The Daily Brief No middle ground in the EMS business
Jan 13, 2026
Explore the fierce dynamics of the EMS industry in India, where competition is high and margins are thin. Learn about the contrasting approaches between high-volume smartphone assembly and specialized sectors like medical devices. Dive into the challenges of procurement, cash flow, and how working capital can provide a competitive edge. The AI segment reveals exciting advancements in reasoning models that boost productivity and transform workflows. Discover Meta's internal struggles and the rise of global challengers shaking up the market.
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Middle-Chain Margin Trap
- EMS firms sit in the value-chain middle with limited pricing power and capture little value compared to component makers and OEMs.
- This 'smile curve' position explains why EMS net margins typically compress to 2–4%.
High Mix Vs High Volume
- EMS work ranges from high-volume, low-mix phones to low-volume, high-mix medical and defense systems.
- High-mix products command stronger margins and create switching frictions due to certification and long lifecycles.
Turnkey Brings Risk And Potential Profit
- Turnkey EMS bears supplier and inventory risk because the EMS sources components and finances production.
- Consignment reduces inventory risk but yields lower margins since OEMs supply parts and EMS earns conversion fees.