China EMS sector’s steady shift from low-cost strategy to high technology

by Vianie Li & Cecile de Veyra

Low-cost manufacturing made China the world’s factory, attracting various industry players including from overseas to set up operations, but this has also relegated many of its homegrown enterprises to the fringes.

In the electronics manufacturing services (EMS) sector, the majority of nearly a thousand suppliers are small and midsize Chinese businesses. Most are competing in the low end for projects not in the scope of global leaders with production facilities in China. While this strategy of staying out of range has worked for decades and kept these companies afloat, the opportunity to venture into bigger territory is at hand.

In the Chinese government’s “Made in China 2025” plan, the goal is to launch China into global high-tech manufacturing. “The program aims to use government subsidies, mobilize state-owned enterprises, and pursue intellectual property acquisition to catch up with—and then surpass—Western technological prowess in advanced industries,” according to James McBride and Andrew Chatzky in an article published by independent think tank Council on Foreign Relations.

Encouraged by this support, domestic EMS companies are prioritizing midrange and high-end products on their R&D agenda in the coming years. They will also continue to transition to smart manufacturing to boost efficiency and reduce costs. Some have already introduced management systems and acquired corresponding equipment toward automation, which will also allow them flexibility in meeting customers’ requirements even in small batches.

Falcon (Dong Guan) Electronics Co. Ltd, for instance, spent $646,000 on an automatic high-speed SMT line in 2021 and plans to purchase more advanced production and test equipment from home and abroad. This acquisition helped Falcon increase output by 12 percent and will ensure its 2022 target of a 10 to 15 percent boost can be accomplished.

Growing market

Also called electronics contract manufacturing services, EMS cover designing, manufacture, assembly and testing. To devote more resources to R&D amid stiff competition in the electronics industry and cut costs at the same time, many companies worldwide are outsourcing their PCB assemblies to EMS providers.

“The EMS model is gaining momentum supported by the ability of contract manufacturers to offer production-related economies of scale, procurement of raw materials, industrial design expertise, and resource pooling, in addition to providing value added services such as repairs and warranty,” according to market research company Global Industry Analysts.

Global Market Insights Research reports that the global EMS industry will reach $750 billion in 2026 from $500 billion in 2021 at 6 percent CAGR, with consumer electronics leading demand at CAGR of 5 percent from 2020 to 2026. In China, the main base of operations of key EMS players, the expected rate of increase will exceed 8 percent during the same period.

Services offered

Chinese EMS providers offer services for consumer electronics, which account for 20 to 30 percent of their shipments, and also for computer, medical and healthcare, automotive, robotics and aerospace applications.

Half and full turnkey services, from design, material and component sourcing, assembly and testing to delivery, are available. In assembly, the choices include through-hole, SMT, conformal coating, wave and reflow soldering, and IC programming.

Companies have the capability to handle components as small as 01005 and 0201 and with a maximum height of 25mm, and 0.2mm in the case of parts in u-BGA packages. In terms of IC pitch, their achievable minimum is 0.2mm. For other pieces for mounting, the finest pitch is 0.25mm. PCBs used include rigid, flexible, rigid-flex and aluminum and can be in any shape.

As assurance, many Chinese suppliers operate facilities that comply with managements systems such as ISO 13485, 16949, 14001 and 9001, and follow the IPC-A-610E standard specific to electronics assembly.

They use materials and components sourced from companies specified by customers. ICs and passive components may be purchased from the US, Europe, Japan and the Taiwan region, with the former usually from Fairchild, onsemi, TI, Renesas and Toshiba.

The cost of ICs surged by nearly 100 percent in 2021, due to supply shortage, and the same happened in passive components, especially MLCCs. This forced Chinese EMS providers to charge 10 to 20 percent more for their services.

In recent months, the conflict in Europe has pushed up IC quotes further.

PCB assembly meets IPC-A-610G

Following the IPC-A-610G standard, Falcon (Dong Guan) Electronics Co. Ltd conducts 100 percent E-testing, visual inspection at IQC, IPQC, FQC and OQC stages, AOI through X-ray and 3D microscope, ICT, and high-voltage and impedance control tests in the manufacture of PCB assemblies such as the Falcon_PCBA030. The minimum order quantity is 100 units. Delivery is within 15 days.

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PCB assembly with lead-free HASL board

The CJD-002-000329 from one-stop PCB services provider Shenzhen Chengjieda Industry Ltd is a PCB assembly based on a board with 1oz copper thickness, lead-free HASL surface finish and green silk-screening. PCB thickness is 1.6mm. An order of at least 15 units is required. Delivery takes seven days.

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Rigid, flexible, rigid-flex, copper, HDI PCB assembly

Suntek Electronics Co. Ltd’s S8-P011-02 PCB assembly is based on a rigid, flexible, rigid-flex, copper or HDI board with 01005 and 0201, 0.2mm BGA and 0.25mm fine-pitch PoP, QFP, CCGA and CSP components. This undergoes ICT, AOI, X-ray, functional and aging tests. The supplier’s services include SMT, THT, box building, potting, coating, in-house programming and packaging services. The minimum order quantity is 500 units. Lead time is seven days.

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PCB assembly on up to 22-layer board

Using mixed assembly technology, Tecoo Electronics Co. Ltd offers the TE-9-59 assembly on an up to 22-layer PCB with minimum 0.5mm BGA and 0.4mm IC precision. The minimum order requirement is 100 units. Lead time is seven days.

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China EMS sector's steady shift from low-cost strategy to high technology

Growing market

Services offered

PCB assembly meets IPC-A-610G

PCB assembly with lead-free HASL board

Rigid, flexible, rigid-flex, copper, HDI PCB assembly

PCB assembly on up to 22-layer board

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