Evolution of the EMS Industry

This is the final article in a three-part series about the history, status, and future direction of the electronic manufacturing services (EMS) industry in relation to defense and aerospace customers. Part I covered the evolution of large EMS providers from their origins as small contract manufacturers focused on assembling prototype circuit boards for the defense and aerospace industries. Part II discussed the repercussions of the dot-com collapse and the ensuing development of strategic relationships between major EMS firms and their defense and aerospace customers. Part III describes important trends and market forces expected to shape the future of relationships between EMS companies and defense and aerospace manufacturers.

Major Market Forces
As we look ahead to what might – and what should – happen regarding the role of EMS providers in aerospace and defense manufacturing, we need to consider a couple of powerful forces in the larger market landscape. Significantly, they both involve electronic components.

The development trajectory of new electronic technologies is light years ahead of previous projections. Electronic components continually become faster, smaller, and more powerful, and there is every indication that this trend will continue. Rapid changes and frequent improvements are great news if you are talking about the cool consumer products that we enjoy, but they present a challenge to the aerospace and defense industries because the products and systems that use these electronic components have life spans measured in years, decades, or even longer. For example, TCAS units (traffic alert and collision avoidance system) designed in the early 1980s are still working well in today’s commercial aircraft.

The growing disparity between the rapid rate of obsolescence in electronic components and the long useful life of aircraft and defense equipment is one of the toughest issues we face in the future. In addition, it is the source of anticipated changes in another critical area – regulatory requirements.

The Federal Aviation Administration (FAA) and other regulatory bodies, including the European Aviation Safety Agency and the Civil Aviation Administration of China, are struggling with how to reconcile rapid innovation in electronics components with the cost, time, and labor required for inspecting and certifying new products.

How often should aircraft electronics be replaced? Every year? Each time there is an important new improvement? Such frequency is simply not feasible, but a solution to the growing component obsolescence issue needs found nonetheless.
 

Designing for the Future
Now, let us imagine the best approach to resolve these dilemmas. It may hinge on blurring or even removing the line that currently separates EMS companies from aerospace and defense OEMs. Here is how it could work.

Imagine you are a designer at a major avionics OEM. Let us say you are designing an advanced TCAS for ground vehicles to avoid runway incursions. You would be sitting at your computer screen and pulling components to assemble functional circuits with which you are designing. Currently, you would choose from a parts library typically assembled by the vendor of the software you are using to help design the circuit.

However, what if your manufacturing partner could contribute expertise and guidance to that parts library?

Instead of choosing randomly from different parts that could work, you would receive valuable advice about the one or few preferred parts. These would be products procured from a supplier that has signed a long-term agreement to mitigate the problem of obsolescence, or a supplier that understands the aerospace industry and has worked with the EMS company to be sure manufacturing practices are in place to take full advantage of the capabilities of the part. Maybe a preferred part in the library is highlighted which indicates a significant advantage in life-cycle cost for that selection.

Engineers make decisions that will have ramifications for many years to come, but during the design process, they are probably not thinking about the distant future. Alternatively, they may automatically turn to a favorite supplier without considering every option. In contrast, an EMS company is constantly looking at the supply chain, manufacturing optimization, and life cycle support. By combining the perspectives of the designer and the EMS company during the design phase – when the costs of making modifications are low – it will be easier to make intelligent decisions about electronic components that will deliver value and avoid obsolescence over the long term.

A blending of the EMS and OEM company responsibilities and authority, a more iterative process are foreseeable in the future. The EMS company could feed information to the OEM designers about selecting the best parts, and in turn, the OEM could provide insight into its design requirements to the EMS partner. This information could help the EMS company plan for manufacturing adjustments needed in the future, as obsolescence eventually occurs. This collaboration could also help ensure component optimization – the OEM knows the functional, contractual, and regulatory requirements for the product, while the EMS provider knows the capabilities of the latest electronics technology from work on commercial projects. Together, they can create a better design with better parts.
 

The growing disparity between the rapid rate of obsolescence in electronic components and the long useful life of aircraft and defense equipment is one of the toughest issues facing the future of EMS suppliers and their customers.

Managing Obsolescence
Closer collaboration between OEMs and EMS companies can also help to accommodate current and future approaches used by regulatory agencies to handle electronics innovations. It is clear that regulations are not keeping pace and the traditional model is unsustainable. For example, technology refreshes are currently practical only every three to seven years. This cycle forces OEMs and their partners to stockpile older components, knowing that they will soon be unavailable in the marketplace because the next generation of parts has superseded them. In spite of the accelerating pace of change in electronics, pressure from the public regarding safety makes it appealing for regulators to stick with the proven status quo in technology.

During this period of transition, the EMS industry, with its broad and deep exposure to the global supply chain, can help manage the problem of components that are going out of production. Because of their work across different sectors, including consumer electronics, and their powerful, global enterprise resource management systems, EMS companies have an accurate picture of the total demand for a given part. Often, they have leverage with suppliers due to the large volume of parts that they purchase across their various business units. Therefore, if a supplier notifies the EMS company about last-time buys of a chip that is going out of production, and the EMS company knows that one of its commercial OEMs will be switching to the new replacement, it may be possible to secure some of the older parts at an attractive price on behalf of an aerospace customer. This can all be done while maintaining the traceability of those components. The customer will then have enough parts to last until the next technology refresh cycle comes around without ever resorting to the secondary (broker) market from which many counterfeit components enter the supply chain.

This type of value-added service is a direct benefit of the EMS industry’s supply chain expertise and broad cross-industry exposure, which in turn are the primary reasons why OEMs partner with an EMS company in the first place.

Another important contribution of EMS companies is alleviating bottlenecks. If an OEM learns that an electronic part is going to phase out, and the design team is unsure about the engineering issues involved with switching to a new one, the EMS partner can help. For example, Jabil has many engineers around the world focused on this type of problem. Their skills and Jabil’s manufacturing experience can help guide the new design to ensure high reliability and optimized production – often at a lower price point thanks to smaller, less-expensive technologies. By turning this issue over to the experts, the OEM can avoid a bottleneck in the redesign process while avoiding the cost of hiring additional support engineering staff.
 

Tighter Integration
Today, EMS companies participate in OEM product teams when possible. In the future, greater integration of the two entities could be a necessity. Successfully managing the transitory nature of electronics will require extensive collaboration so that each partner can contribute specialized knowledge and expertise. Therefore, the blurring of traditional boundaries between the organizations is bound to occur.

One example is the anticipated expansion of the EMS provider’s role from board-level and box-level builds to total product builds, where the product leaves the EMS company bearing a certification sticker, shipping direct to the end customer or an integration facility. The OEM that designed that assembly may not ever see it prior to its installation in the end-users product. Moving even beyond this level of authority, the EMS company may ultimately earn authority under FAA regulations (or the equivalent in other regions), attesting that Jabil or another provider is an approved manufacturer for that product. This higher level of regulatory authority allows the EMS company to conduct certified repairs and other sustainment activities over the lifecycle.

Because EMS providers often can deliver significant cost efficiencies when maintaining products that they also manufacture, this approach supports current Department of Defense efforts – particularly the 2010 memo from Undersecretary of Defense Ashton Carter – to achieve greater affordability, cost control, and other improvements in defense projects.
 

Conclusion
The EMS industry has come a long way since the days of simple circuit board assembly. By leveraging technological advancements, market changes, and their own leadership, today’s large EMS companies have forged strong relationships with defense and aerospace OEMs. These partnerships will undoubtedly grow closer – nearly seamless – in the years ahead, to the benefit of both organizations and the end customers who rely on their products. In the future, the speed of technological innovation combined with greater willingness to work as an integrated team will lead to even more efficient and effective ways of creating and producing highly reliable defense and aerospace products.

Jabil Defense & Aerospace Services
St. Petersburg, FL
jabil.com