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Good Business (and some useful data sources)
January 10, 2000 |Estimated reading time: 11 minutes
Good Business (and some useful data sources)
by Walt Custer
Jan. 10, 2000
This column appears monthly in CircuiTree magazine
Business conditions remain promising as global economic growth continues (Chart 1) and domestic electronic equipment orders continue to surge (Chart 2).The Commerce Department’s factory orders report released in early January showed that overall electronic equipment bookings were up 15.4% on a 3-month basis (Sept-Nov ’99 vs. Sept-Nov ’98). Communications equipment continues to lead the charge with a 34.2% 3-month growth and electronic components (principally semiconductors) rebounded 32.9% from the October dip!It definitely appears that the large Electronic Durable Goods order drop was a data collection anomaly and that end market support for future PCB orders will continue into 2000.
Semiconductor shipments also remain strong (Chart 3) as all areas of the world are setting new revenue records.Through November global $ shipments are up 24.8% on a 3-month basis versus 1998 (see Semiconductor section below). Robust electronic equipment orders, increased semiconductor content, firmed DRAM prices and some Y2K related stockpiling all contributed to the record sales. The biggest problem appears to be shortages of some key components notably tantalum capacitors. Assembly companies are scrambling. A motherboard is useless with one missing chip!
November PCB related shipments and orders were also strong (Chart 4) with rigid PCB bookings up 10.4% versus November 1998. The Flex circuit order growth of 82.8% may be an anomaly as the number of reporting companies was small.
Charts 5 and 6 show the growth of electronic equipment versus PCBs. The ongoing gap between domestic PCBs and equipment order growth in Chart 5 remains a mystery. Is the key cause relatively larger PCB price degradation vs. equipment, increased PCB exports or? Globally PCB orders should grow at the same rate as equipment.
A useful data source
Through the years I have used Harvey Miller and Fred Friedman’s Kirk-Miller Fabfile database when I needed to estimate N American PCB market potentials and target potential customers. Fabfile is a continually updated database of over 740 N. American PCB fabricators including addresses, key contacts, annual sales, production in square feet by board type and many other useful parameters. For a supplier of process consumables or equipment the Fabfile database can be used to calculate market opportunities sorted by $ potential and/or geography and to write form letters to key contacts. The actual data is in dbf format, which can be read directly into an Excel spreadsheet, or you can use the user-friendly front end software provided. If you are a supplier to the PCB industry (or perhaps looking to obtain information about or acquire a PCB manufacturer) Fabfile is an excellent resource. You can contact Kirk-Miller in Palo Alto, CA at 650 327-2029.
General Business Conditions
New orders to American factories for manufactured goods rose 1.2% in November, the first increase since August, as companies producing electronic products enjoyed a surge in demand. Orders for non-durable goods surged 1.6% in November, while orders for electronic components jumped 32.9%.
November electronic durable goods orders rebounded (as I predicted) from the massive drop in October. Orders for electronic equipment (which includes semiconductors) rose 8.7% in November after falling a revised 7.4% in October. The drop in electronics in October was initially reported as 15.3% and was mostly attributed to the effects of the earthquakes in Taiwan.
Here are the changes in the world's main stock market indices for 1999:
INDEX 1999 CLOSE 1998 CLOSE % CHANGE IN 1999 1999 HIGH 1999 LOW New York ($INDU) 11,497.12 9,181.43 25.22% 11,568.77 9,063.26 New York ($SPX.X) 1,469.25 1,229.23 19.53% 1,473.13 1,205.46 New York ($COMPX) 4,069.31 2,192.69 85.59% 4,090.61 2,160.93 London (FTSE) 6,930.20 5,882.60 17.81% 6,930.20 5,697.70 Tokyo (N225) 18,934.34 13,842.17 36.79% 19,036.08 13,122.61 Frankfurt (GDAXI) 6,958.14 5,006.57 38.98% 6,992.92 4,601.07 Hong Kong (HIS) 16,962.10 10,048.58 68.80% 17,138.11 9,000.24 Toronto (TSE) 8,413.75 6,485.94 29.72% 8,498.82 6,157.65
The Japan External Trade Organization's Institute of Developing Economies (IDE) said that 10 East Asian economies are likely to post economic growth of 6.5% in 2000 on a weighted average basis, compared with a forecast of 6.2% for 1999. Following is a breakdown of IDE's forecasts of real gross domestic product growth rates:
1998 1999 2000 South Korea -5.8 9.1 6.4 Taiwan 4.7 5.4 6.1 Hong Kong -5.1 2.0 3.2 Singapore 0.3 5.7 6.3 Indonesia -13.2 0.1 4.5 Thailand -10.0 3.7 4.9 Malaysia -7.5 4.5 5.6 Philippines -0.5 3.1 4.6 Vietnam 5.8 4.6 5.1 China 7.8 7.5 7.8 Overall East Asia (weighted average) 1.0 6.2 6.5
Deloitte Touche’s survey of pre-holiday PC inventories showed they were at their lowest level in the past five years 42% less than five years ago. "Cooler minds are prevailing as PC manufacturers enter the hyper-demand holiday season," said Charlie Goldenberg of Deloitte Consulting. "Despite projections for large volumes of PCs to be sold during the holidays this year, PC manufacturers are better equipped than ever before to meet, but not exceed, product demand."
GartnerGroup projects the worldwide online travel market to increase from $5 billion in 1999 to $30 billion by the fourth quarter of 2001. GartnerGroup analysts caution that leisure travel companies that do not have a presence on the Internet will face difficult times ahead.
Electronic Equipment
The world's biggest mobile phone maker Nokia raised its forecasts for mobile users worldwide. It said it expected to outpace the booming mobile phone market, increasing its lead and boosting net sales in 2000 by 30-40%.
Ericsson expects to begin releasing new mobile telephones equipped with a Web browser from Microsoft in early in 2001.
Lucent Technologies Inc., the world's largest telecommunications equipment maker, said its expected first quarter profit and revenue shortfall was due to execution problems and changes in customer buying trends, but demand throughout the industry remains strong.
Siemens and Bosch reportedly have signed a letter of understanding on Dec 21 to integrate Bosch Dancall into Siemens’ GSM cell phone division. Closing will be end of Q1 2000.
January data from IDC indicates significant weakness in the worldwide server market in 3Q99. That quarter's figures indicate a total factory revenue decline of 10%, as compared to 3Q98, to $13.5 billion. A significant revenue drop-off in high-end systems, due largely to Y2K, led the decline.
Personal computer unit shipments were expected to grow by 17% worldwide in 4Q’99 vs. 4Q’98.
Channel Marketing is forecasting flat to lower unit sales of PCs to U.S. consumers during the first quarter compared with the year-ago period. While PC sales normally drop off after the holidays, their David Goldstein stated that the decline would be more severe than usual. The absence of new technology and exit of several large manufacturers, like IBM and Packard Bell NEC, will be major factors in the decline, he said. In addition, the influence of $400 discounts on new PC purchases bundled with Internet service is also declining, Goldstein believes, because Internet companies are dropping their fees below the value of those discounts. "We believe customers are going to be focusing on faster Internet access, not faster PCs," Goldstein said.
IDC expects handheld companions will grow 22.5% to 5.4 million units worldwide in 1999 and to 18.9 million units by 2003. In the first half of 1999, 3Com's Palm devices dominated the handheld companion market with shipments of nearly 1.2 million units. Key findings from IDC's research include:
- Palm reported 1H99 market share of 68.4% in the United States and 47.2% worldwide for the handheld companion segment.
- The first color personal companion was released 1999.
- Philips Mobile Computing Group, L.G. Electronics, and Everex abandoned the Windows CE platform.
- The lack of smart phone volume until 2000 and beyond is slowing initial growth of the market.
Motorola, which completed its $11 billion acquisition of set-top box maker General Instrument, said it formed a new broadband communications sector that will use the boxes for services such as high-speed Internet access, video and telecommunications. It said this technology could soon transform televisions into computers, telephones and even video stores.
3Com will spin off its palm computing business in February 2000.
Seagate Technology expects to sell its Chokchai, Thailand Plant, which manufactures printed circuit cables and coils, by the end of the year. The sale is part of Seagate's focus on its core business - the production of computer hard drives with outsourcing of other components.
PC Video Camera unit sales increased more than 250% in November 1999 versus November 1998.
Printed Circuit Boards
Tyco has closed the acquisition of Praegitzer Industries, Inc. for $5.50 per share cash.
Taiwan’s Compeq Manufacturing is targeting sales of 18.0 billion NT$ in 2000 - a major increase from 1999 sales of around 13.0 billion NT$(31.6NT$ = 1$US). A spokesman said the company would give greater priority to PCBs for communications, Internet and ball-grid-array integrated circuits.
Malaysian PCB manufacturer PNE PCB Bhd expects improved results next financial year when conditions in the PCB industry improve significantly after lackluster demand in the last two years. PNE manufactures single-sided printed circuit boards and double-sided through-hole circuit boards with silver and carbon printing. Clients include AIWA, Apple Computer, Matsushita, Philips, Pioneer, Sony, and Thomson.
Elec & Eltek International said it will make a capital gain of S$736.7 million (1.67 Singapore$ = 1 US$)if the sale of its entire PCB business goes through.
Samsung Aerospace Industries is set to export chip mounters bearing its own brand name to the U.S. market. Chip mounters are designed to help chipmakers automatically mount semiconductor chips on printed circuit boards. The company has set a target of $150 million for the next five years to the huge U.S. market, which accounts for 35& of the world's chip mounters market.
Cookson has bought Enthone-OMI for $503 million in cash from Asarco, a subsidiary of Grupo Mexico. Enthone, which will be merged with Cookson's Polyclad Technologies arm, also supplies semiconductor fabrication chemicals, as well as coatings to the electronics, automotive, aerospace and jewelry industries.
Gould Electronics acquired Johnson & Johnston Associates, a manufacturer of Copper Aluminum Copper laminate and other products for the printed circuit board industry.
Atotech Deutschland and LPKF Laser und Electronics AG, have signed a cooperation agreement regarding the development of new processes for the structuring of circuit boards. LPKF is involved in research proposal '3D-MID' to place electrical wiring directly into the substrate.
MacDermid acquired PTI, Inc. ("Polyfibron"). The combined businesses of Polyfibron and MacDermid's existing graphic arts business will operate under the name, "MacDermid Graphic Arts, Inc." The combination of MacDermid's existing liquid photopolymer printing plate business with the business of Polyfibron is expected to position MacDermid as a leader in the supply of specialty chemicals and related materials to the graphic arts industry.
Compositech, developer of high tech laminates for the PCB industry, and Netdirect Corporation, an e-commerce company, have signed a letter of intent for Compositech to acquire Netdirect. Is this seemingly strange marriage a fast way for Netdirect to gain a NASDAQ listing?
Assembly
Shares of Solectron fell 11% in mid December after Wall Street analysts said a shortage of key components had hurt Solectron recent sales and was part of a broader problem for printed circuit board makers.
Sanmina will acquire Alcatel’s Clinton, North Carolina electronic enclosure systems facility. The letter of intent covers an 84,000 square foot ISO certified metal fabrication and mechanical assembly facility as well as 26 acres of commercially zoned land. The facility, located near Raleigh, North Carolina, primarily manufactures electronic system enclosures for Alcatel's ADSL products.
Alcatel USA will divest three of its N. American manufacturing facilities. Solectron will acquire its Longview, Texas, and Aguadilla, Puerto Rico, facilities, and Sanmina its Clinton, N.C., facility.
SCI completed the acquisition of ECI Telecom's, Shemer Manufacturing Plant in Petah Tikva, Israel, by SCI's Israeli subsidiary, SCI Tel-Aviv Ltd. In addition to the plant acquisition, a multi-year supply agreement was signed under which ECI Telecom will outsource part of its manufacturing activities to SCI. Formerly a part of Tadiran Telecommunications, the Shemer facility produces PCB assemblies and other products for ECI Telecom and provides related services.
Motorola plans to launch joint mobile telephone production in Hungary with Flextronics International and Singapore's JIT Electronics.
Semiconductors
Worldwide sales of semiconductors rose to $14.2 billion in November, the highest global sales numbers in the history of the industry and breaking October’s $13.4 billion record, the Semiconductor Industry Association (SIA) reported. "November's sales strongly illustrate the continuation of the industry growth pattern that began in mid-1998 and these numbers show a healthy chip industry with across the board sector growth," said SIA’s George Scalise. "Memory product demand is particularly strong with flash memory increasing 74.2% year-to-date in 1999, primarily driven by wireless communications. DRAM has increased 47.6% year-to-date in 1999 with PC and server demand being the major drivers."
Month-to-Month Sales: 3-Month Moving Average ($ Billions) Market October’99 November’99 % Change Americas 4.18 4.30 2.9% Europe 2.85 3.07 7.8% Japan 2.96 3.18 7.7% Asia Pacific 3.41 3.67 7.8% Total 13.39 14.22 6.2%
Year-to-Year Sales: 3-Month Moving Average Market November’98 November’99 % Change Americas 3.70 4.30 16.4% Europe 2.77 3.07 10.8% Japan 2.30 3.18 38.6% Asia Pacific 2.63 3.67 39.3% Total 11.40 14.22 24.8%
Shipley and Samsung Electronics have launched an R&D partnership to develop photoresists for the new 193 nanometer Argon Fluoride lithography process.
Intel, which supplies processors for more than 80% of the world's PCs, noted in late 1999 that it was seeing very strong demand amid a tightening of supply of its products. In mid-November, Intel said it had trouble filling orders beyond existing commitments.
Worldwide semiconductor revenue increased 18% to $160 billion during 1999, according to Dataquest. "One of the key factors for the industry growth was the firming up of the DRAM market," said Joe D'Elia of Dataquest.
The Philippines government has promised Intel a 12-year income tax holiday as part of a package of incentives for the chipmaker to build a wafer-fabrication factory in the country.
Internet Web Sites
Custer Consulting Group’s web site www.custerconsulting.com is now up and running. Content includes:
- my monthly CircuiTree articles
- up-to-date PCB industry related business condition indicators
- my recent IPC TMRC Business Outlook slides
- information about Custer Consulting, Electronic Outlook and Henderson Ventures’ electronic industry related information services and forecasts
- subscription information for my daily industry e-mail news service
- links to other useful sites
Walt Custer Custer Consulting Group www.custerconsulting.com Phone: 707 785-1777
E-mail: America Online waltcuster@aol.com Internet wcuster@mindspring.com