IPC Chief Economist Dr. Shawn DuBravac Shares Industry's Financial Outlook



Audio Summary:

On March 23, IPC Chief Economist Shawn DuBravac, Ph.D., CFA, spoke with I-Connect007 publisher Barry Matties in an exclusive phone interview immediately following DuBravac’s online briefing to IPC member attendees.

This interview presents a rather detailed look at DuBravac’s situational analysis and projections with respect to the COVID-19 outbreak’s short-term and long-term effects on the global electronics manufacturing industry. DuBravac makes some comparisons to consumer economic pressures and also discusses some of the U.S.-based actions taken by the Federal Reserve to smooth the U.S. economy into, and out of, the economic impact of this outbreak.

Before his role with IPC, DuBravac served as chief economist for the Consumer Technology Association, a U.S. trade association representing more than 2,000 consumer tech companies. DuBravac is also the author of the New York Times bestseller “Digital Destiny: How the New Age of Data Will Transform the Way We Work, Live, and Communicate.”

I-Connect007 continues to deliver original reporting and coverage of the electronics design, electronics manufacturing, and contract manufacturing industries, including up-to-date information from the companies, associations, and supply chains globally. Find the latest news and information at www.iconnect007.com, and on our new topic bulletin board, “Industry Leaders Speak Out: Responses to COVID-19 outbreak,” found here. To read the interview, we have included the transcribed text below.

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Transcribed audio interview:

Barry Matties: Today, I'm speaking with Shawn DuBravac. He’s IPC’s chief economist. Shawn is a global tech trends expert and joined the IPC in September of 2019. Of course, back in September, nobody would have predicted that we’re in the condition that we are here today, and—obviously—a lot has changed in the last couple of weeks or so with the COVID-19 outbreak. To help the IPC members have a better understanding of the financial impact on our industry, today Shawn conducted a financial focus webinar for members. Shawn, thanks for taking the time to talk with us today. And why don’t we just get started, if we can, with a brief overview of today’s webinar, please.

Shawn DuBravac: Sure. So one of the things that I have started to do for IPC since joining them is to monitor both what’s happening within and around the industry, as well as what’s happening more broadly in the economy. So leading up to the coronavirus outbreak and COVID-19, we were already monitoring a number of facets of the economy and looking at how the industry is performing in this economy. And so a lot of what we covered in the webinar is just a quick look at where we are today and where we think things will progress over the next year.

Matties: What sort of concerns or questions did the attendees have today in the webinar?

DuBravac: I think if you look at what’s happening, this obviously started as a supply shock. And we saw facilities in Asia that normally will close down for about a week, as it relates to the lunar new year, extend that period and were closed for several weeks in addition to the regular one week delay. The regular one-week lunar holiday is well known within the industry, obviously if you’re in any type of manufacturing, but certainly, within electronics manufacturing, you’re aware of that, and you plan around it.

As that extended to include several weeks, companies began doing what the companies in the supply chain do very well actually, and they respond to these events very well by increasing the information flow within the supply chain, understanding what’s going on, understanding where they might be hindered with regard to further production and what steps they need to take essentially to ensure that they can continue to produce. So they ramped up communications, they started to look for alternative sourcing options, they curtailed business travel, they started to look for alternatives. If the business travel, for example, was related to new product introductions, how they could continue to accelerate new product introductions while not traveling to Asia.And then obviously what has transpired in recent weeks is that initial supply shock has dissolved into a demand shock as well. And as a result of countries across the globe, not just the United States and North America but also throughout Europe, closing down essentially to help fight the spread of the virus, you’ve seen a very significant demand shock go into effect, and that will push us into recession. We’re probably in recession now in the U.S. and throughout Europe. We’re probably quite close to a global recession or at least global growth very near zero. And we expect that to continue through probably about the third quarter, calendar Q3 of 2020. And then we’ll start to see things build out of the recession as we move into Q4 and into 2021, which is in many ways a standard response to an economic shock, to one of these exogenous shocks, and to a recession. And so while every recession is unique, we see the economy respond in very similar ways.

Matties: A lot of people are speculating the speed in which the recovery will happen. Some say it’s going to be slow; others are saying a V-shaped recovery. What’s your expectation?

DuBravac: Well, what you tend to have, certainly what we had after 9/11, what we had in the 2007 to 2009 period, we had a lot of uncertainty. And so we’re all feeling that right now, and you have a lot of uncertainty. You see a wide separation, I’ll call it a diversion, in the forecasts that are being produced because of that uncertainty. And again, the way we tend to measure economic growth is looking at quarter over quarter at an annualized rate. So you start to see that recovery in the back half of the year, the fourth quarter of the year, for a couple of reasons. One is because you’re comparing it to the down quarters of the second quarter and the third quarter. And we do expect to see a very steep decline in the second quarter of the year looking at macroeconomic variables.

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