Leading electronics manufacturers have not taken full advantage of Industry 4.0 solutions yet. By identifying and implementing the technologies best suited for their business, they can potentially improve their EBIT by 9 percentage points.

With a current value of 1.5 trillion euros, the electronics assembly industry is one of the world’s largest, and it is expected to continue growing at about 4 percent a year. Think of portable devices, wearable electronics, and even self-driving cars and artificial intelligence. All these products are based on electronics.

Despite the industry’s growth, it is under pressure from declining average sales prices and ongoing innovation.

We believe large additional efficiency improvements for electronics manufacturing are within arm’s reach, as Industry 4.0 technologies mature. We are using the term Industry 4.0 broadly for the full integration and digitalization of industrial value creation.

Those companies that correctly prioritize and implement key technologies from the Industry 4.0 playbook will be able to move to the next level of efficiency, though getting there won’t be easy. There is no one-size-fits-all solution, given the diversity of the industry and differing levels of maturity related to Industry 4.0 technologies. In deciding how to move forward, electronics manufacturers must consider their own product mix and volumes, and equipment and software providers need to understand the business models of the companies they serve.

For mastering these complexities, we have applied the Roland Berger Framework for Industry 4.0 to electronics manufacturing to help companies prioritize technologies for implementation. The framework includes 20 separate technology blocks relevant for electronics assembly that are either hardware-centric or software-centric.

Each technology block, as we call them, has a calculable direct impact on five key performance indicators (KPIs) of electronics manufacturers, as well as an indirect impact on equipment suppliers' and software providers' businesses. For electronics manufacturers, the improvement potential is up to 9 percentage points of EBIT (earnings before interest and taxes).

Yet our research showed that even leading players are only halfway along the road to full implementation of Industry 4.0 solutions. What can industry players do to reap these benefits and stay competitive?

Manufacturers: Choose the right technology blocks and partners

Electronics manufacturers include companies that make millions of cell phones a year and those that produce only a few pieces of specialized electronic equipment each year. Since they vary so widely, we clustered these companies - including original equipment manufacturers (OEMs), electronics manufacturing service providers (EMS providers) and original design manufacturers (ODMs) - into three categories of operating models. They are: low-volume, high mix (LVHM); high-volume, low-mix (HVLM); and medium-volume, medium-mix (MVMM). For each model, we analyzed which technology blocks to prioritize, saw that doing so increases their capacity utilization, flexibility and quality while reducing time to market, and calculated the impact on EBIT.

An LVHM operating model is mainly used by electronics assembly manufacturers in aerospace and defense, industrial electronics , or the medical industry. The three key blocks here are:

• Workshop-based production systems, in which assembly lines (especially in the back end) are replaced with process-oriented workshops;

• production scheduling optimization systems, where systems, mostly based on artificial intelligence, optimize production schedules by identifying the best combination of tradeoffs;

• and bringing it all together, LVHM companies need process master control systems to handle the increased complexity of workshop-based production and ensure that the new, more complex production schedules are met.

We suggest that companies with LVHM models implement flexible workshop-based production systems inhouse and carefully select partners for help on the other two blocks. Also, consider building up your own software development know-how to reduce dependence on suppliers.

For HVLM, a model used by significantly or highly automated companies producing consumer electronics, computers and communication devices, three key blocks are:

• Further equipment automation, such as upgrades and adding new automation functions, or new technologies, like co-bots;

• predictive maintenance to increase the availability of machines by using sensor data to anticipate breakdowns

• and machine and line performance optimization systems, which also uses sensor data to improve the performance of the machines and the quality produced, such as first pass yield.

Here we recommend keeping an eye on developments in the market for standard equipment and automation solutions, and recruiting relevant partners to get the technology implemented.

Models that are MVMM are often used by automotive electronics producers. The three key blocks here are a combination of the priority technology blocks for LVHM and HVLM players, and our implementation recommendations are the same. The blocks are:

• Further equipment automation

• Workshop-based production systems

• and machine and line performance optimization systems

Next, we will turn to four types of equipment and software suppliers working for electronics manufacturing companies.

Suppliers: Better understand the companies you serve

These companies usually provide solutions, often proprietary, for the Industry 4.0 technology blocks discussed. Here we expect indirect impact and encourage these companies to adjust their own strategies to those that suit their clients best.