Corona and the European EMS Industry

By Dieter G. Weiss, in4ma

When the outbreak of the Corona crisis in Wuhan occurred, drastic changes were predictable for the international industry, but it was not possible to quantify the size of the problem. Accordingly, the company managers in the European EMS industry looked at the development with concern and reached out for any information that could be used to assess the influence on their own company.

My market research firm, in4ma in Europe was approached by several EMS companies to develop this information. At the beginning of March, a group of 27 EMS companies in German-speaking countries were selected to serve as the basis for the investigation. The selection criterion was that the companies had already participated in the in4ma EMS annual statistics for several years, i.e. that the company already had key company figures and that the order structure by market was known. In addition, both small, medium-sized and large companies were deliberately selected because the companies behave differently according to turnover size. Of the 27 companies selected, 23 are from Germany, two from Austria and two from Switzerland. Five companies are located in the sales group XL (> 50 million euros), eight in the sales group L (20-50 million euros), 6 in the sales group M (10-20 million euros) and eight in the sales group S and . XS (<10 million euros). A summary of the reporting group can be seen in Table 1. This group generated sales of almost 2 billion euros in 2019 and employed 7,541 people.

 

Revenue group	Participating companies	revenue/Mil. €	% revenue share of all participants	Employees
XL	5	1,642.0	83.2%	5,497
L	8	210.3	10.7%	1,278
M	6	70.3	3.5%	432
S/XS	8	50.6	2.6%	334
Total	27	1,937.2	100%	7,541

Table 1: revenue and headcount of the different revenue groups

 

The surveys were formulated as simple questions, without requiring a special form to answer them. Rather, it was suggested to communicate as much information as possible in order to get an accurate picture of the situation. A total of four queries were originally planned, three weeks apart. In the meantime, the large EMS companies have asked to continue these evaluations at least until August, as there is no more qualified evaluation of the effects of the Corona crisis. The first four queries have now taken place (27.3./17.4./8.5./29.5.), the fifth query follows on 19.6.

 

Sick leave 

The general level of uncertainty among people was extremely high in March. In addition, schools and kindergartens were closed and many parents had a problem with childcare. As a result, many parents did not come to work, took vacation, reduced their overtime account or reported sick. Since nobody is familiar with the typical symptoms of a corona infection, fear added to the uncertainty. A company with 30% sick leave in production wrote: “Total uncertainty among employees. If the throat scratches only slightly, the employees come and ask what they should do. As part of the duty of care, we have to inform employees that they should call the family doctor. This regularly means that the employees are then written off for 14 days after the telephone diagnosis. These are enormous costs that the company has to bear. If this continues to increase, the company can only be protected by 100% short-time work, since then only the fixed costs are incurred as a minus amount.”

This situation led to a rapid increase in the sickness rate among companies. A third of the companies had a sick leave rate of over 10%, the maximum value was 45%. After the initial panic, the situation slowly calmed down in April. On the one hand, the first companies had already registered short-time work, others had introduced 6 hour shifts, some of which were worked without a break. This led to a reduction in the problem of childcare. In the employee area, the majority of employees worked in the home office. The production was segmented in such a way that the employees had as little contact as possible. Critical functions were divided in such a way that the corresponding employees worked in different shifts to prevent 100% failure. The company entrances were blocked in such a way that no people outside the company were given access, otherwise the doors in the company remained open so that nobody had to touch the door handles as potential sources of infection. Distance rules and additional hygiene measures were defined, communicated and monitored. It was and is all very professional and disciplined. The employees were very aware of the special situation and feedback came in particular from the smaller companies that nobody really wanted to be sick so as not to endanger the existence of the company and thus their own workplace. Accordingly, the third evaluation in May also showed a further decrease in the sickness rate and in the fourth evaluation it went even down further (Table 2).

Revenue group	Sickness Week March 27	%Sick  27.3.	sickness April 4.	Sick 17.4.	sickness May 5.	Sick  8.5.	sickness May 29	Sick  29.5.
XL	618 of 5.497	11,2%	466 of 5.363	8,7%	314 of 5.363	5,9%	305 of 5.497	5,5%
L	202 of 1.278	15,8%	88 of 1.271	6,9%	101 of 1.271	7,9%	76 of 1.271	6,0%
M	70 of 432	16,2%	26 of 432	6,0%	20 of 432	4,6%	24 of 432	5,6%
S/XS	28 of 334	8,4%	13 of 334	3,9%	6 of 334	1,8%	6 of 334	1,8%
All 27	917 of 7.541	12,2%	593 of 7.400	8,0%	441 of 7.400	5,9%	411 of 7.534	5,5%

Table 2: sickness rate of EMS companies by revenue group

 

The reduced number of employees in the second and third survey was caused by the change of a company in the XL sales group, not by staff cuts. Many companies expect sickness levels to normalize further in the next few weeks or have already achieved this. The number of companies with a sick leave rate of >10% (3 out of 27) has remained constant since the last query, but some of them are other companies. The spread of the numbers reported has also decreased significantly. The maximum is now 12.6% after 17% in the third survey, 35% in the second survey and 45% in the first survey. In general, border closure and the problem of cross-border commuters are no longer an issue; employees can easily cross the border with passports, but sometimes have to expect additional waiting times. The following chart shows the development of sick leave graphically:

 

The market sectors

Since it was to be expected that the corona crisis would have a particular impact on both the automotive industry and medical electronics, the sales groups were examined with regard to their sales in these industries (see Table 3).Compared to the normal share of sales per market sector, the reporting group in automotive electronics is slightly underrepresented, because the share of sales in the EMS industry in Germany is normally 22.9%. For this, medical technology is slightly overrepresented, which is usually 9.2%.

Revenue group	Automotive/Mil. €	Automotive%	Medical/Mil.€	Medical %
XL	337.9	20.6%	197.7	12.0%
L	21.8	10.4%	25.0	11.9%
M	0.0	0.0%	8.8	12.5%
S/XS	1.3	2.6%	2.7	5.3%
All 27	361.0	18.6%	234.2	12.1%

Table 3: revenues by market sectors of different revenue groups

 

Due to the closings of many automotive plants, it was to be expected that companies with a high proportion of electronics for the automotive industry would be particularly affected by a drop in incoming orders. This already happened with the first evaluation. Delivery dates were pushed back massively and the corresponding EMS companies immediately went into short-time work. Already in April it could be said that companies with a share of more than 25% in automotive electronics had registered short-time work. On the other hand, medical electronics experienced an upswing, regardless of whether it was components for respirators or other medical products. Order doublings, advance delivery dates up to ten times the order volume were reported. So if you delivered not only to the automotive industry but also to medical technology, you could partially compensate for the minus in one sector with a plus in the other. On the other hand, companies with a share of more than 50% in the automotive industry were particularly hard hit.

Part 2 of Dieter Weiss’ report will be published in EMSNOW on Tuesday, June 16.