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EMS industry in 2023 and war in Ukraine

The industry of electronics manufacturing services (EMS) has already been severely affected by the world’s pandemic. The outbreak of war in Ukraine in 2022 brought even more disturbance. Russian military actions in this European country have an imminent effect on the supply chain for electronics production in many regions. Here are some economic trends related to the war that can shape the EMS market in 2023.

Disruptions in semiconductor manufacturing

South Korea, Taiwan, China and the USA, the leading semiconductor manufacturers, require palladium, neon and C4F6. The latter is an organofluorine compound, another essential gas for electronic chips.

Currently, Ukraine is the world’s leading supplier of neon producing 90% of semiconductor-grade gas with the highest level of purification. Any interruptions in the export of this material can considerably impair electronics manufacturing services. China, South Africa and Japan are other market leaders, albeit their production is incomparably lower than Ukrainian.

Electronics manufacturing services – problems with transportation

Original equipment manufacturers (OEM) have already experienced acute problems with transportation with the COVID-19 epidemiological situation. While outsourcing production to distant Asian countries appears financially lucrative, it is rather risky. Any destabilization of the economy is a potential threat to manufacturing and transportation.

OEMs relying on electronics manufacturing services in Asia are experiencing dramatic growth in logistics costs. The more sanctions other countries are introducing against Russia, the fewer possibilities for optimised road transportation companies are getting since a significant part of the way goes through the territory of this country.

One of the most sensible alternatives for OEMs is switching to EMS providers in Eastern and Central Europe, for example, to Polish-based Assel. Otherwise, they will have to choose longer routes omitting Russia or select expensive water or air transport.

Energy crises

Russia is undeniably one of the major world energy suppliers. Before the war, Russia had been the greatest gas supplier to European countries, whereas around 10% of the gas delivery had been made through Ukraine.

The dynamics of the military conflict caused a temporary shortage in resource delivery and made prices for gas and petroleum skyrocket, which also increased the expenses of electronics manufacturing. Outsourcing production to Central and Eastern Europe is one of the most promising options for many local manufacturers in Western Europe who want to reduce their production costs and avoid issues of transportation from Asia.

EMS in times of crises

The war in Ukraine is one more recent factor making the profits of EMS outsourcing to Asia less feasible. Fortunately, some European countries like Poland have sufficient infrastructure and transportation possibilities to support OEMs. Learn more about contract electronics manufacturing with Assel in Poland on asselems.com.

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