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Boom, boom, boom (Sept 2000)
September 1, 2000 |Estimated reading time: 10 minutes
Walt Custer's September column. Boom, Boom, Boom
by Walt Custer
September 1st, 2000
Electronic equipment (and hence PCB) demand remains extremely strong. Since 1982, total U.S. equipment demand has doubled (Chart 1) and current growth rates are the highest in 15 years (Chart 2). In June 2000, the combined growth of computer and office, communications, instruments and controls, and military electronics was up 34.7% vs. June 1999 and 24.7% on a three-month basis (Apr-June 200 vs. Apr-June 1999).
This remarkable equipment order growth may be a bit misleading. With the pervasive component shortages, perhaps some equipment is being "double ordered" due to slow deliveries and concerns about supply problems. As an example, I ordered a new IBM Thinkpad notebook in early May that, according to their website, was "in stock." Multiple promised delivery dates came and went with mid-September now the quoted date. The IBM rep blames the ongoing delays on shortages of Intel microprocessors. This is not an isolated story. Agilent blamed last quarter's earnings shortfall on its inability to procure components, Palm Pilots are in short supply and the cell phone makers are missing their sales targets because they can't obtain sufficient parts.
The boom in cell phone sales (Chart 3) has exceeded everyone's forecasts. From 284 million handsets shipped worldwide in 1999, cell phone volumes are targeted at 425 million in 2000. Compare this to Ericsson's forecast just one year earlier! And with six billion people in the world, continued growth is inevitable. Per Chart 4, the U.S. population owns 206 cell phones per 1000 people. This puts us eighth on the world list, led by Finland with more than twice the cell phone saturation of the U.S. As cell phone usage in higher population, less developed countries increases, component demand (and probable shortages) will skyrocket. I am convinced that component availability will be the key limiting factor in global electronic equipment growth for the foreseeable future.
Semiconductor shipments are at record levels, with $16.6 billion dollars of chips delivered in June, up 48% vs. June 1999! All geographical areas are strong (Chart 5), with 3/12 growth rates increasing rapidly.
The North American PCB producers are benefiting from this "electronics" boom with full order books and higher prices. As 2Q'00 earnings are released, the aggregate industry profits have finally turned positive (Chart 6). With June's rigid PCB orders up 31.6% vs. last June (Chart 7), third quarter earnings should be even better!
Looking at PCB vs. equipment growth (Chart 8), it would appear that-at least for the short-term-the lofty PCB growth will be well supported by equipment orders. It does not appear that PCB demand will drop anytime soon, as all end markets (Chart 9) are experiencing solid growth - Computer and Office orders are up 24%, Communication up 36%, Instruments and Controls up 19%, and Military electronics up 5%.
2000 should be a very profitable year throughout the supply chain!
General Business Conditions
With Hadco now part of Sanmina, two North American PCB makers are about to "go public." TTM Technologies (Pacific Circuits/Power Circuits combo) and Toronto-based Coretec will soon make initial public offerings.
Electronic Equipment
The worldwide personal computer industry continues to be led by developing regions as PC shipments increased 18% during 2Q'00, according to Dataquest.
Preliminary Worldwide PC Vendor Unit Shipment Estimates for 2Q00 (Thousands of Units)
Company 2Q00 Shipments 2Q00 Market Share (%) 2Q99 Shipments 2Q99 Market Share (%) Growth (%) Compaq 3,980.0 12.6 3,762.9 14.0 5.8 Dell 3,346.5 10.6 2,684.8 10.0 24.6 Hewlett-Packard 2,253.0 7.1 1,678.8 8.7 34.2 IBM 2,249.0 7.1 2,344.0 6.3 -4.1 NEC 1,394.0 4.4 1,278.6 4.8 9.0 Gateway 1,170.3 3.7
1,023.9
3.8 14.3 Others 17,230.0 54.5 14,025.9 52.3 22.8
Total Market
31,622.8 100.0 26,798.9 100.0 18.0
Preliminary U.S. PC Vendor Unit Shipment Estimates for 2Q00 (Thousands of Units)
Company Q2/00 Shipments Q2/00 Market Share (%) Q2/99 Shipments Q2/99 Market Share (%) Growth (%) Dell 2,192.0 18.7 1,706.9 16.2 28.4
Compaq
1,705.0 14.5 1,785.1 17.0 -4.5 Hewlett-Packard 1,220.6 10.4 847.8 8.1 44.0 Gateway 953.3 8.1 852.5 8.1 11.8 IBM 715.0 6.1 876.0 8.3 -18.4 Apple 520.6 4.4 468.4 4.5 11.1 Others 4,425.0 26.7 3,989.2 27.5 10.9 Total Market 11,731.5 100.0 10,525.9 100.0 11.5
Worldwide and U.S. PC Market Growth Rates 1Q98 through 2Q00 (Quarter vs. Previous Year Quarter)
Quarter Worldwide Growth (%) U.S. Growth (%) 1Q98 14.9 19.4 2Q98 11.2 13.1
3Q98
16.4 17.8 4Q98 19.4 23.4 1Q99 22.6 21.4 2Q99 26.9 32.6 3Q99 24.5 21.7 4Q99 20.1 14.3 1Q00 17.0 14.1 2Q00 18.0 11.5
Note: Tables include desk-based PCs, mobile PCs, and PC servers. Source: Dataquest (July 2000)
Compaq Computer and Hyundai Group's Hyundai MultiCAV affiliate have formed a strategic alliance to manufacture co-branded personal computers. Compaq will provide core PC components, technical support and performance authentication, while Hyundai MultiCAV provides manufacturing, marketing, sales, and services through its distribution channels.
The European personal computer market grew 8.9% in 2Q'00 as shipments totalled 7.6 million units.
European Personal Computer Shipment Estimates for Second Quarter 2000 (Thousands of Units)
Company 2Q00 Shipments 2Q00 Market Share (%) 2Q99 Shipments 2Q99 Market Share (%) Growth (%) Compaq 1,214 15.9 1,135 16.2 6.9 Fujitsu Siemens 678 8.9 719 10.3 -5.8 Dell 657 8.6 638 9.1 3.0 Hewlett-Packard 551 7.2 470 6.7 17.2 IBM 491 6.4 610 8.7 -19.6 Others 4,041 53.0 3,433 49.0 17.7 Total Market 7,631 100.0 7,006 100.0 8.9
Source: Dataquest
Japan's domestic personal computer shipments in the April-June period increased 35% from the same period a year earlier, to 2.74 million units-a new record. The Japan Electronic Industry Development Association (JEIDA) said consumer demand in particular was driving the growth of the sales of portable computers.
Motorola, the world's second-largest wireless phone maker, expects to ship 80-85 million telephone handset units by the end of the fiscal year 2000. In July, Motorola raised its forecast for industry-wide sales of cellular phones this year to 425-450 million units from a forecast of 400 million units it gave in the first quarter.
Motorola said it would ship six million set-top boxes in 2000.
Creative Technology, the world's leading soundcard maker, said it deliberately raised stock levels in the fourth quarter to defend the group from nagging global component shortages.
12.7 million U.S. households will have a digital camera by the end of 2000, according to Gartner Group.
Ericsson licensed the ARM processor core for use in its communication products.
China Great Wall Computer Shenzhen will form a new joint venture with IBM to make computer parts.
The manufacture of Bluetooth-enabled equipment will exceed one billion units by 2005, according to Cahners In-Stat Group. Bluetooth is a short-distance wireless technology that spans telecommunications, personal computing, networking, industrial, automotive and consumer electronic devices, allowing voice and data connections up to 30 feet or to 300 meters with an amplifier.
PCB Fabrication
Coretec, Toronto, Canada, which specializes in quick-turn and prototype PCBs, has filed for an initial public stock offering.
TTM Technologies, Redmond, Washington, has filed for a $115 million initial public offering. It was formed from the merger of Pacific Circuits and Power Circuits and had sales of $106 million in 1999. Thayer Capital and Brockway Moran & Partners are the major TTM owners.
Merix announced a major capacity expansion. The $65 million project is expected to increase Merix' high technology production capacity by 75%. This expansion, located in the Portland metropolitan area, will include a new 90,000-square-foot leased facility, dedicated to inner layer processing. Additional outer layer manufacturing capacity will be added at the Forest Grove plant. Initial capacity additions will come online beginning late 2001, with full project completion expected by the summer of 2003. This expansion is in addition to the previously announced $25 million expansion project at the Forest Grove facility.
DDi Corp. acquired the assets of Sterling, Virginia-based Automata International for $20 million in cash. Automata filed for Chapter 11 bankruptcy protection in June.
Flexxtech Holdings will acquire 60% of the common stock of Primavera Corp. Primavera owns 100% of North Texas Circuit Board Company, which manufactures quick-turn PCBs with 1999 sales of $9,887,025. (see piece of news published 8/17/2000 Flexxtech completes acquisition of North Texas Circuit Board Co. Inc.)
Matsushita Electronic Components will raise manufacturing capacity for its Alivh multilayer printed wiring boards by 50% to meet rising demand from mobile phone makers. The firm will invest a total of 2.5 billion yen in production lines at the Mie Prefecture plant, raising overall monthly capacity to 23,000 square meters, sufficient for four million cell phone sets. This will increase Alivh PCB sales to 20 billion yen in the year ending March 2001.
Taiwan PCB makers' July sales were: Cadac NT$160 million, Vertex NT$260 million, Compeq NT$1,700 million, Chin-Poon NT$574 million, and Unitech NT$601 million.
Dai Nippon Printing and Toshiba established a joint venture company that will develop, produce and market PCBs. The new company is scheduled to start operation on October, 2000, under a name that is yet to be decided.
Dr. Hayao Nakahara recently estimated Japanese PWB Output as follows:
1999 (Estimate) $million 2000(Forecast) $million SSB 460 430 DSB 2610 2700 MLB inclusive µV board 6710 7300 motherboards 905 1200 substrates 785 1100 Total 1690 2300 Flex 1472 1580 Grand Total 11252 12010
Exchange rate: ¥105/US$1.00 Source: N.T. Information Ltd
Tyco Electronics has obtained a global license to design, manufacture and distribute optical flex circuits using Advanced Interconnection Technology's proprietary technology.
PCB Assembly
Siemens AG will outsource the production of 33 million mobile phones to Flextronics International over the next three years. This follows Siemens' announcement in July that it won't be able to meet its production target of 30 million mobile phones this year because of a shortage in component supplies.
Solectron acquired Bluegum Group, the Australian electronics manufacturer, which in 1997 took over a former IBM PC assembly plant in Wangaratta, Victoria. Bluegum has an annual turnover of $500 million Australian dollars - or US$288 million.
Solectron completed the acquisition of certain electronic computer-aided design (ECAD) capabilities from Nortel Networks, Toronto.
Celestica acquired Bull Electronics, Lowell, Massachusetts-the North American contract-manufacturing operation of Groupe Bull, France. The 130,000-square-foot operation employs more than 200 people.
Celestica will provide contract optical subassembly services to JDS Uniphase for optical amplifiers. The leading manufacturers of semiconductor equipment are bullish on the prospects for continued growth in the current business cycle, according to the 2000 mid-year SEMI Capital Equipment Consensus Forecast.
Flextronics is acquiring Chatham Technologies, a provider of integrated electronic packaging systems to the communications industry. It will become part of the Flextronics Enclosures business unit, along with recently acquired Palo Alto Products.
Viasystems Group has begun construction of a new 150,000-square-foot EMS facility in the Nanxiang section of Shanghai, China. At this new site, Viasystems will expand and enhance its EMS capabilities currently provided at its facilities in Pu Dong, Shanghai and Nantong, Jiangsu Province. Viasystems will be adding approximately 85 managerial and engineering positions in Shanghai plus 250 operators for a workforce of more than 9,500 employees at Viasystems' seven facilities in China.
C-MAC Industries will acquire Invotronics Mfg., a unit of Magna International. Invotronics designs, engineers and manufactures electronic body controllers, electromechanical systems, and intelligent switches to the automotive industry.
C-MAC Industries completed the acquisition of G.H.Z. Technologies Inc. and T.Q.F. Technologie Inc. G.H.Z. Technologies is a designer and manufacturer of passive microwave filters and other components, and T.Q.F. Technologie is a related business that provides specialized plating of gold and silver on various microwave and wireless components.
Sanmina will acquire certain Electronics Computer-Aided Design (ECAD), Electronics Systems Packaging Design (ESP), and Product Integrity (PI) operations from Nortel Networks.
Sanmina Corporation has acquired a PCB assembly and system assembly facility in Shenzhen, Guang Dong province in China. The facilities include a 270,000-square-foot manufacturing facility with administrative and dormitory buildings. The business focuses on PCB assembly and targets the telecommunication, networking, computer and medical electronics markets. Alcatel, Hewlett- Packard, IBM, Ascom and Fujitsu are among its customers.
ACT Manufacturing will purchase Bull Electronics Angers, France for $56.6 million. BEA provides electronics manufacturing services to OEMs, including printed circuit board and box build systems assembly as well as associated end-to-end value-added services. BEA will spin out its PCB fabrication business to a separate subsidiary of Bull.
EMS provider CTI Technology, Springfield, Massachusetts, has signed a Letter of Intent with American Development Company (ADCO) to acquire the manufacturing assets of Maquila Americana, S.A. de C.V., of Rosarito, Mexico.
Semiconductors
Worldwide sales of semiconductors reached an all-time record high of $16.6 billion in June 2000, increasing from $11.2 billion in June 1999, a 48.1% year-to-year increase, the SIA reported.
Month-to-Month Sales ($ Billions)
Market May 2000 June 2000 % Change Americas 4.85 5.23 7.8% Europe 3.38 3.44 1.8% Japan 3.53 3.71 5.1% Asia Pacific 4.05 4.26 5.1% Total 15.81 16.64 5.2%
Year-to-Year Sales ($ Billions)
Market June 1999 June 2000 % Change
Americas
3.67 5.23 42.7% Europe 2.33 3.44 48.1% Japan 2.46 3.71 50.8% Asia Pacific 2.78 4.26 52.8% Total 11.24 16.64 48.1%
Source: Semiconductor Industry Association
The Book-to-Bill ratio for North American makers of equipment used to build and test computer chips slipped for the third month in a row in June.
Month Shipments Bookings Book-to-Bill January 2000 1,603.5 2,227.3 1.39 February 2000 1,594.3 2,301.5 1.44 March 2000 1,744.9 2,546.5 1.46 April 2000 (final) 1,991.4 2,715.7 1.36 May 2000 (revised) 2,155.2 2,766.9 1.28 June 2000 (prelim.) 2,225.8 2,796.1 1.26
Survey respondents expect the industry to grow almost 37% in 2000, reaching $34.5 billion, and more than 23% in 2001, to $43.0 billion.
Semiconductor Capital Equipment Market by Equipment Segment (Dollars in U.S. Billions; Percentage Year-over-Year)
1998(A) 1999(A) 2000(F) Equipment Type $B $B % Chng $B % Chng
Wafer Process
$13.9 $16.8 21.0% $23.5 39.7% Other Front End # 1.7 1.5 -12.0% 1.9 27.7% Assembly & Packaging 1.5 2.0 31.3% 2.4 21.5% Test 4.4 5.2 17.7% 7.0 35.5% Total Equipment * $21.5 $25.5 18.4% $34.9 36.7%
Lucent Technologies announced that it would spin off its microelectronics business, which includes the optoelectronics components and integrated circuits divisions, into a separate company. The new company will be the world's leading provider of communications semiconductors with more than $4 billion in annual revenues.
Intel has postponed its first 64-bit processor "Itanium" until at least 4Q'00.
Other
Physicists at Bell Labs have developed the first electrically powered organic Laser-a breakthrough that may lead to more widespread use of lasers in various applications. Previous organic lasers had been powered by light sources, such as other lasers.
Corning will invest an additional $250 million to increase production of its liquid crystal display glass-tripling its worldwide AMLCD capacity by the end of 2001. The global market for AMLCD glass is currently estimated at $1 billion and is expected to grow over 40% each year through 2002, Corning said.
Stay Current
To keep up with breaking industry news, e-Mail me to get a free 30-day trial of Custer Consulting Group's daily news service.
Walt Custer Custer Consulting Group Phone: 707 785-1777 FAX: 707 785-1988http://www.custerconsulting.com/
E-mail: America Online waltcuster@aol.com Internet wcuster@mindspring.com
This article was originally published in CircuiTree magazine and is reprinted here with permission.