De-globalization Impact on Supply Chains and EMS Manufacturing Efficiency

The global economic landscape is undergoing a seismic shift as de-globalization reshapes trade patterns, challenging operational efficiency in the electronic manufacturing services (EMS) sector. With rising tariffs, geopolitical tensions, and a move toward regionalized production, EMS providers like Foxconn, Flex, and Jabil face disrupted supply chains that threaten their ability to maintain cost-effective, high-output manufacturing.

Below I share how I see these changes impacting EMS efficiency, drawing on insights from our work published on ventureoutsource.com and markzetter.com, and I provide a strategic outlook for business leaders navigating the nuances of the constantly evolving EMS industry.

What's happening is a once-seamless network of global supply chains fracturing under the weight of new trade barriers.

De-globalization, driven by President Trump's policies and U.S. tariffs, and the retaliatory measures from trading partners, mirrors historical precedents like the Smoot-Hawley tariffs of 1930 when U.S. imports from Europe alone fell by more than 70% between 1929 and 1932. The global aggregate was much closer to two-thirds.

For EMS manufacturers, this shift disrupts the flow of raw materials, components, and finished goods inventory, particularly those reliant on lower-cost manufacturing hubs. Recent data indicates that 30 percent to 40 percent of China-based EMS production has migrated to Mexico and Southeast Asia since 2023, according to cfraresearch.com, forcing companies to reconfigure logistics and sourcing strategies at a time when cost efficiency is paramount.

For electronic supply chain perspective, these ten firms have announced significant capital project spend reductions and corporate savings mandates based on recent public statements, earnings calls, and analyst reports from July to October 2025. What's noteworthy is their role in a core segment of the electronics equipment sector - semiconductors - citing economic uncertainty, tariff risks, inventory overhangs, and muted demand in specific sectors, like automotive and industrial.

Why this matters

Picture SMT PCB systems assembly where delays in component delivery halt assembly, or where sudden tariff hikes inflate material costs by 15 percent to 20 percent. This is the new reality for EMS providers as supply chain fragmentation erodes economies of scale.

For instance, German automakers, heavily dependent on Chinese electronics, have seen production costs rise by 12 percent in 2024 due to tariff-related disruptions, a trend that reverberates through EMS partners supplying critical components.

Previously, I've highlighted how these shifts increase lead times - some OEMs report delays extending from 10 to 30 days - reducing throughput and straining customer and supplier relationships.

For supply chain managers this translates to tighter schedules and heightened pressure to meet deadlines, while procurement executives grapple with balancing regionalization costs against global competitiveness.

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Picture a market where regional supply chains demand localized inventory and redundant manufacturing capacity. This drives up fixed costs, particularly for vertically-integrated tier-1 EMS firms.

The move away from a unified global system, as noted previously in this newsletter, requires EMS manufacturers to invest in multiple facilities, often financed through debt in an already strained economic climate.

Jabil’s 2023 expansion into Mexico also included caution that short-term efficiency losses could persist. For a tier-1 EMS this reveals footprint fragmentation diminishes scale advantages, which once allowed EMS providers to optimize production. I estimate up to a 10% drop in overall efficiencies for EMS provider moving to adapt multi-regional models. Good merger and acquisition strategy pays dividend

Broader implications

U.S. - China trade disputes have already forced many EMS manufacturers to change footprints and diversify suppliers, increasing complexity and risk. The loss of centralized procurement, once a cornerstone of cost management, now requires more sophisticated supply chain management tools and expertise in areas like AI, areas where many EMS manufacturers lag.

Few EMS providers have fully implemented digital supply chain solutions, leaving the majority vulnerable to inefficiencies. For program leaders and procurement specialists, this shift demands new skills and strategies to mitigate risks, while EMS business development teams must reassure OEM clients of reliability amid uncertainty.

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Strategic adaptation is essential for EMS manufacturers weather this storm. Investing in digital supply chain technologies, as recommended by can enhance visibility and responsiveness, though it requires upfront capital and training, and the vast majority of EMS manufacturers are risk-averse.

De-globalization’s toll on EMS efficiency is a defining challenge for the industry. Disrupted supply chains, rising costs, and diminished scale economies test the sector’s adaptability, impacting ability by OEM customers to meet their production goals.

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About

What matters when formulating contract electronic strategy? How do you identify supplier profit centers and what are you doing to protect against margin erosion for your outsourcing programs? Why do provider capabilities often not match capabilities they claim? How are you benchmarking your supply chain against competitors?

I’ve spent 25+ years in contract electronics industry setting up contract electronic divisions and running operations, protecting EMS program profits, manufacturing capacity M&A and more. I run a technology solutions firm. A lot of times this means asking the right questions.

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