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Creating Better Sales Targets (Oct 2000)
October 10, 2000 |Estimated reading time: 9 minutes
Creating Better Sales Targets
by Walt Custer
October 1st, 2000
Although July electronic component and communications equipment orders took a bit of a breather, I believe that this was just a monthly correction following two extremely strong months – May and June. July printed circuit orders were undaunted as the North American rigid PCB book-to-bill climbed to 1.23 (Chart 1), as orders grew 31.4% on a three-month basis versus 1999 (Chart 2). In spite of any mid-summer correction, July electronic equipment orders grew over 22% on a three-month basis with all sectors remaining strong.
Per Chart 3, PCB bookings are outgrowing electronic equipment, suggesting that PCB order growth will cool slightly short-term. However, with broad end market demand continuing into 2001, I believe business conditions will remain strong. Chart 4 shows the continuing growth of total electronic equipment orders. Although July “corrected,” the actual monthly bookings remain well ahead of the trend line and 12-month average. As long as this scenario continues, PCB demand should hold strong.
A Tool For Tracking the End Markets and Creating Sales Targets
Electronic Outlook Corporation (EOC) publishes an interesting book called Electronic Company Prospector. This quarterly study tracks over 500 electronics companies sorted by end market. Sectors tracked include electronic equipment manufacturers by markets served, components (passives, connectors, PCBs & semiconductors), electronics distributors and contract manufacturers.
Sales histories and forecasts are given for each company, the sector as a whole and the total industry. This book is an excellent tool for a PCB sales manager – creating sales targets with sales potentials and historical and projected growth rates. Ralph Anavy, the president of EOC, wrote in his September issue of Electronic Prospector:
IN SUMMATION: ROBUST GROWTH TO CONTINUE As a whole, these data continue to paint a picture of a U.S. industry that is continuing to expand and improve after bottoming in mid-1998. Growth is expected to remain relatively steady and to improve gradually over the next several quarters, as Y2K disruptions are now behind us and a more normal pattern of growth occurs. We expect steadily expanding overall growth conditions to prevail in 2000-2001, especially as a global economic expansion continues to take shape. Virtually all segments will be expanding over the next two years, driven increasingly by growth outside the US.
As an example of Ralph’s work, I have extracted some data from his September 2000 Military/Government/Aerospace section. Chart 5 shows total government & military electronics production by sector for 2000 (per another EOC publication). This data is somewhat aligned with the Department of Commerce “Search and Navigation” section of the Factory Orders report. While the DOC gives us a general idea of sector growth (Chart 6), it provides no monthly details by company.
Electronic Prospector takes a different approach. It tracks the growth by monitoring all the major companies in that sector. Chart 7 lists the Military/Aerospace companies in Ralph’s database. Chart 8 highlights the major companies within this sector, with historical and projected growth. Note how Boeing, the biggest player, negatively affected the total sector sales, while General Dynamics is showing good growth.
Similar data is presented for total computers, PCs & LANs, WANs & Data Comm, industrial equipment, Semi Fab equipment, industrial instruments, medical instruments and communication equipment.
Chart 9 depicts quarterly growth for the entire Military/Aerospace sector. The report contains similar data for each company. Knowing how each company is performing (with a forecast) versus the industry makes selecting the best sales targets much easier. EOC can be reached at 415-648-9480 or www.electronicoutlook.com.
General Business Conditions
U.S. electronic and other electrical equipment orders decreased $7.9 billion or 16.8% to $39.1 billion in July, primarily due to a drop in electronic component and communication equipment bookings. Based upon recent volatility, this probably represented a “normal” month-to-month fluctuation.
The cellular phone service market in Asia/Pacific increased to 171 million subscribers in 1Q’00, a 47% increase over the same period last year, according to Dataquest. For the first time, China was the No. 1 country in the region with 52 million subscribers as Japan fell to No. 2 with 51 million.
The number of mobile phone subscribers in Western Europe is expected to reach 200 million this year and top 300 million by 2004 as mobiles increasingly become part of people's daily lives. IDC stated: "The European cellular services market . . . is now a mass market in which more people will own a mobile phone than fixed phone by 2004."
Dell'Oro Group reported that Nortel has a 43% share of the global market for optical equipment, compared with Lucent's 15% and Fujitsu's 11.1%. In the corresponding quarter of 1999, Nortel's global market share was 28.6%, compared with Lucent's 24.1% and Fujitsu's 14.2%. Other companies, including Cisco Systems, CIENA Corp, Alcatel and others held steady year-over-year with a combined market share of 30.9%. In the first half of 2000, total optical equipment sales on a global basis rose 77% to $11.1 billion from $6.3 billion in the same period of 1999.
Electronic Equipment
Ericsson will use more partners to manufacture mobile phones in order to streamline manufacturing and reduce costs. It may use more companies to handle the development and production of its phones following a recent outsourcing deal with Taiwan's Arima.
Annual shipments of Bluetooth-enabled devices will exceed 1.4 billion nodes in 2005, up from 56 million nodes in 2001, according to Allied Business Intelligence.
AT&T will purchase one million set-top cable boxes from Philips Electronics. The boxes will incorporate a special processor that will allow interactive services including electronic commerce, gaming, and video-on-demand.
ReplayTV will use Maxtor 60 GB hard drives for the new ReplayTV 3060 digital video recorder. The ReplayTV 3060 is the world's first major digital video recorder that offers up to 60 hours of recording on a single hard drive.
Seagate Technology will continue to reduce staffing levels in an effort to cut costs as prices of disk drives continue to fall.
Intel is buying Ziatech for $240 million cash. Ziatech designs and markets Intel Architecture-based circuit boards, hardware platforms and development systems for telecommunications equipment manufacturers.
PCB Fabrication
Merix announced a new facility in Wood Village, Oregon with a 90,000-SF building dedicated to inner layer processing. Construction began immediately. The new facility is part of the $65 million capacity expansion project announced July 10, 2000. Start-up is scheduled for mid-2001, and full capacity will be available by mid-2003.
Teradyne acquired PCB maker Herco Technology and laminate supplier Synthane Taylor for a combined $100 million.
Park Electrochemical approved a major expansion of the facilities of its Neltec subsidiary in Tempe, Arizona.
Ibiden established a new company, IBIDEN Philippines, in Batangas Province to produce over-mold type BGA PCBs for personal computers.
Flexxtech Corporation (OTC:FLXT) acquired Primavera Corporation, the parent company and 100% owner of North Texas Circuit Board Company Inc. (which had sales of $10 million in 1999).
Sheldahl's exclusivity period with International Flex Technologies and its majority owner Morgenthaler Venture Partners has expired without reaching an acquisition agreement. Sheldahl will continue its efforts to maximize shareholder value by seeking suitable strategic alternatives.
PCB maker Active Alliance, Philippines is set to go public this October to raise P50 million. Proceeds will be used to build a manufacturing plant worth P38 million in the Subic Bay Freeport Zone.
Cookson Group completed the acquisition of the PCB laminates division of ACHEM Technology Corporation.
Dexter sold its Electronic Materials, Adhesives And Polymer Systems Businesses to Loctite Corporation for $400 million in cash.
PCB Assembly
ACT Manufacturing completed the acquisition of Bull Electronics Angers, France unit for about $56.6 million. EMS provider Bull Electronics had revenue of about $104 million for 2Q’00.
ACT Manufacturing completed the acquisition of GSS Array Technology, Thailand for approximately $86.6 million. This adds 3,000 employees and 240,000 SF of low-cost manufacturing capacity to ACT.
C-MAC Industries acquired certain Electronics Computer-Aided Design, Electronic Systems Packaging, Product Integrity Engineering and Product Assurance activities from Nortel Networks.
Flextronics will acquire fellow Singapore-based CEM, JIT Holdings, for $640 million to be closer to a common customer - Motorola.
Flextronics formed Flextronics Enclosures business unit to provide design, manufacturing, integration and deployment services, supplying custom electronic enclosure systems for the communications infrastructure, computer and networking industries.
Flextronics completed the acquisition of Uniskor Ltd. for $20 million including Uniskor's 8000-square-meter facility in Migdal Haemek, Israel and its 500-person work force. Also, Flextronics completed the acquisition of Electronics S.A. de C.V. for $8.9 million.
IBM China and China Great Wall Shenzhen formed an EMS JV in China. The new company, Beijing GKI Electronics, will provide advanced PCB assemblies to Nokia Joint Ventures for their current and future wireless communication products and systems. Total investment is approximately US$25 million; IBM China will hold 70% of the equity and Great Wall 30%. PCB manufacturing will be in Xingwang (International) Industrial Park in the Beijing Economic-Technological Development Area. Beijing GKI expects to begin production in January 2001.
Jabil Circuit has broken ground on a total of 550,000 SF of manufacturing space in Chihuahua, Mexico. One 275,000-SF plant will be dedicated to serving the automotive industry, while the other will focus on serving the consumer sector. Jabil's initial investment will be more than $15 million with a targeted completion in 1Q’00.
Sanmina will acquire Ocean Manufacturing in Shenzhen, China and also the San Jose, Calif. system integration and fulfillment operation of Lucent Technologies. SCI Systems acquired EOG Incorporated, a mid-Atlantic electronic design and manufacturing services company with particular emphasis in telecommunications and a growing base of optical networking activities.
SCI Systems and Ericsson signed an agreement for the manufacture of sub units to Ericsson base transceiver station for the GSM product line. The award will result in more than $200 million in new business for SCI during calendar year 2001.
SCI purchased the Ma'alot, Israel, facility from telecom solutions maker Telrad Networks in a deal that includes a multiyear supply agreement worth more than $500 million.
Viasystems acquired a radio component factory in Rouen, France, from Lucent Technologies. The companies also have agreed to a contract for Viasystems to manufacture radio telecommunications and transmission components for 30 months.
Semiconductors
Worldwide sales of semiconductors reached an all-time record high of $17.3 billion in July 2000, increasing from $11.5 billion in July 1999, a 50% year-over-year growth in chip sales, the SIA reported. The Asia Pacific and Japan markets grew 57.3% and 52.0%, respectively, from last year. The Americas market was up 46.1% from last year, and Europe's sales grew 46.5%.
North American-based manufacturers of semiconductor equipment posted another record month for bookings and shipments in July 2000, with a book-to-bill ratio of 1.23. The three-month average of worldwide shipments in July 2000 was $2.4 billion. The figure is 5% above the June 2000 level and 73% above the July 1999 shipments level of $1.4 billion. July shipments were 45% above the previous cycle peak of $1.6 billion shipped in November 1997.
Orders for Japanese-made semiconductor manufacturing equipment totaled 228.8 billion yen in June, up 140% from a year earlier and rising for an eighth consecutive month. June orders for chip making equipment for use in Japan, including foreign-made equipment, rose 122% from a year earlier to 131 billion yen, reported the Semiconductor Equipment Association of Japan.
Motorola won government approval to invest $1.93 billion in chip-manufacturing and telecommunications facilities in the port city of Tianjin, China.
Semico Research forecasts that worldwide sales of DRAM modules will rise 53% to $27.8 billion this year, from $18.1 billion in 1999. Next year, sales will increase 38.8% to $38.5 billion.
Other
DisplaySearch reported that the TFT LCD equipment and materials markets had record highs in 1999. The equipment market rose 139% in 1999 to $3.1 billion and is expected to increase an additional 96% in 2000 to over $6 billion. The TFT LCD materials market rose 77% in 1999 and is expected to rise an additional 38% in 2000 to $5.7 billion.
Stay Informed
If you would like to receive this type of market information on a daily basis, ask for a free 30-day trial of my news service. E-mail me.
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.