Frost: E. Europe Manufacturing Hotspot Spurs SMT Reflow Soldering Equipment Market
August 21, 2007 // Published as a news service by IHS
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Due to the rise of Asian countries as global manufacturing hubs, the changing regional landscape of the electronics industry has forced equipment manufacturers to radically rethink their business strategies.
According to Frost & Sullivan, the shift of manufacturing from Western Europe to low-cost Asian regions has prompted reflow manufacturers to look for opportunities in the emerging Eastern European markets.
Recent analysis from Frost & Sullivan of the European surface mount technology (SMT) reflow soldering equipment markets found earned revenues of $60.1 million in 2006, with estimates to reach $101.7 million in 2013.
"The emergence of Eastern Europe as a new electronics manufacturing hotspot has helped sustain the growth in the European reflow soldering equipment market," said Frost & Sullivan research analyst Sujatha Chellathurai.
"Countries such as Hungary, Romania, Poland, Estonia and the Czech Republic are providing lower-cost alternatives to the former manufacturing hubs in Western Europe."
These economies are growing at a faster rate than the rest of Europe, leading to increased consumer demand for electronics products.
Analysts said these countries are recognized today as attractive, low-cost manufacturing regions for large electronic manufacturing services (EMS) providers, such as Jabil Circuit, Flextronics International, Sanmina-SCI Corp. and Solectron.
Environmental legislations from the European Union (EU) propelled steady growth in the market in 2004 and 2005, with several manufacturers replacing existing equipment with lead-free ones.
Analysts said the market is experiencing slow growth rates today, as most of the manufacturers met the Restriction of Hazardous Substances (RoHS) mandate deadline in advance and have already upgraded their old equipment. As a result, they are not likely to consider replacements in the next few years.
Over the long term, however, the rise in technological innovations and trends, improving economies and end-user demand for flexible manufacturing equipment will propel market growth. Analysts said the shift of electronics manufacturing to low-cost Southeast Asian countries has hindered growth in the European markets. Several manufacturers have started to close production locally and move their bases to China and to other low-cost regions to gain cost benefits.
"China's large and flexible low-cost labor force, fast-growing domestic market and access to high number of new engineering graduates are slowly causing the demise of high volume manufacturing in Europe," said Sujatha.
"Inflexible European labor laws are preventing manufacturers from responding quickly to changes and restricting Europe's strong capability in technology innovation."
Despite the shift of manufacturing bases to low-cost Asian countries, European manufacturers have the key advantage of developing high quality products. Analysts said they would do well to implement new strategies that will allow for reduced operational costs and consequently pass on the benefits to the customer.
Source: Frost & Sullivan.