7For decades, the electronics manufacturing services (EMS) industry has accepted a tiering system that categorises providers by revenue size: Tier 1, Tier 2, Tier 3.
It is simple. It is familiar. And it is increasingly unfit for purpose.
Tiering was never created to help EMS companies grow. It exists to help OEMs simplify risk. In a world where outsourcing electronics manufacturing carries material, commercial and operational consequences, buyers needed shorthand. Revenue became a proxy for capability, resilience, and continuity.
Bigger meant safer. Smaller meant riskier.
However, the EMS market has undergone significant changes, both structurally, operationally, and commercially, while tiering has remained relatively unchanged. Today, tiering no longer acts as a neutral descriptor. For many EMS companies, particularly Tier 2 and Tier 3, it has become a constraint: shaping perception, access, and pricing long before real capability is assessed.
The result is a growing disconnect between what EMS companies actually do and how the market perceives them.
And that disconnect has consequences.
The hidden cost of tiering for Tier 2 and Tier 3 EMS
Tiering compresses complexity into a single variable: size. It assumes linearity where none exists.
A £40M EMS with deep DfM capability, vertically integrated test, and decades of experience in regulated sectors is not meaningfully comparable to a £40M EMS focused on general industrial PCBA. Yet tiering treats them as equivalent.
Likewise, a £250M EMS with strong regional depth and medical or aerospace expertise is often grouped alongside Tier 1 global providers, despite operating under very different economic and organisational realities.
For Tier 2 and Tier 3 EMS companies, this creates three persistent problems.
Pre-qualification bias
OEM shortlists are often filtered before meaningful engagement can occur. Tiering becomes a gatekeeper rather than a guide. Being perceived as “not Tier 1” can exclude a supplier before relevance is tested.
Margin pressure
Tiering creates asymmetrical expectations. Tier 2 and Tier 3 EMS firms are often expected to deliver Tier 1 reliability at lower cost. This compresses margins and commoditises genuine capability.
Strategic drift
In response, many EMS companies prioritise scale over clarity, adding customers, capabilities, or geographies without a coherent positioning logic. Complexity increases, but differentiation does not.
Tiering tells the market how big you are.
It does not tell them what you are best suited to do.
Positioning has become critical in EMS
Positioning is often misunderstood as a marketing exercise. In EMS, it is something far more fundamental: commercial risk signalling.
OEMs do not buy SMT lines or factory square footage. They buy outcomes:
- manufacturability confidence
- continuity of supply
- regulatory compliance
- supply chain resilience
- lifecycle accountability
Positioning shapes whether an OEM believes you are structurally designed to deliver those outcomes before a meeting, an RFQ, or an audit ever takes place.
Without deliberate positioning:
- websites become inventories of capability
- sales conversations default to price and capacity
- differentiation collapses into generic claims of quality and flexibility
With clear positioning:
- the right OEMs recognise themselves in your story
- wrong-fit prospects self-select out
- value-led conversations replace justification
This is where many EMS companies underestimate the strategic importance of how they describe themselves.
EMS, CEM, ESM — labels matter less than operating reality
In practice, OEMs do not buy acronyms. They buy operating models.
EMS and CEM are often used interchangeably, particularly in Europe and North America. Importantly, many EMS companies are deeply partnership-oriented, providing:
- DfM and DFx
- NPI and industrialisation support
- supply chain engineering
- test development
- lifecycle and change control
In many cases, it is within EMS organisations that OEMs find the strongest expertise in manufacturability.
The distinction is not semantic — it is behavioural.
OEMs care about:
- when engineering engages
- who owns manufacturability decisions
- how yield and test strategy are managed
- where accountability begins and ends
Positioning fails when language over-promises or under-signals reality. It succeeds when narrative, operating model, and customer expectation are aligned.
Scale changes scope — but scope alone does not create advantage
A clear and observable pattern exists in the EMS market.
As EMS companies grow, most expand beyond PCB assembly and SMT into:
- box build and system integration
- cable and wire harnessing
- functional and system-level test
- configuration, labelling, and packaging
- logistics and postponement
This shift is not accidental.
Why larger EMS companies vertically integrate
OEM demand drives it. As products mature and volumes scale, OEMs want:
- fewer suppliers
- clearer accountability
- reduced integration risk
At a certain scale, remaining PCB-only becomes commercially limiting. EMS companies that stop at the board level risk being positioned as subcontractors rather than partners.
There is also an economic logic. PCB assembly is increasingly price-transparent and competitive on its own. System integration increases the share of wallet, raises switching costs, and embeds the EMS more deeply into the product lifecycle.
At scale, vertical integration becomes a necessity.
Why smaller EMS companies often remain PCB-focused — by design
Conversely, many smaller EMS companies deliberately remain focused on PCBA and SMT.
This is not a lack of ambition. It is a strategic choice.
Vertical integration introduces:
- capital intensity
- labour complexity
- inventory and working-capital exposure
- margin dilution from mechanical work
Many smaller EMS firms compete successfully by specialising in:
- high-mix complexity
- deep DfM capability
- engineering intimacy
- responsiveness and flexibility
Importantly, many OEMs actively prefer specialist board-level partners — particularly where system integration is handled elsewhere or where design ownership remains internal.
The problem emerges when the market assumes that more integrated automatically means better.
It does not.
The real risk: capability expansion without positioning
This is where many Tier 2 and Tier 3 EMS companies struggle.
They add box build, harnessing, or test because:
- “OEMs expect it”
- “competitors offer it”
- “we need to increase share of wallet”
However, without clear positioning, expanded capabilities create ambiguity rather than advantage.
Two EMS companies may offer the same services — PCBA, box build, test — yet be structurally optimised for entirely different OEM problems.
Without positioning, buyers see capability sprawl, not strategic fit.
Ownership and scale create different positioning realities
Positioning cannot be generic, because EMS companies are not structurally identical.
Owner-managed EMS (often under £50M)
These firms are typically specialised, engineering-led, and relationship-driven. Their challenge is not one of competence, but rather visibility. As OEM buying becomes more centralised and digital-first, relying on reputation alone becomes insufficient.
Positioning here must surface specialisation and translate tacit strength into explicit relevance.
Sub-£100M professionally led EMS
This is the most vulnerable segment. Too large to rely on founder relationships, too small to benefit from Tier 1 gravity, these firms often suffer from identity drift.
Here, positioning must act as a strategic constraint — clarifying where to compete and where not to.
£100M–£1B global (non-Tier 1) EMS
These companies face false equivalence. They are compared to Tier 1s on footprint, but without the same leverage or brand gravity.
Their advantage lies in selective globality, sector depth, and agility — but only if articulated deliberately.
OEMs are looking beyond Tier 1
OEM behaviour has shifted.
Supply-chain disruptions, geopolitical risks, and cost volatility have driven a reassessment of concentration risk. Many OEMs are actively diversifying away from over-reliance on Tier 1 providers.
OEMs are not looking for “smaller”.
They are looking for fit-for-purpose partners.
This creates opportunity for Tier 2 and Tier 3 EMS — but only for those who can clearly articulate why they are the right partner for specific products, volumes, and risk profiles.
That articulation is positioning.
Tiering is imposed. Positioning is owned.
EMS companies cannot opt out of being tiered.
But they can outgrow its limitations.
The EMS organisations that will outperform over the next decade will not be those that chase tier upgrades, but those that:
- define who they are for
- align capability with the narrative
- communicate with precision and consistency
In a market where many suppliers look interchangeable, clarity becomes a competitive advantage.
For EMS, positioning is no longer optional.
It is the difference between being shortlisted and never being seen at all.
