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PCB Expansion Continues (March 2000)
March 7, 2000 |Estimated reading time: 6 minutes
PCB Expansion Continues
by Walt Custer
Mar. 07, 2000
This column appears monthly in CircuiTree magazine
The global economic climate remains strong as virtually every key industrial country is growing (Chart 1). Currency exchange rate trends provide some interesting insight. Chart 2 shows the key European currencies’ performance versus the dollar. Compared to July 1996 the continental currencies have weakened 30-35% with this trend accelerating in recent months. By comparison the UK pound has remained strong so that exports from the USA and UK to the European continent face an increasing exchange rate penalty. Conversely German and Italian-made goods are more of a bargain in the U.S. and England now compared to 1996.
Asia is a slightly different story. In mid-1997 most of the SE Asian currencies plummeted versus the dollar and Yen. This “Asia Crisis” appears now over as many of these same countries are experiencing double-digit growth (Chart 1) and their currencies have largely recovered (Chart 3).
Domestically Greenspan is busy raising interest rates to moderate growth. The late February Department of Commerce announcement that January Durable Goods’ orders dropped significantly raised “slowdown” worries. This DOC release revealed that “Electronic & Other Electrical Equipment” declined almost $5 billion (Chart 4) but their subsequent (early March release) Factory Orders report showed that the culprit was components not finished electronic equipment. The likely explanation – a combined impact of normal month-to-month semiconductor order fluctuations, the price effect of recent large DRAM price declines and the “working down” of some excess chip inventories stockpiled as Y2K buffers. I am not too concerned because the key PCB driver (electronic equipment orders) remained strong (chart 5).
As I noted in previous articles personal computer orders are highly seasonal – a large back-to-school and December holiday surge followed by a late winter/early spring slowdown. Since personal computers consume about one third of the world’s multilayer PCBs this seasonality plays havoc with the printed wiring board market both in volumes and pricing. Early each year the PC motherboard manufacturers go hunting for MLB orders to fill their factories until the fall surge begins anew. Last year’s anticipated Y2K issues caused a number of companies to freeze IT capital spending in late 1999. Since the actual Y2K effect was minimal and also because early 2000 business conditions are so strong the corporate “purse strings” have now been loosened. Servers, LAN equipment and corporate PC orders will benefit. A recent Computer Reseller News survey (Chart 6) shows that planned early 2000 PC purchases will be substantially higher than in 1999. This post-Y2K demand uptick should minimize the traditional after-Christmas PC slowing.
In spite of any Y2K worries personal computers enjoyed an excellent 1999 growing 21.7% globally as Compaq, Dell and IBM led their competitors (Chart 7). 113 million desktop PCs and notebooks were shipped last year plus an additional 1.6 million total NT and UNIX workstations (Charts 8 & 9). Clearly the volumes (and multilayer demand) are centered on PCs. For comparison 283 million cellular phones were made in 1999.
Robust electronic equipment orders are driving PCB demand. January 2000 set an all-time record for U.S. PCB bookings (Chart 10) as communications equipment continues to support this growth. Actually all the end markets are growing (Chart 11) providing optimism for a sustained PCB expansion. Chart 12 shows the combined 3-month (3/12) growth rates of the equipment end markets versus PCBs. We are clearly in an “up” portion of the business cycle with good short/medium term prospects. Eventually higher interest rates will cool things a bit but for now let’s enjoy it!
Electronic Equipment
General Motors, Ford Motor and DaimlerChrysler are forming a JV purchasing network to control much of their combined $240 billion annual purchasing of raw materials, parts, etc.
Driven by the strong shipments of ink jet printers, the U.S. printer market grew 23% to 23.8 million units in 1999 versus 19.3 million units in 1998 according to Dataquest. The industry was lead by the ink jet printers, which had shipments totaling 19.3 million units, an increase of 30% over 1998 shipments. Ink jet printers accounted for 81% of overall printer shipments in the United States in 1999. The success of the ink jet printer market was attributed to the continued success in the sub $100 segment of the market.
Printed Circuit Boards
Aspocomp, Finland has acquired a 12.5% stake in PCB Center, Thailand's second largest PCB maker. Aspocomp has also agreed to participate in financing PCB Center's expansion by further investments in the near future. PCB Center’s sales were approximately US$34 million in 1999 and the company employs 1,100 at its factory in central Thailand. Aspocomp, a major supplier of PCBs to the mobile phone industry, reported 1999 profit was up 97% to 20.1 million euros. Net sales rose 57.7% to 201.3 million euros, including the acquisition of the Philips, France PCB facility that added net sales of 57.7 million euros.
KCE Thailand’s new factory, located in the Hi-Tech Industrial Park in Lat Krabang, will double the company's annual manufacturing capacity of circuit boards to 15 million square feet. It will be operated by KCE Technology Co, a subsidiary of the KCE Electronics group.
Ionics Circuits plans to spend $40 million in capital expenditure in 2000 to construct new plants in the Philippines and China.
Sheldahl is considering acquisition offers from Molex and also the Irwin Jacobs Investor Group.
Elec & Eltek International Holdings Ltd said the targeted US$ 516 million sale of its PCB operations was not completed by the Feb 11 deadline. Negotiations regarding the definitive documentation and due diligence have still to be completed and no timetable for this has been set. Elec & Eltek International Co is a 42%-owned associate of Elec & Eltek International Holdings.
Viasystems is launching a $500 million IPO and its stock will trade as VG on the NYSE. It will reposition itself as a PCB assembler and spin off some of its European PCB fabs. In 1999 Viasystems had net sales of $1.1 billion and a net loss of $616.2 million – primarily due to acquisition-related expenses.
Wong's International (Holdings) Ltd has signed an agreement with unit Wong's Circuits (Holdings) Ltd and the Wong family on the sale of their PCB business to another party for a minimum of US$ 180 million. The sale price will be increased by US$ 11 million if the PCB business meets its performance targets this year.
Assembly
Plexus is acquiring privately held Agility, Incorporated, a Boston-area electronic manufacturing services provider. Founded in 1969, Agility specializes in complex PCB assembly with complete box and system build capability. Agility's facilities, located in Ayer, Mass., comprise 25,000 square feet. An addition to at least double the current space is expected to commence in late spring.
NatSteel Electronics, the world’s fifth-largest electronics equipment contractor, will purchase NEC America’s 380,000 SF Oregon fabrication facility. Included in the $220 million deal is a three-year supply contract with NEC. The Oregon plant has annual revenues of US$200 million.
Semiconductors
DRAM prices have dropped again as 64-Mbit SDRAMs were listing on the February spot market for as little as $4.50. A few months ago the price was $20. Industry analysts predict that it will take until the second quarter before some balance is restored to the supply/demand. Reasons for the price drop include seasonality, the scarcity of Intel processors and no significant increase in the amount of memory in new computers. A rebound is expected when the PC industry ramps up for back-to-school and holiday sales
VIA Technologies launched its low-cost Joshua chip aka VIA Cyrix 111 – an attempt to penetrate the market for low cost PCs. Speeds are 500 and 533 megahertz (US$84 & US$99). VIA already competes with Intel on PC chipsets.
Walt Custer CusterConsulting Group Phone: 707 785-1777FAX: 707 785-1988 http://www.custerconsulting.com
E-mail: America Online waltcuster@aol.com Internet wcuster@mindspring.com
“A Deal You Can’t Refuse”
Custer Consulting Group offers a daily e-mail based news service where selected PCB fabrication & assembly, semiconductor and electronic equipment news is “delivered” directly to your e-mail box. Also included are analyses and charts relating to timely industry happenings. This subscription service is described on my website. If you would like to “evaluate” this E-News free for 30 days e-mail me at wcuster@mindspring.com. For further details visit:http://www.custerconsulting.com/ccg-prod.html