 billion, followed by Luxshare Precision at $1.1 billion. Delta Electronics earned $959 million, Pegatron earned $896 million, and Jabil produced $696 million.

Figure 2 summarizes the worldwide assembly market for all electronics products for 2021 and 2026 by market segment. The largest market in size is the communications segment, with its dominance by smartphones, which have almost replaced PCs. The traditional computer market is not far behind, with steady need being driven by business machines, servers, and specialty tablets. The consumer market ranks third, being sustained by strong demand for digital TVs. The industrial market ranks fourth in size, followed by the automotive and aviation/defense/other transportation segments, and lastly by the medical equipment market. All these market segments for electronics product assembly totaled approximately $1.4 trillion in total assembly revenue in 2021.

Figure 2. The Worldwide Market for Electronic Products Assembly by Market Segment, 2021 and 2026. Source: New Venture Research

The overall market demand for electronics products should continue growing at a CAGR of 6.8% over the next five years, NVR said. Communications and medical products will continue to be the segments driving the largest growth in the electronics industry.

In 2026, the total industry is expected to reach $1.8 trillion in annual assembly value (COGS), as consumption and replacement of electronic products continue and new products sustain demand. Subsequently, outsourcing has proven itself as a critical element in keeping the electronics assembly industry expanding and innovating each year, which is a leading factor in stimulating continuous consumer demand. Moreover, the trend to move price-sensitive manufacturing to low-cost regions will impact the industry for all suppliers in the foreseeable future.

Figure 3 compares the worldwide CM market by region for 2021 and 2026. The shift in production to low-cost regions has been largely accomplished, although some migration will continue unless tariff impositions reverse the market growth, which seems likely. However, increasingly we are seeing OEM customers insisting that their CM partners manufacture products near the regions where the products are to be sold, which includes more business for Mexico and Eastern Europe. For certain high-volume products like smartphones and PCs, OEMs need to leverage the lowest cost in manufacturing, and, labor cost differentials between regions are becoming less significant when weighed against the total cost of production (including transportation and logistical obstacles). The shift toward Asian manufacturing is expected to continue, but not be disruptive.

Figure 3. The Worldwide CM Market by Region, 2021 and 2026.

The table ranks the top 10 EMS companies by revenue for 2021. Foxconn continued its extraordinary dominance as the leading EMS firm in the industry, outdistancing its closest contender by more than four times. The top 10 accounted for 74.5% of total industry production revenue. 

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