Industry Outlook from IPC's Sharon Starr
Sharon Starr, IPC's director of market research, provides updates on the PCB industry outlook, benefits of IPC membership and participation, plans to expand the EMS statistical program, and new studies being published.
Patty Goldman: Hi Sharon, I like to get these updates from you every year. Please tell us what’s going on in our industry.
Sharon Starr: Well, 2018 was a really good year for every segment of the industry. There was a lot of growth, and what we’ve seen in our statistical programs is that growth for the North American EMS and PCB companies is still positive. It’s slowing a little bit—not quite as high as it was in the middle of the year—but it’s still very strong. I think we can expect positive growth for a little while longer at least.
One thing that’s new is that we are expanding our EMS statistical program based on interest from member companies overseas. There are companies in Asia and Europe who have asked to be included. It’s a benefit of IPC membership, so any EMS company that has an IPC membership anywhere in their organization is eligible to participate. We plan to add quarterly EMS surveys for the companies in Asia and Europe. We’re very excited about this because, assuming we get a critical mass in both regions, we will expand the program globally. Then, everybody who participates—including the North American companies—will get global data.
Goldman: That sounds great. What are the advantages? Why would they want to participate?
Starr: They can use the data to estimate their market share and compare their sales performance against industry averages. They can also see what segments of the industry are growing or declining based on trends in the sales data. In the reports, we also provide short-term sales forecasts.
Goldman: So, the real benefit is they get a report back that they can use to compare themselves to the rest of the industry—plus they get some market information and forecasts.
Starr: That’s right. And there are other useful metrics, such as order backlogs, which is a leading indicator. In the EMS program, we have a whole separate quarterly survey on business performance, which covers operational and financial data including profit margins and percentages of costs for direct labor, direct materials, and so on. And a lot of companies like to see what the industry norms are to compare their own cost structure to what’s going on in the industry.
Goldman: Benchmarking.
Starr: Yes. And all of the data is broken down by tier size, so you can actually compare your own company to other companies of the same size, which makes it even more useful.
Goldman: Are there statistical programs for other segments of the industry?
Starr: Yes, we have statistical programs for assembly equipment manufacturers and electronics-grade solder manufacturers. Those programs are global and the surveys are quarterly; they work the same way. We collect data by region on sales in units and dollars for specific equipment types in the assembly equipment program, and by units for several types of solder and flux in the solder program. The participants get back the results by product types and by region.
Goldman: How do you assure that the information provided remains anonymous? I know it is confidential, but if there’s not a very big group, one may be able to pick out certain companies.
Starr: We have very specific policies to maintain confidentiality. For example, if we have one aggregate data point on a particular type of product in a particular region, and one company represents a high percentage of the aggregate total, we won’t publish the number because it could be too transparent for the big company. We collect the data in a secure system online and store the data securely with a numeric code and not by company name. We never share any company-specific information without the participant’s consent.
Goldman: What do you estimate the participation rate is versus the entire industry?
Starr: It’s different for every program. In the PCB statistical program, which is just North America, we have about 50% of the market participating based on dollar volume. The solder program is another really strong one where we don’t know the total size of the solder market globally, but based on what we think it is, we believe our participation is about 70% of the global market, which is great. A lot of the companies that we don’t have in that program are in China. But we’re now working with our colleagues at IPC Asia to recruit more of those companies into the program, so every year, the programs grow in participation.
Goldman: How can companies get into these programs to participate and receive the reports?
Starr: Statistical program participation is a benefit of IPC membership. So, any company with an IPC member facility anywhere in the world is eligible to participate, provided there is a program for their industry segment. Currently, we run statistical programs for EMS companies, PCB fabricators, assembly equipment manufacturers, and solder suppliers. Companies have until April 1 to sign up to participate in this year’s programs. They can simply contact us to sign up.
Goldman: Are there statistical programs the whole industry can participate in?
Starr: Yes, and it’s a very interesting program. About a year and a half ago, we launched a quarterly survey called “Pulse of the Electronics Industry.” The purpose is to keep tabs on the health of the industry—not only the current state but where the industry sees it going. So, we’ve identified various indicators for health and outlook—things like production volume, sales, orders, exports, profit margins, inventories, labor and material costs, capital investment, and hiring.
Goldman: Hiring and staffing must be a big deal these days.
Starr: Absolutely. In fact, it’s one of the indicators that tends to pull down the net score of the health of the industry right now because so many companies are having trouble finding talent and hiring. But the interesting thing is that ever since the program started in mid-2017, the whole industry has been really bullish. It reached a peak in the middle of 2018, and it has been cooling a bit since then, but it’s still very positive.
We look at not only the net scores for the current state, but we also have a six-month and 12-month outlook. Further, we look at the individual indicators and how they affect the scores, either positively or negatively. We examine the results for OEMs, PCB fabricators, EMS companies, equipment suppliers, and material suppliers separately. The results are also segmented by region, so we can tell a lot about what’s going on with equipment suppliers in Asia, for example. Speaking of equipment suppliers, in our fourth quarter 2018 report, the equipment suppliers were at the top of the heap as far as optimism. They seem to be very happy right now, but again, everybody’s doing pretty well.
Goldman: That’s great. To recap, you publish your results quarterly, correct?
Starr: Yes, and the reports are available free to anyone who participates in the survey.
Goldman: That must be the biggest incentive; simply fill out the questionnaire and supply some information, and you get a whole lot of information back.
Starr: You do. And it’s not hard to provide the information because we don’t ask for specific numbers except for sales growth, and that’s an easy one for most executives. The rest of it is based on the aforementioned indicators. Is it improving, getting worse, or remaining flat? They tell us that, and with a large number of companies participating, we get a strong indication of what’s going on. It has been a great program. Every quarter, it’s exciting to see how the results have changed.
Goldman: What else is new in IPC’s market research?
Starr: We just published an important new study. Every two years, we do a PCB technology trends study, and the 2018 study was published in January. The report is over 200 pages; it’s very comprehensive. This year’s study was based on two separate surveys—one for OEMs, and one for PCB bare board manufacturers.
Goldman: And it's all in the one study?
Starr: Yes. What we tried to do is find out about OEMs' technology requirements today and what they expect them to be by 2023, so it’s a five-year outlook. With PCB fabricators, we asked about their technical capabilities for things like HDI, printed electronics, stretchable circuits, etc.—a lot of different technology-related measurements—to find out what they’re doing today, and what they expect to be able to do within the next five years. We examined how they match up and if there are any gaps. It’s also interesting to see differences by region in the results because we see some things like stretchable circuits, which a fairly sizeable proportion of the manufacturers in Asia are using now, but not so much in North America and Europe. But they all expect to be doing more of that as time goes on.
Goldman: I presume that report is for sale now and available to IPC members and perhaps nonmembers as well?
Starr: Yes, it's available to everybody. IPC members get a 50% discount on all reports, so that’s a benefit of membership, but the reports are available to everyone in the IPC online store.
Goldman: That's great news. Sharon, thanks so much for your time. It’s always a pleasure to talk with you.
Starr: You're welcome, Patty. Thank you.
