A warm welcome to Incap's Capital Markets Day 2022. First, I would like to introduce to the stage Incap's Chairman of the Board, Ville Vuori. Welcome.
Thank you and welcome. It's very nice to see people in person as well after a couple of years everything in virtual mode. Yes, let's kick it off now. My name is Ville Vuori, Chairman of the Board of Directors, and I think we have all the other board members here as well, if I'm right. Yeah, there we are. Päivi Jokinen in there, Kaisa Kokkonen, and Carl-Gustaf von Troil. Very good. The board is lean and efficient as the whole company. Before I give it to the management, I started to reflect as we are now in this or next to the Slush event, that this, what Slush represents actually is a rather big thing and important thing for Incap as well.
Because over the past years, the management has really focused on developing our service concept so that we can equally serve startups as well as our volume customers. And, uh, when you look at this activity, you can see that we basically start from the scratch with these customers. We could be the one building the first, uh, prototype, and then taking it from there. Sometimes the startups fail, but sometimes those turn into million accounts. And obviously, on the beginning, this kind of an activity is, is not the most profitable one, but it might turn to be so. So with this res-respect, uh, we in Incap, we are actually acting a little bit like a seed investor. We are choosing cases, and cases are choosing us. And so far, that has been a really good and important part of our company.
It's greatly contributing to our culture, the way we work. Okay, I'm not gonna steal more time here. I'm gonna give it now to, I guess, Otto next. Sorry. You. Thank you.
Thank you, Ville. I steal the show for a moment here for myself. On behalf of myself as well, a warm welcome. My name is Rosa, and I will be moderating this event today. Our agenda consists today of that first we hear from Incap CEO and CFO about Incap rocks today and tomorrow, EMS market update by Dieter Weiss from in4ma, global component availability update by Hanno Septer from Incap, and we will meet the management team. At the very end, we will have a Q&A session with everyone who has been presenting today here. For the virtual audience, if you'd like to ask questions, you can ask questions the whole time. There is a chat box underneath the webcast.
Please send out your questions, and we will take them at the very end of this event. For the live audience here in Messukeskus, please raise your hand when we have the Q&A session or meet the management session, and you can just raise your hand and someone will come with the microphone to you. Without further ado, I would like to ask to step on the stage first, CEO of Incap, Otto Pukk, and then CFO of Incap, Antti Pynnönen. Welcome to the stage.
Thank you very much and also welcome from my side. I totally agree with Ville. It's nice that we can have these kind of events again and see each other face to face in that sense.
Yes, let's go.
Very good. As the audience here is a little bit split, some of you guys have been following us for years and are owners in Incap and some have just walked in from Slush. Let's little bit talk about what kind of company Incap is so everybody knows. We are an EMS company. We are a global company. We have operations in Estonia, in India, in U.K., and Slovakia. We're listed in Nasdaq since 1997. 2,500 employees, and Antti will crunch numbers later, but we will end up somewhere between EUR 262 million and EUR 270 million in revenue this year. That gives a little bit of a ballpark on who we are. We do electronics in a lot of different fields.
We are in automotive, we are in aerospace and defense, we're in industrial electronics, IoT, medical and so on. Electronics for us is, if you take a hammer to an electronic device, it all looks more or less the same inside. You have a PCB, you have some buttons, perhaps a display, and a mechanical envelope. What kind of application it is, if it's a mobile phone or if it's a medical equipment, that doesn't differ so much how we produce it. That said, very many of our products has to do with something green. Is it green energy or green, like e-mobility or so.
Green is some kind of common thing, not only on the PCB that are colored green inside, but also on our business. Today, EMS business is not anymore simple subcontracting. We do an array of different services to our customers. We support them from everything from design to different logistic solutions, sourcing materials, engineering services to manufacturing, doing the whole box builds and testing and delivering it to the customers. It's not so like simple subcontracting. We are a trusted partner to our clients and are very much integrated into their business. Basically, we are their production and perhaps part of their R&D department. As I said, we have global operations where people all over the world almost, at least in Europe, in Slovakia and Finland.
Finland's headquarters is small when we had this raised hands for the Board. Basically if Jonas is here as well or if he's down at Slush, but we have two persons working every day in our small headquarters that is much smaller than our Slush booth downstairs in that sense. We have factories in Slovakia and Estonia and two factories in India. I know we did this survey before this event, so as I will stop a little bit on the Indian project. Murthy Munipalli is here, so he can answer questions in details. Everything is going on time. That was one of the questions. As you see, we have already roof on the building. We're closing the walls currently. Q1, we are starting to ramp up in India.
That you can ask Murthy Munipalli much more in detail. He's happy to answer your questions. Basically, global EMS companies, everything sounds exactly like our peer, but it's not. If you look at the Incap, in our industry, on-time delivery, quality and pricing, that is hygiene factors. Everybody has those at the same kind of level. Our industry is moving more and more into that you need to have a broader service offering. Also, almost everybody offer these kind of services in the industry. Yet we do it differently. The differentiator in the market is how you deliver these different kind of services and how you do the business. We have chosen a totally decentralized model in Incap, and that gives us basically three benefits.
For our customers, time to market is key, and to be able to be quick, agile, flexible, and efficient in the approach to the customers is key for their business. With our decentralized model, we have customer-oriented teams for each customer in each unit. When Incap goes into a meeting, we always have the decision-maker in that meeting. We can take the decision then and there over that business case. For customers that appreciate that have a quick or need a speedy time to market, that is a huge game changer. By doing so, by decentralizing organization, giving people in the organization possibility to take responsibility and to take charge of the business. Many other businesses in our size, you work in a silo. You're not part of the business, you just do a task.
In Incap, you can really be entrepreneurial in it, and that is very motivating for people. If you look at our people, we have very little turnover. It's almost going in, if you visit one of our factories, it's like a startup mentality. People really like what they are doing. It's not only I am saying. You go and talk to them. You have the people here as well. Of course, lastly, that kind of model where you don't have overhead, that shows on the bottom row as well. Incap's numbers or result is not because we have higher prices. It's simply because we have less costs. It is an interesting model there to, we think. How you earn money is today more and more important.
In Incap, we also take very much pride in that we have signed this U.N. Sustainable Development Goals. We're only one of these 17,000, I think, the companies are today that have signed those. We are working with it, but it's tough because still in the industry and in the market, there is no standards really. We have chosen doing our reporting from this reporting initiative that is this GRI. Still, there's a lot to develop, and I hope many companies, our peer, come with us and help us to develop because the footprint, what we do in the world, all both politically and socially and eventually, I think that is really important. Before I go give over to Antti here, and he will start cracking the numbers. People make these numbers.
We have fantastic people in Incap. It's a super team that we have in each unit, and I just want to emphasize that they are behind these numbers. I hope you will realize, and I hope you take the opportunity to meet them down at Slush, the ones in our team we have, and also during this event. Floor is yours.
Thank you very much, Otto, for the great introduction to Incap. Basically, easy to continue from my side, looking the numbers every day. The customer and orientation and the success behind our employees and fantastic team shows really concretely here in the number side. Here is the first nine months report that we disclosed in early October showing the tremendous growth in the top line, EUR 185.1 million, and that's over 56% of purely organic growth. Profitability also is extremely important for Incap. Therefore, we are very proud that we increased that by almost 50% to EUR 26.3 million, corresponding 14.2% of revenue.
On this slide, we have collected a little bit history of the quarterly results. I think they speak for themselves pretty nicely. Of course, starting there from first quarter 2019, there has been tremendous growth, very rapid growth. Of course, for the ones who doesn't know Incap history that well, so worth mentioning that we acquired AWS Electronics. Incap expanded its operations to U.K. and Slovakia through this transaction, and that was completed in first quarter of 2020. That of course a bit boosted the figures onwards. Ever since, there's still a very rapid organic growth for Incap. On the right-hand side, there we focus more on the profitability side of the company.
There are a bit ups and downs in the journey, as you can see in the big picture. Couple main reasons there. Those are related to, for example, in the acquisition, 2020 Q1, like mentioned, there were some like non-recurring items regarding the transaction, plus of course the purchase price amortization elements combined almost EUR 2 million in that one year, impacting heavily of course the EBIT. Those other drops, slight drops there are related to lockdown impacts we had in India unit. In 2021 in first quarter and then, sorry, second quarter and then we had actually the first quarter in 2020 straight after acquisition, we were facing a lot of challenges with the lockdowns and COVID-19 hitting as a pandemic.
What a journey still those three years and the profitability is very strong on the double-digit. Mainly I would like to highlight that, for example, this year we're really proud that all our European units have shown growth. It's not only one unit here and there, but the whole team is performing really well. I would like to also show you the disclosed balance sheet from our first-half report. The ones who have had a look on that already when we released the report, it's nothing new, but probably just to highlight that the Incap's balance sheet is very much driven by the networking capital elements and items and such as the inventories and trade receivables. On the liability side, obviously the payables. Those are really defining Incap's balance sheet.
75%+ of the asset value are related to inventories and receivables. Equity ratio is very strong for Incap, over 50%, well over 50%. Also, something to mention here, boosting our figures and equity, for example, was the rights issue we completed in 2020, later part of 2020 after the acquisition was completed. The whole reason for that one was to get rid of the debt that we took on this acquisition and be really ready for other acquisition opportunities shall they arise. Time is money in acquisitions as well. Ability to move quickly and do quick moves is appreciated in order to make good deals for the shareholders. We are waiting still this deal. It will come sooner or later. Don't be worry.
I can show my hands. I don't have any tattoos. It's part of our media team. The rest of the tattoos apply the same logic. From the cash flow perspective, it really also shows the impacts of the rapid growth. Incap has been growing so dramatically past years. It really crystallizes here in the operational cash flow, mainly the line in the change in working capital. I have one slide later about inventories. Obviously, it's good to understand then that in Incap's business, we are electronics manufacturer. Our business is, let's say 75%-80% even is related to materials. Without materials, basically we don't have any, like a product to offer to our clients. Those materials are very important.
That line is driven by the organic growth we have had. Obviously, there has been market turbulence, logistical challenges in order to get those components and delays. That also a bit impacts on the inventory values. Overall, cash flow is very much impacted by the rapid growth of our business and will remain to be so if we continue such a huge growth as we have had in the past. Inventory levels. We started 2019 collecting the data, roughly EUR 10 million. Now it's even close to EUR 90 million. Couple main bullet points to highlight on this one. These are very critical assets to Incap. We basically order materials based on the confirmed delivery plan from the customers and purchase orders. Every single material item and code we have, we will invoice from the end customer.
Materials we have today is the business of tomorrow for Incap. That said, of course, there has been this bottleneck of materials availability challenges, delays that drives sometimes a bit in our work in process, being on a higher side. Overall, the business volumes are main reason for this one. Minor impact has, of course, been the global inflation. Everybody knows the inflation levels are pretty high, applying also to the material component prices. Of course, that has a limited effect also in the balance sheet value of the materials and assets for Incap. Outlook for 2022, we disclosed this updated steering in early October, and then we specified this range in our Quarter Three report.
We stated that our numbers for 2022 will be significantly higher than in 2021, previous year. We specified indeed the top line being EUR 262 and EUR 270 between this range, and the EBIT profitability between the range EUR 38 million and EUR 42 million. Incap share price, this is also showing, if you look, for example, past seven years, there was a stable phase, and now basically we are meeting the all-time high figures also from the company valuation perspective. I think also the market has noticed that the figures are strong and then the company's going the right direction. This is historical data. I will hand over to Mr. Pukk.
Yes.
For your final words.
For my final words. Hopefully I have some more minutes to live, so it's not my totally final word.
I didn't mean it that way.
Little bit about strategy as well. Perhaps you saw it in Antti's number. We have a profitable growth strategy. I think that has not gone by anybody. We're growing very strongly organically. As Antti said, we have good opportunities also to look at M&As. We're not rushing into any M&A opportunities. Key is that these whatever moves we make are value-adding for our shareholder, and we don't want to spoil it with any turnaround cases or so. The third cornerstone in our strategy is our model. We think it's scalable. We think that we could be double the size that we are today with a very similar model without adding on too many layers in management to handle it.
That would be a very interesting proposition to the market to be a bigger EMS company, somewhere perhaps a billion in turnover, but still have very lean organizational model. Such one is not out there. With that size, if we have a better geographical footprint perhaps than today, we could already offer tier one offering but be small and flexible. That is what we are working on strategy-wise, where we want to take the company. Always when we talk to analysts, and I see some of you guys here and our investors, the big risk that is pointed out with Incap is the customer dependency. I just wanted to illustrate here.
Normally, Antti is the number guy, but I got one slide with numbers as well, how it has looked historically. Basically, we had a much bigger dependence of our four customers if we go back to 2015 and see that growing. With the AWS acquisition that we did in 2020, we got more balance in it. We have continued to grow the other accounts as well, but our four largest customers have been growing very fast. Of course, we are happy for that. I think it's a never-ending story how we are gonna tackle this. We continue our organic growth, we continue to work closely with our customers, and we look at M.&A.s to balance the situation out moving forward.
From our perspective, it's not a big problem to be dependent on a customer. In EMS business, it's very difficult to go in and steal somebody else's customer. I was describing before, we're very much integrated into our customers with our service offering and such. We are an integral part of their production setup. That is not something you change overnight. To reach where we have reached with our biggest accounts, it takes years of commitment and years of building up that kind of trust that these companies basically close down their own production, logistics, part of their R&D, and then give it to Incap to take care of. It's not that simple to do.
If you look at also the future, we're very much integrated in the R&D process, doing all the prototypes and test series for the next generation of products for many of these customers. Yes, we understand the concern on paper, but being in the business, it's quite normal. Moving forward, strong organic growth. We want to continue on that track. We have a new factory coming up in India that we intend to fill, otherwise we wouldn't have done the investment. We will continue to also look at possible M&A cases. We've been evaluating a lot of them, but it should be the right one, the one with the right culture fit and also be profitable company that fits into our system.
Why not to learn, as I said before, going into new geographical markets, North America, Germany, that has been very much on our focus. To summarize, why then to invest in Incap? I think that electronics is the right industry to invest in. We have strong growth in electronics. People are putting electronics in one more crazy thing than the other today. Of course, as in our business, we produce, we don't judge where it's gonna go. We also have a strong financial track record and a strong financial position to be able to execute our strategy and our plan, our growth plan. We have excellent team with the entrepreneurial spirit, and we have a value offering in our business that no other EMS company have. I think it's summarized, it's quite good why.
I think with that.
I have to.
Yes.
From my side, also summarizing couple of key findings from my side and how do I see. Incap is a growth company that is shown in the figures in the past. Look at it, the cash flow, balance sheet, profit and loss, there are clear reasons why they look like that, and that's because of the huge growth. Growth requires a lot of cash. That was clearly mentioned in the cash flow statement, and that will be the case. Although we, of course, have some concrete actions in order to improve it, but in general, investing to the business, whether it's acquisitions, et cetera, that requires cash. Eventually, our balance sheet is very strong. There's a flexibility in order to make moves, keep investing.
For example, now we are investing to the third factory in India. That's a very major project for Incap, supporting organic growth. Eventually, like mentioned, bigger moves such as larger size acquisitions are in our radar. That's my three key takeaways for you guys if you have to remember something. Maybe those will help you.
We will be available for questions with Antti.
Mm-hmm.
Just shoot them afterwards. We managed quite well with the time as well.
Yes. Absolutely.
Now it's 16 seconds over, so. Sorry, Rosa.
As always. Thank you.
Thank you, Otto and Antti. Next up, we will hear the EMS market update by Dieter Weiss, so from in4ma. Welcome, Dieter.
Thank you very much, Rosa. Yeah, good evening, ladies and gentlemen. Just a short word about myself. I'm an old wreck. I have been working in the electronics industry for the last 45 years. For the last 10 years, I've been doing a lot of market research. I read more than 1,000 annual reports of EMS companies, and I allow myself to say that I am the only one in Europe who knows this industry the best and with actual numbers. Apologies for my non-official slides. I just wanted to give you a short overview what happens and what is the driver of this industry. It's miniaturization. You can see it's all my own equipment.
About 50 years, I bought my first stereo. That was really big. It was manufactured by original equipment manufacturers, so-called OEMs. Only over time that changed. Nowadays everything that is related to consumer electronics is more or less manufactured by electronics manufacturing services. The latest development is this strange mobile phone which is so small and is not a phone, it's actually much more. I would like to give you a little explanation as well about the wording we are using. We have components, electrical or electronic components, which we use. We have printed circuit boards which are being assembled to printed circuit boards assembled or called PCBA. That is what the EMS companies have been doing in the past, but that is not enough.
What actually happens is that what we see is the EMS companies are taking more and more the full production of a company over. It is, in actual fact, it's a sticky relation we have there 'cause the EMS industry is the extended workbench somehow for the customers, and you don't change that just for a little price difference 'cause quality is what is important. You wanna make sure that you have consistent quality of your product, and therefore, the relation between the OEMs and the EMS are sticky. We're gonna get to that later on, what you see that there is a huge trend for the industries that the OEMs want the EMS companies to not just manufacture PCBAs, but the complete systems for them.
They want to give up full production for various reasons which we're gonna talk about later. Now, different to other researchers and analysts, I do primary analysis with my team of people. We search the country company registers, and we know exactly that there are about 2,200 EMS companies in Europe. If you just go to EMS-Scout on the internet, you will see all of them listed there because this is a digital buyer's guide to the OEM industry. You see 266 companies in Germany, still the biggest market followed by France. All of the numbers I'm showing you about Europe are actual numbers because they are in a database, and they get the revenues for every company out there.
The top 100 global companies have 84% of the market. There are about 16,000 EMS companies globally with 2.4 million, and this is substantially growing. Europe at the moment has 9% of the market, the United States about 13, and America 19. You see it as well. We do not know exactly how many companies there are in Asia, but I can tell you it's still very dominant. Now if we look at the global top 30 companies in present, there is only one European company in there, and that is the biggest European player, Zollner Elektronik, on position 17.
You see as well the biggest one, you all know them, it's Hon Hai or better known as Foxconn, who are the manufacturers of the Apple iPhone and the iPod, iPad and all these things. They are Taiwanese company, but majorly manufacturing in China. You have read lately so many things about them, about the coronavirus and all of that, and they employ more than a million people worldwide. Now if we look at the global value chain, you see that the biggest chunk still, and that has always been the case, has been made with trading. Yeah. The global market for total electronic equipment is EUR 2.2 trillion, and for the PCBA, it's EUR 1.3 trillion.
Still as of today, more than 50% of that in global terms and in European terms is manufactured by the OEM, which means that there is a substantial market potential for the EMS industry. If we look once more on the short picture, you see as well that is what today's world is about the EMS industry, and I don't want to focus too much on that. If we look at the top 100 companies, how many European companies are in there? There is a total of 31 companies in there, and you can see Incap is on position 29, and that is based on the 2021 revenues. You have seen it, Antti has presented it together with Otto, how much they are expecting to raise that.
I'm pretty much sure they are climbing up this ladder, and they continue to be a more important player in 2023. Now if we actually look at this picture a little further, there is a lot of consolidation going on. In Europe, it is just four companies in present who manufacture more than EUR 1 billion. Out of the four companies, three are global players such as Foxconn, who have four factories in Europe. It is Jabil, and it is Flex. The only European one among those is Zollner Elektronik. Comes 26 companies with EUR 250 million-EUR 1,000 million or EUR 1 billion.
You can see then there is a lot of companies at the end, and I can clearly tell you that picture will change because you see it over here. Out of the 2,200 companies I mentioned to you, it is only 305 companies who have revenues of more than EUR 15 million annually. If I take those companies, they today represent about 88.8% of all production value in Europe. If I look backwards, and we can look backwards, we have the actual figures, you see that the same companies only had 79% of the business, so there is consolidation. There is M&A activities going on. That is what will continue, and Incap has done several acquisitions themselves as well.
In regards to production volume, as I said, it's similar to the previous chart. It's 17.8% of all products being manufactured in Germany. Germany is the biggest player, followed by the Czech Republic. The Czech Republic being in the majority Foxconn, then followed by Hungary, France, Poland, Great Britain, Italy, Slovakia, Romania, and Austria. This is not a map from World War II. It just shows you how the market streams are going. In actual fact, there are two streams missing at the moment. One is the French companies transfer a lot of business to Tunisia as well. There's a huge electronics cluster in Tunisia, and the reason is that they have 17.4% unemployment rate.
That is a motivating factor because employment labor is gonna be a key issue in the future for all of us. The second biggest arrow is moving towards Europe, and that is missing as well at the moment. That is called reshoring. We see a lot of products coming back specifically from China. I've been visiting 15 European companies over the last two and a half weeks, and nearly in every company I visited I got the message, "We have new orders coming back from China." The important message was, "We can manufacture it at the same cost as it has been purchased in China in the past." There is lots of opportunity here.
If we go to the top 40 European companies, as I said before, Foxconn is the biggest. That is due to the fact, for example, as well, that they are manufacturing all Sony TVs in Slovakia, which they took over this factory in 2009. They as well manufacture all Hewlett Packard products in Pardubice in the Czech Republic, so they're very big. Only on position 3 comes Zollner, but Incap on position 39, and I assume there might be a 2 in front of the position next year. Oops, sorry, I'm pushed the wrong button. Now, you all have heard about the problems we have been facing in the industry in the past.
There are several macroeconomic factors that affected us, and I'm just reviewing these in a quick rush. There has been an MLCC allocation. Multi-layer ceramic capacitors is the product. It's a passive component, and that has been short. You see the labor shortage has been an ongoing problem already for a longer period of time. We were hit with the corona pandemic, and shortly afterwards, all of you have probably heard about the semiconductor crisis. I just wanna go into some of those problems in brief. What you see is over here is how the market developed.
You see this huge collapse in 2020, which was only due to the pandemic, but as well caused by the automotive industry, who at the same time drove down the building programs. In 2021, the majority of companies were able to pick up the business again. What we see is over here, and I normally categorize companies by cloth size. XL is the big companies, L and M are medium-sized, and then I have S and XX companies. You see that the smaller the companies, the more they were hit with the problem during corona. The biggest problem was with those companies who had a high share of automotive problems. You can see there is more or less nearly a linear dependence.
The higher the automotive share of the revenues, the higher the revenue loss was in the first half of 2020, and that continued all over 2020 as well. Still as of today, those companies are facing huge problems. To the best of my knowledge, Incap is not having a huge and only a minor share of automotive, and that is a healthy situation. Now, why are the big EMS growing faster than the small ones? If we compare 2019 to 2021, you see that on the chart, there is a gap opening. You see that there are a lot of companies who have been able to increase their profits compared to 2019.
There is still 40% of companies who have not been able to get back to their 2019 revenues, and there is a lot of reasons to that. One is that customers are more and more coming and want to have vertical integration. They want to have full system builds, and that is what a small company not always is in the position to do. At the same time, a customer gives his whole production to an EMS, the order values increase, and as the order value increase, the revenue of such orders is exceeding the 20% revenue limit for a single supplier. That is the problem, and that causes further consolidation. Now let's talk about the semiconductor crisis.
We have seen and what you see over here in the chart is that the semiconductor industry has a little slump in 2019, manufactured 6% less, but already in 2020, manufactured 8% more. In 2021, it has been manufacturing 21.6% more. Still, a lot of electronics companies complained that they did not have sufficient product. The problem was simply what we call a bullwhip effect. After the pandemic in 2020, everybody was now ordering more material. As all of a sudden, the demand for electronic products increased dramatically, it exceeded the 21.6% which the semiconductor industry was able to supply. They then call the crisis. It is definitely not a crisis.
The real crisis is what we see over here, and that is the inventory levels. It is not just Incap who had those increases in inventory levels. We have been tracking that for many years. What you see is there is a group of eight where Incap is in that group, and you see they increased their inventory levels to 25% of an annual revenue for the full year of 2021. There is a further increase after the first half of 2022. That is a burden 'cause too much capital is bound, and that needs to be reduced. The problem was a simple thing. It was the distributors where the EMS companies get their materials from.
First of all, they extended the delivery dates, then they gave false delivery dates, and at the end they gave no delivery dates at all anymore. Yeah. The companies didn't know when they finally get their materials. As you can imagine on such a PCBA, there is 800, 900 different components on there. It's not just, as you can see, it's not just Incap, they all did it. They ordered all the materials they had on the bill of materials in order to when finally the semiconductor arrives, they were able then to finish the product. Yeah. There were other smart ideas which I don't wanna go too much in detail, but there were smart ideas.
If there had not been smart ideas to overcome this problem, Incap would not have been able to make revenue increases much more than what the semiconductor industry was able to supply. Again, we are seeing a split in fast-growing companies and those who still did not return to 2019 revenues. In Western Europe in 2021, they were able to increase by 7.3%. The real big companies, a group of eight, which I call them, where Incap belongs to, they increased on average 13.9%, whereas Incap grew 59.4%. Revenues of public companies at this time, a group of four for the first half of 2022 increased by 37.1%. Incap grew 60.6%.
For 2022, we expect a revenue growth rate in Western Europe of 18.8%, in which 2/3 will be quantity and 1/3 will be price increases. In summary, to me, the crisis looks different. It was not a real semiconductor crisis. It was just the fact that there was more demands than could be supplied by the semiconductor manufacturers. The real problem is still that inventories have increased dramatically for as well for the group of eight. We see as well that the material content, and Antti said it, the biggest chunk on the revenues is material, yeah. Between 65% and 75%, and then followed by labor. Those are the two big items. Yeah. Those need to be controlled.
That material content increased, which means as well that not all price increases for material were able to be forwarded to the customers. That is changing now. You have seen as well what Antti showed you as well, that the EBIT improved, which is definitely not what I was able to see in all the other public companies. As the situation in general improves, we need to now focus on the high inventory levels as they're becoming a burden, because at the same time we see that the customers pay their bills later. A brief outlook. Everything is focusing at the moment on energy saving. We see a huge boom on LED technologies. I've seen companies who are doing EMS services only in LED.
They are able to double their revenues this year. The automotive, I'm very careful on, I don't believe these numbers, even so we are all talking about electrical vehicles. The consumers are at the moment with rising energy costs and with inflation, very careful. Where is the market potential? We have an electronic market of EUR 130 billion. Europe manufactures EUR 105 billion. The European OEMs still manufacture EUR 62 billion, and that is a big chance for this industry to get better and much faster revenue increases than the normal industry. Still, I predict turbulences ahead, but it's definitely not a semiconductor crisis.
It is general problems which we have to face, and they'll be dependent upon a good management, and that's what I can see over here. This year we're gonna see 15.5% of the industry growing in general in Europe. Next year it's gonna be again on a normal level, so we see a consolidation again. That finalizes my presentation. I thank you very much for your attention.
Thank you, Dieter. I would like to remind everyone who is watching online that you can still post your questions on the chat below the webcast. As said earlier, we will have the Q&A session later. If you want to ask questions here in the live audience, please raise your hand at the Q&A session, and a microphone will be brought to you. Now without the further ado, I would like to introduce to the stage talk about global component availability update by Hanno Septer from Incap Group Sourcing Lead. Welcome to the stage.
Yeah, good evening. I have to say that actually this is very good moment then to come up with my slides after Dieter slides. I think Dieter have been very precise and very detailed. I think where we are today is that we can count, as you saw from the presentation, we can go from the lower level to the more higher level. When you talk about boards, then you go up modules, then the full devices. I think now we go one step or a couple of steps lower to see that what has happened in the component markets. Of course, this has been the most, I think, spoken topic during last couple of years.
I think by today there is no person who doesn't know that electronic components does exist, if they read at least some kind of headlines in the newspapers. A couple of words about me. My name is Hanno , and I started in the electronics business 1993. I spent almost 29 years in Arrow Electronics, who is the world biggest electronic components distributor, and by today also technology distributor and then consultant company. From August 2022, I joined Incap Corporation as a Group Sourcing Lead. My target for this position is to find the synergies between our operating units, to find the mainstream, like processes, how we manage the supply chain, how we do the purchases, what tools we use, and all these kind of additional effects.
How we can improve our already well-working operations. Of course, when you talk about the components and then the component crisis, I think before we move that, it's important maybe to cover a couple of key elements which are actually describing then the components industry. Why I say that? Because I think the components availability is kind of the same situation when you talk about, for example, your blood pressure. The blood pressure today maybe is not so important, but it's important what was maybe during last week or months ago, what is the trend. The same thing is that whatever you compare, P&L.
If you check the P&L today is one thing, but how it has been changing over the last quarters give you some totally different view where the company is heading to. The same is actually also with the component market because it's very specific market. In a big scale, I think the first important thing to understand is that the semiconductor industry has been very long-growing industry, but it's very cyclical. Which means that after very deep dives, there is also even the more straight up going. That this has been already for tens and tens of years, since 1970s, 1980s, where all the industries started to picking up. This slide actually now describes the 0%. If this particular year, monthly semiconductor sales has been the same as the last year sales.
Which means that if we are above 0, then the current sales has been bigger or higher. If we're below 0, then the sales has been dropping and is below 0 last year's level. As you can see, it's a marvelous industry where you can face such a roller coasters where sometimes you'd fall 20% minus and then already in like couple of years you are then going 40%, 41% up again and then 30% down. It's always going this way. I think this is very important to understand that there is a cyclicity and the percentage, what is the variable part of it, is actually very important and then to remember that. We come back to this topic a little bit later.
Second thing is that what most probably we don't realize on everyday basis is that it is very highly concentrated market. Even if we feel there is lot of choices around us, when it comes to the semiconductor market, then the top 10 manufacturers of electronic components actually give already 55% of the market volume, the sales volume, the component volume. Which means that there is 10 biggest players who are more than half of the market impact. When you jump to the customer side, it's the same thing. When you talk about like the top 10 customers, they are 42%, but we can also maybe a little bit like exaggerate and say that half of the market is already only top 10 customers.
Of course, we all know Apple and Samsung and Lenovo and then BBK's, the Chinese group of electronics production. These are well-known names. Their size and their impact and their worth on the market is very important when it comes to the market development and also component availability. Of course, you can see it also pointed out that how the growth numbers have been remarkable. Huawei is, of course, due to the unfortunate situation with U.S. has been a little bit impacted, but nevertheless you see that how the market has been developing. One more thing about this consolidated market is that manufacturers are constantly buying the smaller competitors. This is from two aspects, getting the new technology but also buying the competitors.
As you can see, who is little bit like maybe more has experience with electronics, most probably you may know AMD and Intel, obviously, if you have a PC at home. There are other manufacturers as well. You can see that over the years there is a clear tendency of buying smaller companies and integrated them into them. Of course, this is having impact to the same consolidation and then bigger manufacturers getting bigger. The same is with customer space as well. Also, one important aspect here is to understand that there is more than 60% of the electronic component billings is in the Asia area or APAC, how to say. Out of this Asia, the yellow line is the Chinese market.
Out of Asian sales, the China has 50% of the full Asian sales. America has been now struggling but still being above 20%. Europe and Japan part of the impact to our share of the global billing is now slightly but steadily going down and now being below the 10%. Now where the most of the components are and then all the volumes are turning is the Asia and specifically also, of course, Chinese impact. One more important point is to understand is that why then the crisis can happen or what can be the impactors here. Maybe little bit busy slide, but let's try to then figure it out together. As you know, everything but when you do something, it starts from the design. You have to like the order creation.
You create the product. You design the product, and then you have to manufacture it. When it comes to the electronic components, then the manufacturing it is then in two parts. It's called front-end wafer fabrication. The wafer is now this. Maybe you have seen it in newspapers, this big disk, maybe usually very nice and shiny disk where the industries then, so to say, using the lithography technologies, putting the chips or like they're burning the chips on. The chips or like disks are then broken. Broken, yeah. We put into the packages test, and it will be shipped to the customers all over the world. Important here is to see that when you talk about design, then it's usually the Western world.
When you talk about the wafer fabrication, we instantly talk about China, Taiwan, South Korea, also little bit Japan. When you talk about the test and assembly, it's again, the same Asian countries. When you talk about the tools, what is that all the equipment, what is required for this process, then again, you see the American flag, Japanese, European Union. It's important also, very interesting fact that one key element for the lithography technology is produced in Holland in a company ASML, which is basically the only company in the world who is able to produce today the equipment, how you can do the top-notch semiconductors today. That again, one company and impacting basically the whole $600 billion industry.
Of course, from this aspect also, I think it's interesting to see that when you next time see that there is some kind of earthquake in Taiwan or there has been tsunami or there is something else like this or there is drought in again in Taiwan, it can impact the industry instantly. At some point of time, the market does feel the impact of that. Also Dieter mention the three Cs. The three Cs are the market segments, who are the component users, computer, communication, consumer. You can see that actually there hasn't been quite already since 1998, there has been some like the weight changes, but still the main drivers are the same.
We talk about then 87% of the three Cs and automotive 4.7%. By 2020, it was 85%, 7.5%. I think by today, maybe the automotive is already like 9%, maybe 10-ish%. Still in the big picture, when you read the headlines that automotive is doing big losses or not gaining the profits what they would expect due to the lack of components, then from the big picture, this is only actually small part of the market. Much bigger part are your mobile phones, your laptops, everything what you are using on a daily basis. In that respect, it's interesting, like not balanced way that the P.R. companies are doing exceptionally good work for the automotive company, but their impact is maybe not so wide.
After saying that, most probably if we tell the German or French governments who have to face the impact of the hundreds of thousands, if not million peoples working at auto industry and it's going down, of course, we have a totally different social impact. This is already topic for another presentation. To start recapping it, one more important thing, what is then maybe little bit not understood. When we talk about at first you have to design the components, which is then R&D, and then you have to build buildings, the production lines, how you get, where you can do this. If you start thinking, maybe you think that pharma, of course, last two years, the pharma has been a hot topic. The pharma is then the biggest industry. Actually, this is not.
Semiconductor industry is the biggest where you need to have the capital put in to have the semiconductor production. When you want to build the factories, again, utilities. We all know that if you want to build a city, you want to put the pipes into the electricity, everything, it must be expensive. It's even more in semiconductor industry. It's both sides, it's capital expensive thing. As a reference then, one typical semiconductor industry fab can be $2 billion, $3 billion-$4 billion. Well, I think one of the Taiwan Semi factories was about $9 billion. It's a huge amount of money. When you start building it only will be operable after 2-3 years.
Means that if we start today, there is no way we can produce it off before three years anything, just the nature of the business, and it requires money. When we get into this, why we have this crisis today? This is now the some historical numbers, how much have been the investments into the semiconductor industry. The issue has been which 2017, 2018, 2019, where should have been more money invested into the semiconductor industry, into the fabs, where which are then able to produce more volumes. It's very hard then to predict what is actually market is requiring. 2020 Q1, when we all hold the breath, what will happen to the global economy? Yes, there was a small hiccup, but from Q3, electronics went crazy.
We were at home, we wanted new PCs, our children wanted to have laptops to have their Zooms at with school. We needed the monitors. We need the IoT devices because people cannot travel to measure something. It all was driving component market up, crazy up. Now what has happened since, you can see this is only a small fraction. This is part of the like the new 300 mm wafer semiconductor fabs, which is if you're interested what exactly is, I'm here later, please. It takes a little too much time to discuss it here. You can see how the fab number has been starting growing now. This estimation now until 2026, there has been no investments ongoing.
People are investing now into the technology and into the facilities, so to meet the global demand. Last thing is really also what you cannot actually like estimate by nature. It's very strange way how today the products are built. At first you take the silicon, which is you can say sand. You take it from U.S., you take it to the Japan to make it their wafers. You take it to the Taiwan when you have like the wafer production, the chip production. You take it to Malaysia just to test it. You then take it to China, or today more people are coming back from Chinese factories to produce production here to other places of the world.
You ship it somewhere in the world where the end customer key. For example, back to the U.S., we talk about tens of 1,000 km. It takes time again, you cannot change it right away. Now market outlook, of course, always a good question, when will it end? Very simplistic slide, but I wanted to put it here because it's obvious that we are now in the new fabs built and overcapacity happens situation. What will happen now? At the moment we have been total capacity, lack of capacity. Prices have been crazily up. New fabs are built, as we saw. Will overcapacity happen? It's always the how the trend is going.
We are building the factories, but in the same time, global demand for the components has been the last 2-3 years crazy. All the semi manufacturers have said, "We are investing, we are doing," but you want more. We cannot keep up. As you saw, it takes years and a lot of money then to build the new factories. You cannot do it exactly. We agree something and next Friday we can ship it. No, it takes years. Where we are today, first time in a long time, now we have seen that it's the August numbers, world semiconductor consolidated sales has been now starting to go down. We have now seen the drop of the already concrete percentages.
Now it's important also to see that the drop is coming from the Chinese and Asian market because the consumers are then not buying so much anymore mobile phones, laptops, and its component demand has been going down in Asia. Europe and Americas are still growing, but also there is the production, more industrial, automotive, medical, all these kinds of things. We talk about that some market segments go down, some market segments actually are still growing. Now the market going down and what you can read in the newspaper has impacted certain like the market segments. Now the next logical question is how we will end this year and what we're facing next year. Of course, this is marvelous picture in that sense that all these analyst companies are honorable companies.
They do their work, but we see very much how much the picture can differ. I think this is now the case that it's very now difficult and complicated to estimate really where it will go. There is so many aspects. We talk about wars, geopolitical, climate issues, all the kind of things. We have the GDPs going down, inflation going up, maybe customer confidence going down. All these things are then impacting this. This is the picture. I would actually like to choose then that we are on the green side. To have like the final words about then what will happen to the components.
If we say that all the component production technologies which has been then invented and implemented during last five years, let's call them below 60 nm technologies, for the electronics actually it mean very concrete things. There is an estimation that already by the end of 2022, we're already able to get much more easier situation. Basically, this is mobile phones, laptops, because the demand in Asia has been going down. There is a resource already. Mainstream, which is then the technology maybe 5-10, maybe 12 years behind historically. These components are expected to be more or less in the normal market situation early mid-2023. We talk about like the next year middle.
Mature technologies, which are then the 15 or maybe even 20 years back, then these components are then possibly second half of the 2023. There are certain components which are then extremely high demand, which can be like for example, some automotive components. Now electric vehicles, I think when you hear the technology silicon carbide, these silicon carbide technology has been sold out already for the ST, for the Wolfspeed, for full 2023. You cannot get the components. It's not exactly the clear picture. There are certain things what we can get, certain things what we cannot get. Basically what it means is that on one side, we talk about the situation where supply, the manufacturers want to produce newer technologies, switch every five years to the new technology because they're able to do it.
Everything will be more smaller. Everything will be work faster. Also the smaller means that manufacturers can produce more with one production batch. It's more effective to them. They can earn more, just purely more margin out of that. On the other side is demand. Only part of the market wants to have the demand of this rapid change. This is exactly now Apple using Intel, then Apple doing M1, then Apple doing M2. This is a classical example. Now you will have next year the new Apple version, and again, you have M3 and M4. We are happy because it's faster, brighter, everything's longer time on the battery. Makes us happy. Only small part of the market. Second part is something what we see in the automotive, medical, industrial.
These guys actually want to have more stable. I don't want to redesign my design. Tell to ABB that they need to do their full energy network fully new five years. They will throw you out with this discussion. They want 25, 30 years, some same components running. This is the key of their business. Now we have exactly the question, investing, where to invest? New technologies, older technologies. Of course we can see that. Let's say that there is a new word, it's not equilibrium, it's chequilibrium. How we can balance the motivation of the suppliers and then the market who wants to buy certain products? To final words, we expect then component situation be more easier by the first half, during the first half of next year.
There's some early signs we see already, and then that can be several reasons. Let's discuss it later. It's so important to understand that fully the component delivery issues are not fully behind us yet. There are some components and functionalities and technologies which will be challenged throughout 2024. What Incap is doing in this situation is still we continue the same tactics what we have. We provide to our supply chain the long-term full visibility of our demand. We are working very closely then with our customers, because you need to do some, maybe some special arrangements to keep the product production running. Of course then also with the suppliers to be more prioritized and get the part sooner. This is like us in a nutshell. Thank you.
Thank you, Hanno. We will meet the management team. Now we really have a good chance to get to know Incap's production facilities a little bit better. I will soon introduce with me to the stage Jamie Maughan, Director of Incap U.K. operations, Miroslav Michalik, the Head of Operations in Slovakia, Murthy Munipalli, who is responsible for Incap's operations in India and sales in APAC, and last but not least, Margus Jakobson, Interim Director of the company's Estonian operations. Guys, follow me to the stage, and let's give them warm applause. You can sit here. Yeah. Perfect. Let's start with the overview of the operations. Could each of you please give a brief introduction of the operations in your country, which products and services you offer, and what specialty sectors you have? We'll start with Jamie.
There you go.
Thank you, Rosa. To give you introduction into U.K. business, we're located in Newcastle-under-Lyme, which is quite central in the U.K., between Manchester and Birmingham. The site's been there since 1974. It's been there a long time. We have a manufacturing facility of 4,400 m squared and just under 180 employees. We're quite diverse. I think Dieter showed on his slides there's almost 190 EMSs in the U.K. There are a lot of competition. We are now in the top handful of those companies in the U.K. in turnover and size and scale. We're seeing products coming back. We're involved in lots of different industries, from medical, military, avionics, aerospace, as well as electric vehicles. We are very diverse.
I think we talked about lots of electronic equipment and products that are out there, and we're involved in lots of different areas. We see the U.K. market as very mature. We see small quantities, high mix, and very complex equipment. That's really what's left in the U.K. There's no high volume that goes to, you know, some of our other factories, but also to Asia. As a whole, we see a very mature market with very entrepreneurial businesses and lots of startups, as well as new designs for electric vehicles, things like that. We're very heavily involved in that as part of our business.
Thank you, Jamie.
Thank you.
Let's next hear about Slovakia, so Miroslav, please.
Hello, good evening. Greetings from Slovakia. From the north of the Slovakia. We are, I will say located close to the Polish border, just 15 km, you know, one and a half hour to Kraków Airport. Our site was, I will say, started in 2008, and from 2020, we are part of Incap. Production, I will say, we are focused, let's say mix of low volume, high mix, but also high volume or lower mix. The product which we are producing there, I will say, mostly in the area of, for example, very precise laboratory equipment. There is a lot of instrumentation or I will say the application for the industrial controls. We have also specific the automotive sector, so we are producing the PCBs for the cars.
There is also the cars which are, I will say, very famous known, so for example, Mercedes-Benz or Toyota. This is the portfolio. Our site, it's in term of the size of 5,200 sq m and employees, 240. That's, I will say the Slovakia site. We have, I will say, plan, I will say to develop and grow for the future.
Thank you. Let's hear from Indian factories. Murthy, the floor is yours.
Thank you, Rosa. Good evening. Greetings from India. We have actually two manufacturing facilities in India already, and we are constructing the third one now. Should be ready for production. We will be ramping up as soon as Q1 of 2023. The building is expected to be completed by end of this year, and then we'll be then setting up the machinery and taking it from there. We have 16,000 sq m of area in the two facilities that we are operating in, and we are adding another 8,500 to that. It's roughly 26,500 sq m of manufacturing facility in three facilities, in three factories, with roughly 2,000 people working currently.
We are situated in a place called Tumkur, which is 65 km west of Bangalore. The advantage of this particular town, if I may say so, but it's a small city with about I would say 800,000 population. That is an educational hub. Getting people a skilled labor is quite easy for us because it's known as an educational hub. More importantly, it's one of the 100 smart cities which the Prime Minister announced a few years ago, one of the 100 smart cities in India. We see a lot of development in Tumkur. The other advantage is that if someone is visiting our facility from somewhere, they don't need to come through the Bangalore traffic. There is a bypass.
You can directly take the bypass and get into the Tumkur facility in less than one and a half hour from the international airport. Our facility is the biggest in Incap amongst the four facilities that we have in manufacturing facilities. We cater mostly to the industrial segment, working with some of the well-known names in the industry. We also do a little bit of medical and we do from PCBA to complete box build. Almost hundreds of products that we deliver every month. We took over from an industrial conglomerate in India called TVS Electronics. It's a huge conglomerate in India.
We took over from them in 2007, June, and that is how Incap started from 1st of June 2007. It's been a long journey, but the growth has been really phenomenal and we see a lot more coming in because as Otto said in his opening remarks, we are looking at the growth, otherwise we wouldn't have really gone for this kind of major expansion, investing so much of money. We're gonna fill up the third factory, and he's already teasing me now, "When are you constructing the fourth one?" Hopefully, yes, very soon we should be looking at that as well. This is briefly about the Indian facility, and I have been associated for the last 14 years.
I joined in 2008 from a very big salt to software conglomerate, the Tata Group. I was heading the Semicon group in the Tata Group. I quit that and joined this Incap, though reluctantly at that time I should admit, but no regrets. I'm more than happy because I've seen the ups and downs, and we have grown, and it gives such a good satisfaction because we all of us have entrepreneurial thinking and we are a totally decentralized unit. Of course, later, if you have any questions in the Q&A, I'll be more than happy to answer your questions.
Thank you, Murthy. Let's give it to Margus. Margus can tell a little bit about the Estonia factory.
Yeah. Thank you, Rosa. It's good to be here.
Estonian facility is located in Kuressaare, which is located on Saaremaa, which is a nice beautiful island in Estonia. You're all welcome. Not far from here. The company was founded there 22 years ago in the year 2000. We have around 100 employees. Great team, fantastic team. Also, the floor space we have, it's 7,300 sq m. The product range is quite big. We have very many interesting products, nice customers. If I just mention a few of those, you can find the products that we do in Kuressaare, for example, in light electric vehicles and in the streets.
Also, yeah, monitoring measuring devices and our products go also to energy storage systems, which then are located worldwide, yeah, in the seas and the yachts. We have more that we do. We also have medical certificates, so we do some medical products and all kind of fun stuff. Thank you.
Thank you, Margus. Now we know a little bit more what the factories do. Let's next talk about investments. What kind of investments you have done lately in your country, and what kind of corporate responsibility initiatives are you involved with? We could go with Jamie first.
Thanks, Rosa. Yeah, this year we've spent a lot of time investing in the facility. I mentioned we've been in there a long time. For the main production hall, we've installed air conditioning throughout, so it makes the process better but also better for the employees. It's more efficient than the older system we had in place. You may have seen a press release this week that we've just invested in a new inspection machine for optical inspection of PCBAs. That should be delivered just before Christmas and be up and running in the first couple of weeks of January. From a corporate responsibility point of view, we're involved a lot in the local community and local charities. We work with schools, colleges and universities close to the factory.
We also develop an apprenticeship scheme on-site and work with the youth and the people around us to hopefully grow the factory and bring the talent into electronics and promote manufacturing for the U.K.
Thank you, Jamie. Miroslav.
Yeah, thank you, Rosa. I will say recently in Slovakia, we invest EUR 1.4 million, which was mostly for the upgrade of our technology. That was one new SMT line, plus also we invest to the selective soldering which are, I would say, core competencies and core processes in our production. We are using also the renting model, which is giving us the scalability, giving us the flexibility which our customer are expecting to address. As we already mentioned, there is also expectation to be, I will say, quickly with the product putting on the market. That is moving us also to the new standard. Also this investment are giving us and driving us for the upgrade in Industry 4.0.
This is driven the efficiencies. This is driven the quality improvements. Of course, on top of that is the customer satisfaction. Of course that is necessary to have the good team, which we have, and we follow up, but this investment are really supporting it. Also I'm proud that also in this corporate initiative or responsibility initiative, we are covered by 100% of all electricity from the green sources, so is the water power station or I will say the solar power stations. We are also contributing, as Jamie mentioned, we have also a lot of work and cooperation with the technical schools, universities and developing and investing also time to the young people, to our future.
Plus supporting the local activities, even from the sport or even helping with our social charity project to the people which maybe are not so lucky as maybe more of us. That's from Slovakia.
Thank you, Miroslav. Murthy, how about India?
Yeah. The third facility that I spoke about is keeping in mind the latest technology and the sustainability. This is a pre-engineered board that we are using. It's not like the conventional constructions which are usually constructed in India. This is done with a PEB, which is a pre-engineered board. We are doing this with PEB for two reasons. One is this is extremely scalable, and the second one is keeping in mind the sustainability. By doing this, we are also saving a lot of very valuable resources like energy and water.
The second thing with this is that the speed with which we can bring this up also gives us lot more flexibility in terms of installation of, say for example, the solar equipment on top of the roof, which we can produce our own electricity. This is again extremely sustainable for us.
The second thing about this is we have an eight acre plot, which is quite big. The plan and the outlook that we have for this facility is going to be totally world-class, and it is just opposite to the existing two factories. It is less than, I would say, 100 m. You can actually see it from across the street. Huge amount of investment is made on this. Of course, we are also getting some new SMT lines, new wave soldering machines, new X-ray, and a whole lot of other new equipment for this new third facility.
Thank you, Murthy.
Thank you.
Then Margus.
Thank you. Investments in Kuressaare lately, the biggest investment have been to our SMT lines to increase the capacity. So far, we have had two SMT lines, so we have increased their capacity. Also what we have done, we have added the third SMT line. All of these investments increase our capacity around 50%, we expect. What is also good about this investment is that the third line will be dedicated for Prototypes and FastTrack, so that will give more flexibility, more productivity. The existing two lines will concentrate on mass and serial production, and they don't sort of disturb each other so much if you can say it like this.
We will have better opportunities, more efficiency, and more productivity. Corporate responsibility. We do care, I could say that. We are working with local community a lot, supporting it. We are a family-friendly company and also have awarded a gold label for that. We do a lot of work with HSE, which stands for Health, Safety and Environment. This work is done elsewhere in the group also, as I know. It is important, and our employees are very important to us. Thank you.
Thank you, Margus. We have time for one question still more with quite rapid answers. We have time for the Q&A as well. It's a competition for you guys. Let's start with Jamie, and the question is, now, how does the component situation impact your production unit?
Yeah. I think it's been, as Dieter and Hanno have already said, it's been a difficult 18 months. I think we started very early communicating with our customers that there were issues and got them to place more order coverage, so we have materials on order and ready to come in. Ultimately, it's come down to the team in the purchasing department of all of the businesses working hard with the suppliers. Our customer account managers working close with the customers, making sure that we're communicating and giving options to the customers with alternatives, maybe design changes, things like that, where we're trying to expedite material and work, you know, to get that material in and keep the production going and get customers their product as soon as possible.
Maybe not to the lead times they would have historically had, but work with them on that. I don't think I was gray before the 18 months, so I think it's made me grayer as the time has gone on. Thank you.
Thank you, Jamie. How about Miroslav?
Yeah, very, very similar. We see also even now, maybe the tendency is the situation is more stabilizing. We are getting, but still, as Dieter mentioned, 100 components and one is missing, you have problem. You cannot finish, you cannot build it. That's we also. A lot of workload, a lot of effort, a lot of focus, I will say, to work with customer to find alternative on the supply, alternative on the parts. That was really tough and challenging time. Despite that, I will say the team get also good experiences. They have been also working hard and built also, I will say, relationship with the customer. I see it also as a positive way how we can also go forward.
I believe that, okay, with this strong team, we will just continue and satisfy the customer for the future.
Thank you, Miroslav. How about Murthy?
Like my other colleagues said, the situation was extremely challenging. It was very difficult to get the components because one of the main key performance indicators for us as an EMS company is on-time delivery. OTD is the most important thing. Of course, quality. There is absolutely no compromise on that. OTD is because time to market is extremely critical for all these OEMs and ODMs. They come to us because we are their manufacturing partner. We are an extended arm of this particular ODM or OEM. Having said that, like any other OEM companies or electronic manufacturing companies, we also faced a lot of challenges. First of all, the components were not available. The component prices were skyrocketing.
The traders were in between stocking all this material and selling at 20 times, even going up to 200 times at times, because we had to get these components. Thanks to my team, I would like to compliment the team back home. The team has been absolutely fantastic. They are so proactive. With our proactive nature, we have gone back to the customer, we have told them, we have suggested alternates. Because of this, in discussion with the customer, we have bought these components. We don't actually see any drop in our profitability because we were able to recover all these FastTrack costs, number one. Number two, we were able to satisfy the customer because on-time deliveries were made.
Number three, of course, they are seen in the numbers here because in spite of these challenges, we were still able to show a phenomenal growth. It's all because of the team effort. It's all because of being absolutely straight and proactive with the customers. The situation is now improving. We are actually seeing some light at the end of the tunnel now. It's a very major topic. Like any other EMS, we are also waiting and watching. The good thing about this is the customers have also understood, and now we have gone back and asked all the customers for forecasts. At least we have a very good visibility into the next year or year and a half, so we know what exactly is coming. In a way, it was a good lesson that we learned.
Okay.
Thank you.
Thank you, Murthy. Margus, how do you ensure component availability in Estonia?
Thank you. Yeah, when I hear my good colleagues and experienced colleagues around the world here, then I think it's similar. It's very similar. The situation is similar, issues are similar, and I think the solutions are also quite similar. The team, Murthy told about the team, I need to also say once more, the team is fantastic. The work that has been done, it has been tremendous hard work, and I think the key is to work together, yeah, within the team, with our good colleagues here, and also with our customers and suppliers. That's one of the key issues.
I also think that the process improvements and organizational improvements is something we can continually keep on improving, and digitalization is also one of the keys which would then ease and already has been showing results, and we will continue that to digitalize, automize the processes. That is also important in when it comes to supply chain, purchasing and sourcing. Thank you.
Thank you. Hey, thank you for your answers. Stay put. Now we will continue to the Q&A, and I would like to introduce back to the stage Otto, Antti, Dieter, and Hanno, please come here. Maybe just there are seats for everyone.
Now everybody's moving.
Okay. As said, you can send your questions to the chat if you're watching us virtually. In here, just raise your hand and we will take your questions. Let's take the first question online. This one is to Otto. Dieter Weiss talked about production transfer from East to West. Has Incap benefited from it, and how do you see it affecting Incap's future growth?
No, I think for sure that from East West out from China, we have seen a lot of production move to our Indian facility and also to our European facilities. There's a clear trend, and this has started some time ago. We already had during the Trump administration the trade war with the U.S. and China. We started to see some customers moving. Now during COVID, also China is still closed. I was at IPC event here. Here I met all the CEOs of our peers in Europe here some months ago. There is some of the companies, they haven't been able to visit their own manufacturing facility for three years now.
Of course, customers want control and that. That's very much so for Incap as well. I think through to all of our units, we see back sourcing in that sense.
Do we have any questions from the live audience? Yes. Wait for the microphone.
Thank you. Hans Raukas from SEB. I have a couple of questions, and the first one is related to your M&A pipeline. What size transactions you're looking for, if you could give any hint here?
Yeah. I am a strong believer of this American concept, bang for the buck, in that sense. We are a very lean team in Incap. Of course, making a transaction then for a company with EUR 10 million in revenue or EUR 100 million in revenue, that would mean more or less the same kind of work for us. We are looking at bigger. What we have said is that one site of a company should be minimum somewhere between EUR 20 million and EUR 25 million in revenue or upwards. That then they can contain the different, like support functions themselves, and can operate in our decentralized model. That said, of course, bigger transactions would be nicer. Yeah, Dieter knows the figures better.
There are not so many out there in that sense, in that range, say EUR 100 million-around EUR 100 million in range. There's a lot of small companies, EMS companies, you know, EUR 5 million, EUR 10 million in revenue that are either bought up or closing down currently in the market. This bigger range is, there are fewer around. We keep on looking, and we have been evaluating several cases, and I'm quite confident that eventually we will get something on the hook. It's like Antti said, and I also mentioned in my presentation, that we don't want the turnaround cases. We want to buy profitable business that matches us culturally, that gives us an additional geographic reach, and we are prepared to wait.
There's no disaster growing like we have done organically. You all seen the numbers in that sense. We don't want to spoil that. Let's see.
The second one is about your growth. Of course, we all know that your organic growth has been really impressive during the recent years and quarters. How much of that organic growth is related to, like, your biggest customers expanding the usage of your products and services? Of course, I guess that your growth is mainly coming from your customers growing as well. Like, have they expanded the usage of your products?
Yeah. They have expanded, and we see a trend in, like, outsourcing more and more of different kind of services around production. I think if you look at the numbers, I think majority comes from our customers growing as well. The total demand of our scope of services have gone up. I think that is the weight is on their growth.
Okay, thanks.
Thank you. We could take one question from here from the chat. This is from Nick Bianco. Can you please help me understand a couple of things? First, what is the footprint utilization rate currently, and how do you see if in 2023, once new plants or expansions are complete, do you have the possibility to keep expanding current facilities or do you need to build new facilities going forward to drive the sales growth? Third, can you please provide me some color on the order book and its sizing? Thank you.
Many questions. Only to me as well. These guys are rock stars. They should also. Yeah, I can answer. These guys, they always work to keep some kind of overcapacity in their production facilities. When we plan, for example, new investments like the Indian factory, we always think about that. Yeah, we should have a little bit extra because if we are full, then we can't sell. That is one part of the answer. The other thing is that if you look at the EMS industry today, I think Miroslav and Margus mentioned it that, for example, they are using rental solutions when it comes to production infrastructure investments.
It's much more flexible than it was when I started in the industry. You did a big CapEx investment. You owned your own equipment. You owned the line. It was big money to go in and start up. Nowadays, you can rent facilities. You can rent people. You can rent equipment, and it's much less of a hassle to extend your capacity or change your capability and so. There is a change in the industry where you before sold, like classically you could sell your own capability and your own capacity. Nowadays, you little bit ask the customer what kind of capability or capacity you want. Within three months, we can change it and custom-made it for the customer. There is a big change. Third question I don't remember anymore.
Can you please provide some color on the order book and its sizing?
No. We are normally not publishing in that sense, but we have an all-time high order book currently. As many of my colleagues here mentioned that the visibility is much greater than it used to be. Classically, I think, in the EMS business you could be happy if you had three months visibility. It got very blurry. You had the board and other asking that, what about the forecast for the year? Now we have visibility 12 months, even 24 months with some customers. It's a totally game changer for us in the industry. If that will continue now when components get more available or not, hopefully, but perhaps the visibility will go down again and customers will adapt.
Currently we have great visibility. That's why also we are doing the investments.
Yes. The next question is to Antti. Miroslav, can you please give the microphone to Antti? Could you talk about the margin fluctuations? What is driving the swing from quarter to quarter? Are you at full margin, or do you think it is possible to achieve further scale effects going forward?
Yes, very good question. There is indeed ups and downs. I have looked many, many years back, made a trend myself, and I looked at sales margin and the material margin. There is some fluctuation. The biggest element impacting the quarterly profitability and margin levels is obviously the product mix that we are manufacturing. Different products are in different phases. New introduced products usually have a bit lower product profitability compared to the ones that we have manufactured years due to the learning curve, synergies and so forth. The product mix is driving that one. I think we discussed a lot about this topic also when we started the year and reported the first quarter results.
Yeah, of course, we are always working with improving our factory efficiencies. That's also what we have heard today from this gentleman. They are increasing the investment levels that obviously will help of us to be competitive in the future and defend our margins. That's probably my answer to this question.
Okay. Any questions from the audience? Yes. Antti has a question.
Thank you for very good presentations. Antti Viljakainen from Inderes. My question is actually to Board, and it's about financial targets. Most of listed companies have financial targets, but Incap doesn't have. Why this is the case?
You can come, Ville, here and answer.
Financial targets. I think that these would be a good tool also to Incap to indicate your long-term ambitions in terms of growth and profitability.
Right. Yeah. This is partly, I guess, about our tradition. We have been rather happy how we do it so far, but you are right that we have an increasing amount of inquiries for this direction. Of course, this is something that we are continuously talking within the Board, that how could we increase the service level to our investors and owners. So far it has been a bit tricky given the nature of the business and particularly during the past years. The conditions have been so extraordinary that basically estimating or forecasting anything has been, if not impossible, very difficult. What should I say there? Maybe, I don't wanna make any promises here, but let's take this as one of the topics that we should be considering more seriously. You're welcome.
It has gone quite well so far.
Yeah.
Yes. We take a question again from the chat. Do you see any risk of overcapacity in the industry if we face an economic downturn? In that case, how does it affect Incap? Who would like to answer?
Well, number one, yes, we see a downturn in the industry, but you cannot say that this is a general thing. First of all, we talk often about the three Cs, which is consumer, computer, and communication industries. Those are products which in the majority are manufactured in Asia. You remember all 2020 when we had the pandemic, everybody was buying laptops, communication equipment because we were working from home, having our home office. As well, you remember that people when they had not the possibility to go out, they were buying computer games and special computer games were totally sold out. There was a high demand in the industry.
Now, in 2021 already, when the pandemic situation improved tremendously, the market was saturated, and the three Cs industries are now seeing a tremendous downturn. This as well has an impact on the semiconductor industry because those three products use a lot of memory chips, and these memory chips are now available as usual, to say so. Whereas we only have a small part, and that is in the majority automotive industry, where we are using either microcontrollers and a lot of microcontrollers are used in the automotive industry, especially with the electrification, but as well analog chips. Those two sets are still short. Now you ask yourself, how is a company, for example, and it's not just Incap. We see a general revenue growth this year of two digits, and Incap's revenue growth is tremendously.
How are they able to get to this revenue growth if on the other hand, semiconductors are short? The answer is very simple. We heard as well it is not all semiconductors in regards to their complexity, which are short. It's in the majority mature and legacy products which are short. Those are, to say so, old technologies, more than 40 nanometers and not sizes. Those are short. The industry, the semiconductor industry, does not invest in that industry anymore. They are investing in lower than 40 nanometers technologies, and that's why those technologies are more readily available. There is this very smart move in this industry to just redesign together with the customers the boards and convince them to change their mature semiconductors to advanced semiconductors.
Doing so, if you have the right customers, that is the secret of it all. If you have the right customers, then you can overcome this idle capacity, what some people think. The idle capacity at the moment is in the Far East, in China, and definitely not over here in Europe. If I look at India, there is a huge market out there. We're not just talking about India as a so-called cheap labor country. We are talking about India as a huge market which needs to be served. The higher the standards of living gets, the more electronic devices will be needed in that industry. I see a bright future for India and electronics productions in India. Sorry for the long answer.
Yeah. Hanno, give the.
Yeah. Actually, I put it like one different kind of angle here. We discussed today about the, like the consumer, industrial, medical, automotive, and I think the differentiation today is that all the markets are different. I think what has been historically, it has been more mainstream, and if it's really downturned, the economy goes down, then it really goes down. Today, we have so many like parallel eco-economies, so to say, running technology-wise. If something is going down, not necessarily something else is going down, and this, I think, is the key takeaway here. My question actually here is that the biggest change, I think, during last 10 year is that take a moment and think, when was the last thing what you did by yourself which didn't contain electronics?
Was it the 20 years the same? These are not. This is the biggest change, I think, what happened in the world, that electronics is really part of our lives, and then that this is the change. We may have some emerging cases of technologies which are then kind of like compensating partly then that, like, the economies which are the functionalities or applications which are in recession. I think this is the biggest change at the moment.
Thank you. You mentioned that you could double your revenue with the same central costs. How would that change your financial profile?
No, I said that I think that we can double the size of the company without building any significant layers in between. I think what we're doing is scalable. I think we can still be a double-digit earning, EBITDA digit earning EMS but have an even further global reach to put it simple. We have seen it, and it's a very effective model. These guys and their teams, they are rock stars. That's why we have this Incap Rock theme as well. It's a pleasure working with these guys. The enthusiasm and the ideas that are generated in Incap's, how to say, grassroot level is fantastic.
I strongly believe that empowering people will give you success, and we see that in our numbers. It's simple, and why not then scale it? Why not scale it even more?
Yes. A couple more questions. This one is from Daniel, and this question goes to Murthy . How fast can you fill up the third factory, and how much of what you produce is export versus domestic use? Also, what segments, energy, medtech, et cetera, are you most enthusiastic about going forward?
Yeah, the first one is we will be completely ramping up from the unit three by quarter one of 2023 because the building is to be completed by end of this year. We will be putting up the machinery and then making arrangements for the mass production to start somewhere in Q1. We will be able to ramp it up from there. We have also decided what kind of product lines that are going to be shifted from the existing facility and how many people it will provide working area for about 1,000 employees. We will be reshuffling some of the employees from the existing facility. What are the new product lines, which we have already discussed with our major customers.
The plan is in place for that. By somewhere in Q1, we will be able to ramp up from that facility. That's number one. Number two is that the major industrial segments that we are currently addressing is industrial and to some extent medical. When I say industrial, it's not just confined to one or two industries. It's a vast industrial application. For example, we make rescue devices for some of the elevator companies. We make low voltage and medium voltage, L.V. and M.V. drives for lot of companies. We also make inverters and UPSs for industrial application. I'm not exaggerating, hundreds of different varieties of these. The battery chargers for various applications. For solar applications, we make inverters which can actually have an MPPT which can easily be plugged in.
We also make electronics for fuel dispensing systems, which are actually exported to many parts of the world. These are the main segments that we are addressing. I hope I have answered the question if I've understood it correctly.
Yeah. Well, thank you, Murthy, for your answer. We have only time for one more question. I can promise on behalf of the company that all the questions will be answered, but for now we don't have any more time. I will just ask the last question. If closing an acquisition, how do you plan to fund it? What leverage would it be acceptable post-transaction?
Yeah, it depends, of course, very much on the target in that sense. I think we have a lot of different opportunities here. We have strong books in that sense, so we can consider debt financing. We can consider raising equity. We can consider using Incap shares in the deal. It all depends on the target. Once we come there, let's we figure it out then what is best on that case in that sense.
Thank you. I will give the floor to you, Otto, to say the last words from our Capital Markets Day.
Yes. I want to thank everybody that came here today and everybody that's watching home. As I always do when I talk to investors and analysts and people, come and visit us in Incap. If you're close to one of the factories, give us a call because seeing, I think, is believing. Listening to us here on stage, we are the tip of the iceberg in that sense. The real action is down in the units, where fantastic people, teams all over the world that is working and enthusiastic. It produce the best electronics and offer the best services to our customers. Come and see us. Once more, thank you for the interest of Incap, and let's continue rocking. No problem.