-
- News
- Books
Featured Books
- pcb007 Magazine
Latest Issues
Current IssueThe Sustainability Issue
Sustainability is one of the most widely used terms in business today, especially for electronics and manufacturing but what does it mean to you? We explore the environmental, business, and economic impacts.
The Fabricator’s Guide to IPC APEX EXPO
This issue previews many of the important events taking place at this year's show and highlights some changes and opportunities. So, buckle up. We are counting down to IPC APEX EXPO 2024.
Getting to Know Your Designer
In this issue, we examine how fabs work with their design customers, educating them on the critical elements of fabrication needed to be successful, as well as the many tradeoffs involved. How well do you really know your customer? What makes for a closer, more synchronized working relationship?
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - pcb007 Magazine
Clouds Still Blanket North America & Europe, But Some Clearing Is Evident (Nov 2002)
November 4, 2002 |Estimated reading time: 17 minutes
A View from 38,000 Feet . . .
Clouds Still Blanket North America & Europe, But Some Clearing Is Evident
by Walt Custer
November 1st, 2002
I am writing this article on UA 930 en route to the ECWC9 world PCB conference and companion EPC2002 trade show in Cologne, Germany - hence the “contrived” title.
Business conditions remain very difficult, to say the least. However, if you look hard, there are a few bright spots. Globally we are slowly emerging from our industrial recession. Per Chart 1, industrial production growth remains very strong in Asia, and is just beginning its recovery in the USA and Canada. Europe, which lagged the USA by three months in entering the recession, is also trailing in the rebound.
Regarding electronic production, business is brisk in “low-cost” areas such as China, but U.S. electronic equipment orders have remained flat for over a year (Chart 2). Following the phony bubble of 2000, the main drivers of the U.S. market, communications equipment and Internet infrastructure, still remain quite stagnant. Chart 3 shows orders by major segment – highlighting how dependent we were on communications (including Internet) equipment. Ironically “Communications” has now dropped from #1 to third place and “slow but steady” Electromedical, measurement and control equipment has now become our second largest end-market – perhaps soon to be #1.
Military and government electronics (Chart 4) is not showing the growth I expected. However, this may simply be an accounting issue with the DOC. Other explanations might include that much of this equipment is being purchased offshore or it is relatively generic and grouped in other categories. This remains a mystery to me. Any comments from the readership?
Looking at all groups (Chart 5) we see that only instruments are growing. However since the 3-month growth rates are the leading indicators at least all categories are improving – often from deep troughs. For example rigid PCB shipments are only 61.3% of last year on an annualized basis – primarily because 1Q’01 was so much stronger than 1Q’02. However even with constant improvement month-to-month through year-end, it still appears that the N. American PCB market will be down 30% vs. last year!
Since a key culprit for the 2001/2002 PCB downturn was excess inventories Charts 6 & 7 are instructive. Total equipment inventories (Chart 6) have definitely declined – especially for the bloated communications sector. However Chart 7 is even more interesting. The “component inventory overhang” still has a ways to go. While electronic equipment inventories vs. order levels are now back to pre-2000 levels, excess component stocks are still an issue. Presumably some of these components have now aged technically so write-offs are likely.
Looking globally and using chip consumption as a measure of electronic equipment production (Chart 8), SE Asia is growing strongly while Japan, North America and Europe remain quite flat (aside from normal monthly fluctuations.
The EMS sector has not suffered as much globally as PCBs, chips and electronic equipment. Because of continuing outsourcing deals (where EMS companies take over OEM production plants), global EMS sales where almost flat from 2000 to present with decent growth prospects for the near future (Chart 9)
North American PCB shipments and orders by comparison “fell off a cliff” in 2001 (Chart 10), however orders have finally shown modest gains in the last few months. Because of the many business failures and plant shutdowns the surviving players are now gaining share. PCB companies with strong balance sheets will have good prospects as many of the weaker players sadly are removed from the supply chain. The “new reality” of the U.S. market will be fewer companies pursuing a smaller opportunity but on a relative basis decent market opportunities will exist for the survivors.
Dr Hayao Nakahara kindly allowed me to use his recent global PCB forecast (Chart 11). The prospects are not great but the worst should soon be over. Looking at North America, Chart 12 is most sobering. However, assuming some recovery in domestic electronic equipment demand, I am optimistic for some growth in 2003. Considering how deep we are in the current trough, 5-10% growth or more is not unrealistic. As we further consume or write off the “component inventory overhang” the surviving North American PCB makers should once again have some decent business prospects. Not immediately – but the clouds will clear!
General Business Conditions
Demand for telecommunications products and services will eventually recover, said Kurt Hellstrom CEO of LM Ericsson. “There is almost infinite demand. Growth will return.”
Siemens head Heinrich von Pierer said 2003 will be another difficult year for the company, although once its restructuring measures have been implemented, the worst should be over. “One simply must see that the slump has lasted longer than expected,” von Pierer said citing a delayed recovery in the U.S. as one reason. Von Pierer said, however, he is confident for 2003 because Siemens “is prepared.”
Cisco Systems said that its customers are increasingly having a harder time projecting their near-term business prospects in the weak spending environment. Per CEO John Chambers “their visibility...is getting tighter, but I think that actually tightness has increased a little bit over the last several months in terms of what they’re seeing.”
Intel CEO Craig Barrett said he did not expect a real turnaround in computer sales until companies returned to profitability and started spending on technology. “I expect some uptake in (personal) computer buying during the holidays but I don’t know how strong,” Barrett said. “(But) a turnaround will happen when there is corporate purchases of IT infrastructure and that cannot happen until there is corporate profitability in the United States, Japan and Western Europe...It is very difficult to predict when that will happen.”
The Electronic Components, Assemblies & Materials Association (ECA) reported little or no movement in its August electronic component index. The much-anticipated recovery in the second half of the year remains elusive, according to Bob Willis, ECA president. “The economy and electronic component sales are both waiting on optimists to outnumber the pessimists, while most linger somewhere in between.” The distribution channel continues to struggle with an inventory surplus of last year’s products, according to Willis. “Manufacturers and distributors are having trouble moving these inventories as demand increases for newer and smaller components.”
Electronic Equipment
Computers
IDC lowered its PC market forecasts for 2002 and 2003 to reflect weakening demand for PCs from both consumer and business users. Total worldwide PC shipments are now expected to reach 135.5 million in 2002 on growth of 1.1%, with growth of 8.4% projected for 2003. The numbers were reduced from the June forecast for growth of 4.7% in 2002 and 11.1% in 2003.
Dell Computer plans to close its Austin, Texas notebook assembly plant and move production to Penang, Malaysia. After closing the Austin plant, Dell will ship half-finished notebooks manufactured by three Taiwanese notebook makers - Quanta Computer, Compal Electronics and Wistron - to Penang first for final assembly and software installation, and then ship the finished products to retailers in the US.
Communications
Nortel Networks executive Frank Plastina predicted that network-equipment spending by the world’s telephone companies will be unchanged or fall “slightly” next year. Any decrease will be in a “very modest, single digit range,” said Plastina.
Cisco maintained its lead over the traditional telecom equipment manufacturers for the second straight quarter for total Q2 2002 communications equipment sales. The top five players all gained share, with Cisco and Ericsson experiencing the greatest share gains.
WW Total Communications Equipment Market Shares
Q2 2002
Q1 2002
Cisco
14.6%
12.9%
Siemens
11.7%
11.4%
Alcatel
10.2%
10.1%
Nortel
9.8%
9.7%
Lucent
7.8%
9.5%
Ericsson and Motorola are preparing for the expected “gold rush” in China’s telecoms market after next year’s launch of a 3G mobile communications system. “The large-scale development of 3G is quite close to us now,” said Kurt Hellstrom, president and CEO of Ericsson. Hellstrom predicts annual revenues from 3G by 2005 will account for more than half of Ericsson’s revenues. Currently, 3G accounts for about 10% of Ericsson’s revenues.
Taiwanese mobile-phone manufacturers BenQ, Compal Communications and Quanta may get increased orders due to a proposed business alliance between Motorola and Siemens. “With Motorola at the helm of the alliance’s cellphone business, Taiwanese handset makers who already have a strong manufacturing relationship with Motorola will definitely benefit,” said Alex Wu, an analyst at China Securities Corp.
Strategy Analytics reported that 26% of cellular handsets worldwide will be made by contract manufacturers in 2002. This will rise steadily to 38% in 2007, as first and second-tier handset vendors seek lower costs, production flexibility and economies of scale. Flextronics will be the world’s largest contract handset manufacturer in 2002, with an estimated 42% share. Flextronics is currently the world’s 3rd largest handset manufacturer after Nokia and Motorola.
Consumer Electronics
World production of home video game machines will reach 41.6 million units in 2002, up 37% from 2001, according to Nikkei Market Access.
PCB Fabrication
IBM and Endicott Interconnect Technologies announced in late September that they will delay the closing on the IBM PCB plant purchase until the end of October. “This is a massive undertaking and we were not going to close the deal until we had a seamless transition,” said James Orband, counsel to EIT and managing partner of Hinman, Howard & Kattell in Binghamton. “We will continue to move forward aggressively to get it closed.” Richard Knight, IBM-Endicott spokesman, cites unfinished paperwork and the failure to survey more than 100 separate parcels of land as reasons for the delay. The land must be surveyed before it can be legally transferred to EIT.
AT&S will buy 4.61% share in local radio technology company Adcon Telemetry. AT&S and Adcon have started a strategic cooperation in the technology and design fields.
Flexxtech sold through its subsidiary, Primavera Corporation, 100% of the shares of North Texas Circuit Board Company of Grand Prairie, Texas to BC Electronics. The purchase price consisted of over $2.25 million that was loaned to NTCB by BC Electronics over the last three months, and 10% of the net profits of NTCB through December 31, 2007.
STP Elektronische Systeme, a subsidiary of Mayer & Cie, will cut 370 out of its 800 jobs, insolvency administrator Volker Viniol said in mid-September. The job reductions will affect the company’s factories in Sindelfingen and Tailfingen, Germany. The job cuts were aimed at avoiding the company’s closure, Viniol added. STP filed for insolvency on July 7, 2002. The company posted 72 million euro in revenue for 2001. Dr. Viniol will oversee a significant restructuring plan to increase the profitability of the company in order to ensure its future and also with the aim of attracting a new owner/investor.
Compeq forecast a 31% surge in shipments to cell-phone makers in China after moving factories to the mainland. The predicted rise in shipments to 55 million PCBs comes as the company won market share, Compeq VP Tong Chia-ching said. He added that the company won’t alter its forecast for a full-year loss and that competition is getting fiercer in China.
Gul Technologies of Singapore said it intends to focus on growing its operations in China by increasing the production of PCBs at its Suzhou plant given the relatively bleak prospects in the second half of this year. “Despite a rise in manufacturing activity in recent months, the electronics industry is not optimistic about second half prospects, and expects global demand to recover at a slow pace as businesses and consumers remain cautious,” the company said in a statement.
Printed Circuit Corporation, Woburn, MA, to facilitate a restructuring of debt and relieve cash-flow issues, filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. “Today’s action provides us with time to restructure our balance sheet while continuing to operate our businesses without interruption,” said PCC President and CEO Glen Kashgegian. “We hope to emerge from this process quickly as a stronger, more competitive organization.” He added that customers, vendors and employees should notice no difference in PCCs operations during the process.
Alcatel Bell will close its PCB production plant in Ghent, Belgium. The market for printed circuit boards, which Ghent manufactures, specifically suffers from the economic downturn and the competitive disadvantage against low cost countries. In parallel, Alcatel keeps looking for potential buyers.
Materials & Process Equipment
Shipley named Carol Eicher Vice President/General Manager Americas and Europe for the PWB Division. Ms. Eicher will now be responsible for European PWB operations, as well as those in North America. Congratulations Carol.
Nan Ya Plastics Corp. will invest US$16 million to establish a copper-clad laminate factory in Huizhou of Guangdong Province, mainland China. The firm has established 15 factories in China to make plastic products, copper-clad laminates, glass fiber, glass fabric, epoxy, copper foil, and PCBs.
Isola Laminate Systems is relocating its North American headquarters from La Crosse, Wisconsin to Chandler, Arizona where Isola has a manufacturing facility. “The relocation will include the construction of an office and technology center on the existing site,” said Michael Kowalski CEO of Isola AG and speaker for the board of directors.
Jim Griffin has been appointed Director of Marketing, Polyclad Laminates, by Cookson Electronics PWB Materials & Chemistry, Londonderry, New Hampshire. He will have global responsibilities for OEM and EMS marketing. Jim’s additional focus will be on strategic planning, product line strategy and the PWB Materials & Chemistry value proposition. Congratulations Jim!
Wagner Rubber purchased Vortex Roller a leader in “microgroove” liquid resist roller-coating applications for the PCB industry. A press release noted that Vortex is exclusively certified by both Shipley and Bürkle, and it is the only globally certified Bürkle vendor.
MANIA Technologie is selling its subsidiary Option Tecnologie Italia to the Italian Igefi Group. The sale of Option Tecnologiie, a high-volume manufacturer of PCBs using mass lamination is part of MANIA’s extensive restructuring program.
Barco agreed with Mania to swap its 33% stake in their JV, ManiaBarco, for an additional 9% stake in Mania. Mania will be left with 80% of ManiaBarco, with the remaining 20% in the hands of financial investors.
Gordon Tindle was appointed Executive General Manager of Enthone., United Kingdom, by Cookson Electronics PWB Materials & Chemistry. Mr. Tindle has overall operating responsibility for the Enthone chemistry, PWB laminate and equipment businesses throughout the United Kingdom and Ireland.
AIK Laminates, Sittard, Netherlands, filed for insolvency on September 27, 2002. AIK laid-off its 48 employees due to lack of orders.
Electro Scientific Industries (ESI) is relocating its Electronic Component Systems manufacturing (multilayer ceramic capacitors) from Escondido, CA to the company’s headquarters facility in Portland, OR.
Following the closing of Robertson Stephens, Keith Dunne is now Managing Director – Research Analyst with RBC Capital Markets in San Francisco.
Dover Corporation acquired Hover-Davis, a manufacturer of component feeder systems for the electronic assembly automation industry. Hover-Davis will be reported as part of the Circuit Board Assembly and Test products in the Dover Technologies subsidiary.
Electronic Manufacturing Services
Flextronics has 19 million square feet of manufacturing space worldwide. In Asia, it has 9.3 million square feet, excluding its Shanghai Industrial Park, which is still under construction. “Our plants in Asia are running at high capacity of between 80 and 85%. But for the rest of the world, we still have available capacity,” Executive Vice President Jim Sacherman said in early September.
Flextronics said it will lay off 200-300 employees at its Kyroskoski, Finland plant due to weak demand. “These... streamlining efforts are aimed at improving the company’s competitiveness both locally and globally,” Flextronics said. The Kyrokoski plant currently employs around 680 people.
Hon Hai Precision Industry secured an order worth NT$12 billion from Nintendo to assemble its Game Boy and Game Cube game consoles. The Nintendo order is expected to expand to NT$25 billion next year. At the same time, Nintendo has decided to outsource power supplies from Delta Electronics and printed circuit boards from Nan Ya PCB.
Ionics of the Philippines is under increasing pressure from its customers to relocate to China, local newspapers reported, citing Ionics chairman and CEO Lawrence Qua. He said the pressure has become “more intense” following China’s entry to the World Trade Organization. Ionics’ clients, including IBM, Fujitsu and NEC, have been planning to tap the China market, Qua said, adding that these clients want their suppliers to make the same move.
Jabil Circuit will lay off 500 workers by the end of the year and close its Meridian Idaho manufacturing plant. A company spokeswoman said demand for Jabil’s telecommunications and networking products has dwindled. Jabil, which employs 17,000 worldwide, targeted the Meridian plant for closure because of performance issues. “The three things that we considered were its historical performance, its manufacturing capabilities and its organizational depth,” Lisa Allison said from the company’s headquarters in St. Petersburg, FL.
Sanmina-SCI said it sees an essentially flat market for the next six to nine months and may cut costs further. CEO and Chairman Jure Sola said Sanmina-SCI was making good progress in talks with banks on its revolving debt. The company also has about $1 billion in cash to help ride out the hard times, he said.
Sanmina-SCI’s staff at its Heerenveen, northern Netherlands facility has been able to prevent two of the company’s six production lines from being moved to its branch in Hungary, it was reported in late September.
Solectron CEO Koichi Nishimura will step down in a year. “The board has agreed to move forward with the succession process now to ensure a seamless transition and continuity of our long-range plans,” he said. “I will continue in my role as chairman of the board, and I will also continue as CEO until my successor is identified and the transition is completed.”
Venture Manufacturing of Singapore agreed to buy a plant in Malaysia from customer Iomega for an estimated US$8 million. Iomega operates a 376,000-square-foot facility in Penang that manufactures storage drives, cartridges, service parts and accessories. The purchase also grants Venture exclusive manufacturing rights for Iomega’s Zip drives for the next five years.
Viasystems filed for protection under Chapter 11 of the U.S. bankruptcy code, listing assets of $1.6 billion and debts of $1.1 billion. Viasystems said that restructuring would reduce its debt load to $380 million.
Semiconductors
Global sales of semiconductors rose 2.2% in August from July and rose 14% from August a year ago. “After 5.6% sequential growth in the first quarter of 2002 and 5.8% growth in the second quarter, the double-digit year-over-year increase in August sales is yet further evidence of a sustained and durable recovery,” said SIA President George Scalise. The wireless market continues to be the strongest, paced by strong growth of chips used in handsets and fueled by subscriber growth in cellular service in Asia and by existing customers upgrade to phones with newer technologies, the SIA said. China is the biggest cell phone market in the world.
North American-based manufacturers of semiconductor equipment posted $1.12 billion in orders in August 2002 (three-month average basis) and a book-to-bill ratio of 1.14, according SEMI. “The decline in orders was anticipated considering recent announcements from chip and capital equipment manufacturers about the poor visibility for the semiconductor industry in the second half of this year,” said Dan Tracy, Ph.D., director, Industry Research and Statistics for SEMI. “While bookings are considerably higher than one year ago, the overall order trend is not providing any signal of substantial further improvement this year.”
Tokyo Electron, Ebara and Dainippon Screen Mfg. Formed a joint venture company to develop, manufacture, and market a “low energy electron beam direct writing system.” This is a mask-less lithography system that pursues quick turnaround time, advantageous to smaller manufacturing operations with a large variety of devices, as seen in system on a chip (SoC) and system LSI chip products.
Motorola will sell its Goochland County, VA property. The news ended seven years of preparation, promises, delays and doubts about one of the Richmond area’s most celebrated economic development programs. Motorola’s planned $3 billion, 362 acre, 5,000-job semiconductor factory had been expected to help transform Richmond from a banking-and-tobacco town into a high-tech center.
Other
Motorola said its new GPS satellite sensor is small enough and cheap enough for practical use in consumer-electronics devices such as cell phones and notebook computers. “All of a sudden, starting 10 or 15 years ago, every electronics device had a clock,” said Tim McCarthy, business director for GPS at Motorola’s Automotive Group’s Telematics Division. “I see position awareness going down that same path. It’s just a question of how long it takes.”
Oji Paper developed a non-contact IC card (radio frequency identification, or RFID) embedded with optical writing electronic paper - using “E-Paper” technology developed by Fuji Xerox.
Walt Custer
Custer Consulting Group
Phone: 707 785-1777
FAX: 707 785-1988
E-mail: walt@custerconsulting.com
This article was originally published in CircuiTree magazine and is reprinted here with permission.