-
- News
- Books
Featured Books
- pcb007 Magazine
Latest Issues
Current IssueThe Growing Industry
In this issue of PCB007 Magazine, we talk with leading economic experts, advocacy specialists in Washington, D.C., and PCB company leadership to get a well-rounded picture of what’s happening in the industry today. Don’t miss it.
The 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.
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - pcb007 Magazine
North American Market Improving; SARS Scrambling Global Picture (June 2003)
June 16, 2003 |Estimated reading time: 15 minutes
North American Market Improving; SARS Scrambling Global Picture By Walt Custer June 1, 2003
Although there are conflicting signs, I believe the North American electronics market has finally "turned the corner" and is now growing on a sustainable basis. Unfortunately, in addition to real growth, some of our gains are due to the SARS crisis in Asia and possible inventory building. However business does look like its improving. Consider the following:
Good News
- Electronic equipment orders growing
- up 13% from November 2002 to March 2003 (Chart 1)
- All equipment end markets are expanding
- computers, communication, instruments and military (Chart 2)
- Electronic equipment Inventories are minimal
- lowest levels since 1994, down 32% from peak in February 2001 (Chart 3)
- Iraqi war activities have lessened, allowing more focus on domestic economy
- Consumer Confidence Index is up substantially
- 81.0 in April from 61.4 in March
- Oil prices have dropped
- $28.25/barrel in April vs. $33.55/barrel in March
Concerns
- Electronic equipment order growth may be a temporary buildup in reaction to Iraqi war and SARS
- Business confidence remains low
- purchasing managers index dropped in April (45.4 vs. 46.2 in March)
- Unemployment is increasing
- 6% in April vs. 5.8% in March
- Component orders dropped in April
- although electronic equipment orders rose
- Global semiconductor shipment growth is slowing (Chart 4), North America is flat (Chart 5) and has gone from the #1 chip consumer in 2000 to #4 in March 2003
- IT spending plans still anemic
- the "business purse strings" are still tied (Chart 6)
Will the "concerns" change soon? I think so. My guess is that we have seen the worst and will soon experience sustainable improvement in both the domestic economy and electronics sector. The buying indices should rebound soon. Employment (a lagging indicator) will take a bit longer. IT spending plans are heavily dependent upon business confidence and corporate profits. Capital projects have been delayed and IT equipment is aging. There is certainly impetus for new spending.
What about North America's dramatic drop from the #1 to #4 chip consumer? I believe it is due to multiple factors:
- Significant electronic equipment production was shifted to "low cost" Asia
- North America's "traditional high-growth end markets" (communications, Internet Infrastructure and semiconductor test & measurement) were hit much harder in the 2001/2002 downturn than consumer electronics and personal computers (Asia's stronghold). Our end markets were hit harder - hence North America's larger decline
- Demand dropped due to our flat domestic economy and low consumer/business confidence - made worse by war, terrorist scares and accounting scandals
With an improved geopolitical situation, low inventories and growing demand, domestic manufactures should benefit. But don't overlook the global effects of the SARS outbreak.
SARS Impact Consider the implications of the following recent news items:
- Acer slowed plans to move notebook computer orders to factories in China, due to the spread of SARS. (Taiwan's reliance upon "low cost" China is now in question)
- Tech firms that do business in Asia are seeing their China sales drop sharply as consumers avoid crowded stores due to the SARS outbreak. Mobile phone handset makers are feeling the largest effect. China has the most mobile phone users in the world, and is expected soon to overtake Japan as the number-two PC market. (China's large internal demand is suffering)
- SARS in China's Pearl River Delta is threatening the production structures of foreign companies that have increasingly shifted their manufacturing bases to the region. These factories are especially vulnerable because production efficiency in the delta is the product of manual labor, rather than automated devices. Also because industries are so concentrated in the delta, if SARS were to affect the operations of a company's suppliers, the company itself would also feel the impact right away. (Labor intensive, close proximity supply chains are especially vulnerable to SARS)
- SARS is affecting AVX's plans to cut jobs and move some of its production from the USA to countries where it can find cheap labor to help offset continuing weakness in the consumer electronics market. "We continue to be optimistic, but we are forced to wait for worldwide economic conditions to improve," said AVX President John Gilbertson. (North American companies are delaying their rush to China)
- Sony reportedly instructed all its 52 overseas factories to build up inventories of audiovisual equipment components to cope with a possible disruption of the goods distribution market due to the spread of SARS. Many Japanese parts manufacturers are making products in China. Sony is the first major Japanese electronics company to take action in parts procurement in connection with the spread of SARS. If other major electronics companies follow suit, parts demand and their prices will surge. (OEMs are concerned about component supply and are building inventories; a price spiral could result)
China, including Hong Kong, was likely to be the leading producer of eight of 12 key electronic products in 2003. China was expected to account for 40.5% of global output of DVD-ROM drives, 62.2% of DVD players, 35.2% of notebook personal computers, 30.1% of mobile phones, 26.7% of color TVs, and 36.5% of desktop PCs, among others. (China is a key global electronics supplier)
SARS is a tragedy that we all hope will be controlled very soon. It is a bigger problem in densely populated areas. China's assembly factories, heavily dependent upon manual labor, are very vulnerable. Supply disruptions are inevitable and OEMs are reconsidering their vendor base. In a time of increasing demand when much of the North American component capacity has been shutdown, supply issues will be amplified. Inventory building and double ordering could happen again.
Improved demand is badly needed but we don't need another "2000 bubble." Watch carefully!
Electronic Equipment
Computers Worldwide PC shipments totaled 34.5 million units in 1Q'03, a 5.5% increase from the same period last year, according to Gartner (Chart 7).
Handheld device sales declined in 1Q'03 due to sluggish demand from businesses and consumers alike. According to IDC device shipments fell by 21.3% year-on-year in 1Q'03 and dropped sequentially by 26.5% to 2.45 million units.
Top 10 Vendors, Worldwide Handheld Device Unit Shipments and Market Share 1Q 2003 (Preliminary)
RankVendor1Q 2003 Shipments1Q 2003 Market Share 1Palm881,70936.0% 2Hewlett-Packard444,00018.1% 3Sony400,00016.3% 4Dell159,0006.5% 5Toshiba87,3323.6% 6Casio83,2503.4% 7Handspring70,0002.9% 8Sharp68,9602.8% 9RIM51,0002.1% 10GSL48,5002.0% Other158,3006.5% Total2,452,041100%
Communications Worldwide handset shipments grew by 16.6% year-over-year in 1Q03 (Chart 8) and dropped sequentially by 12.4% to 107.6 million units. Nokia remained #1 while LG Electronics replaced Sony Ericsson in the top 5. "The evolution of color displays, digital imaging, and converged handheld devices continues to drive growth in the worldwide handset market," said IDC's Ross Sealfon. "Despite continued economic uncertainty, a strong first quarter supported by new technologies and form factors indicates healthy industry growth during 2003."
Alcatel sold its Paris and Madrid headquarters and a components factory in Belgium as part of plans to raise 1 billion euros from disposals this year. The Belgian factory in Hoboken, which makes electrical network components, will be transferred outright to Scanfil Oyj, the Finnish contract manufacturer.
The optical switch market fell by 11% in 2002, with no signs of an upturn in this sector until 2004, according to Probe Research here. But the optical switch market will begin to show "steady growth" in 2004, and, in total, the sector is expected to grow 143% by 2007, according to Probe.
Products based on Advanced Telecom Computing Architecture are entering the market, with chassis and backplanes leading the way and single-board computers trailing just a few months behind. AdvancedTCA provides a standardized form factor and platform. It supplies the needed performance, in terms of bandwidth and heat dissipation, for the central-office telecom market. Intel is among the major equipment makers now working on AdvancedTCA boards. Others include Artesyn Technologies, Aurora Technologies, Force Computers, Kontron and Motorola Computer Group.
Servers & Infrastructure 3Com is teaming with Huawei to produce high-end networking gear for the large enterprise market. Their joint venture calls for Huawei to produce gear that has 3Com's 'look and feel.'
The market for semiconductor components specific to Wi-Fi LANs almost doubled year-on-year to $471m in 2002, IDC said. Intersil was the 2002 leader with 51% revenue market share. Agere was #2 followed by RF Micro Devices, Atheros, Texas Instruments and Broadcom.
Worldwide server shipments totaled 1.2 million units in 1Q'03, up 10.4% from 1Q'02, according to Gartner. "The worldwide server market performed better than expected in the first quarter of 2003, but the threat of a lingering war with Iraq, combined with a weak economy, still had an effect on IT spending during the quarter," said Gartner's Shahin Naftchi. "As a result, the life cycle for existing large systems was extended and corporate buyers delayed purchases of high-end equipment, preferring the quick returns from short-term investments instead."
Storage Seagate Removable Storage Solutions changed its name to Certance and named Howard Matthews President and CEO. The maker of computer-storage devices, formerly a division of Seagate Technology has about 1,100 employees.
Automotive The automotive semiconductor market will grow from $12.3 billion in 2002 to more than $17 billion by 2007, due to advanced safety, engine and chassis control technologies, according to Allied Business Intelligence. The largest target application for automotive silicon is body and chassis control, which includes electronic traction, suspension and stability control systems.
Consumer Electronics Clothing maker Benetton will not use radio tags to track its clothing, an apparent victory for pro-privacy groups and a blow to Philips. "We are currently analyzing RFID (Radio Frequency Identification) technology to evaluate its technical characteristics and no feasibility studies have yet to be undertaken with a view to the possible introduction of this technology," Benetton said. Philips had earlier said it would ship 15 million radio tags for Benetton's Sisley line of clothing.
PCB Fabrication
Aspocomp said it would start personnel negotiations regarding the possibility of closing down its PWB factory in Padasjoki, Finland. Aspocomp said that the possible closure was required for productive and economic reasons.
Dai Nippon Printing has developed an extremely thin high-density, multilayer PCB that does not use a glass epoxy resin substrate. Circuit layers for the build-up board are piled up on a metal substrate, which is then removed, producing a board that is 80% thinner than existing ones. The board, which consists of circuit layers and an insulating layer, is 0.09 mm thick for two circuit layers and 0.15 mm for three. Both models can be reportedly thinned further to 0.05 mm and 0.09 mm respectively. Dai Nippon Printing has commercialized the board by licensing technology on the basic structure of insulating and circuit layers from NEC and NEC Electronics. The width of a circuit line on the mass-produced board is 25 microns, although the company has succeeded in making a prototype with a line width of 10 microns. Dai Nippon Printing will begin producing the boards at a plant in Saitama Prefecture at an initial rate of 300 000 a month, raising the number to one million by December and five million by March 2005.
DDi now trades on the Over the Counter Bulletin Board under the ticker symbol "DDIC." CEO Bruce McMaster commented, "We do not anticipate that the move to the OTCBB will have any material impact on the Company's day-to-day business activities or its debt restructuring initiatives."
Endicott Interconnect Technologies named Michael Hills VP of Business Development. He will be responsible for business development, product management and customer service.
Gul Technologies Singapore received a $20 million loan from China's Anhui Prime Cord Fabrics, in exchange for a stake in GulTech's China-based unit, GulTech (Suzhou) Electronics. GulTech had announced it would maximize high-end plant capacity in Suzhou, and planned to build a new plant in Wuxi. Upon completion, GulTech's production capacity in China would be triple its existing size. GulTech is a subsidiary of diversified group Tuan Sing Holdings.
Leicester Circuits went into voluntary administration on April 7, but it has now been bought out as a going concern by four directors. The PCB company was set up in 1961 and is one of the oldest surviving UK electronics firms. A Leicester Circuits Director stated "Around 10 years ago, there were probably 450 circuit board manufacturers in the UK. Now there are only around 170."
Nan Ya Printed Circuit Board had sales of NT$12 billion (US$348 million) in 2002, making it the third largest PCB manufacturer in Taiwan, following Compeq Manufacturing and World Wiser Electronics.
Northrop Grumman's Interconnect Technologies business unit has entered the military PCB market.
Tyco Microser will cut 310 jobs from its 661-person workforce in Madrid, Spain and transfer part of the plant's PCB output to its facility in Boecillo, Valladolid, Spain. Tyco Microser will have Euro27.8 million in grants. The Boecillo plant currently has 325 workers, and will receive 80% of the company's PCB output in Spain.
Yashin Industrial is moving most of its PCB production to its Suzhou plant in Jiangsu Province, mainland China but will maintain its Taiwan plant as the R&D center.
Materials Cookson appointed John Yim VP Sales, Asia - responsible for the sales and technical support of Enthone PWB products and processes throughout the Asia Pacific Region.
Electro Scientific Industries placed its President and CEO James Dooley on administrative leave of absence pending the results of an ongoing review of its financial statements for fiscal 2003. Barry Harmon has been named President and CEO. In addition, Jon Tompkins has been named Chairman of the Board to succeed David Bolender.
GSI Lumonics acquired Spectron Laser Systems, a subsidiary of Lumenis, Rugby, U.K. for US$6.3 million in cash. The product lines acquired had sales of approximately US$11 million for CY2002. This acquisition includes both diode pumped laser solid-state technology and products as well as both lamp pumped and CO2-based technologies. Spectron's lasers are primarily used in material processing applications such as marking, cutting plastic and diamonds, silicon machining and micro-welding.
Kaneka is increasing production of polyimide film. It is investing 4 billion yen to add a fifth production line and upgrade equipment at its Shiga plant by the spring of 2004. Domestic production volume will rise to 1,800 tons a year from 1,200 tons at present. With a U.S. plant producing 200 tons a year, the company will have global production of 2,000 tons, a 50% increase from current levels.
Nippon Mining Holdings plans to invest 16 billion yen in its electronics business to boost production capacity for rolled copper foil.
Shipley announced the following appointments:
- Bob Ferguson PWB General Manager, North America. Bob will relocate from Mission Viejo, California to Marlborough, Massachusetts. Congratulations Bob!
- Jean-Pierre Robic PWB General Manager, Europe. Mr. Robic will retain his roles as Shipley Vice President, Europe and Microelectronics General Manager, Europe.
- Wolfgang Schiller will succeed Sean Fitzgerald as PWB Director Sales and Marketing, Europe.
Shipley announced that Unichem Industries will be the exclusive North American distributor for its PCB processing equipment.
Electronic Manufacturing Services
To become less dependent on telecommunications and networking markets, EMS suppliers have been focusing on nontraditional customers in the automotive, medical, industrial and consumer sectors.
Flextronics will manufacture under license power supply units for Celetron's original equipment manufacturers. "This partnership is an ideal match," said Jugi Tandon, chairman and CEO of Celetron. "By licensing Celetron's technology, Flextronics greatly increases the availability of our AC/DC power supply units for our global OEM customers."
Foxconn Electronics (Hon Hai Precision Industry) will set up two R&D centers in a technology park in Tucheng, Taipei County (Taiwan).
LaBarge received a $1 million contract to produce circuit card assemblies for Northrop Grumman's MESA (Multi-role Electronically Scanned Array) radar system.
Plexus will close its manufacturing operations in Kentucky and cut about 400 jobs, or 8% of its work force with production shifted to other sites in the United States and Mexico.
SMTEK International sold its Irish subsidiary to a group of Northern Ireland investors for nominal consideration. The sale of the subsidiary will reduce SMTEK's liabilities and debt structure.
Solectron paid $5 million to acquire operating assets in connection with a supply agreement with Hewlett-Packard. As reported, Solectron may take in as much as $1.4 billion over five years under the manufacturing and supply agreement. The company plans to produce PCBA's and memory modules at its facilities in Puerto Rico for HP's mid- and high-end enterprise servers.
Solectron paid $14 million to acquire assets from IBM. Solectron bought IBM's Global Asset Recovery operations in Raleigh, N.C. and the companies entered into a 3-year supply agreement.
Solectron will close its Westboro, MA plant and eliminate 360 jobs as part of a restructuring that is cutting 12,000 jobs from the company. The plant, established in 1996, makes PCBAs and provides systems assembly services for various electronics products.
Solectron formed a JV with Guangzhou Soutec (Group) Technology (Soutec). The JV, Soutectron Technology (Guangzhou) Co. Ltd. (Soutectron), will be the exclusive manufacturer for cell phones designed and marketed by Soutec, which had revenues of $200 million in 2002. Solectron is majority owner of the joint venture. The JV will lease a building from Soutec on that company's campus in Guangzhou, China. Approximately 850 employees will be hired.
USC Corp. launched an EMS business in China. Consigned production will be undertaken in Shenzhen, China. Once USC has procured the parts and materials, it will outsource assembly to three circuit-board-mounting firms there, including one in which the Japanese company has a 17% interest.
Semiconductors
Worldwide semiconductor sales rose to $12.1 billion in March 2003, a 2.6% sequential increase from the $11.8 billion in February 2003. "A number of the products that were weak in February reversed course, showing renewed demand in March," stated SIA President George Scalise. "The sequential revenue increase we recorded in March, and the 13% year-over-year revenue gain for the first quarter, under trying global geopolitical conditions, demonstrates once again the resilience and strength of this industry."
The SIA revised its 2003 semiconductor growth forecast from its prior 19% down to 10 to 15% due to "geopolitical impact".
North American-based manufacturers of semiconductor equipment posted $823 million in orders in March 2003 (3-month average basis) and a book-to-bill ratio of 0.99. "Signs of some improvements in corporate earnings and in the geopolitical environment provide further hope for recovery this year, however we remain cautious looking out over the near-term," said Stanley Myers, president and CEO of SEMI. "One strongly positive sign is the growth of the test and assembly segment, which has historically preceded overall recovery in the industry. Orders for final manufacturing equipment have increased for three consecutive months and the book-to-bill ratio for the segment has been above parity for two straight months."
Worldwide semiconductor manufacturing equipment sales (excluding test equipment) totaled $18.5 billion in 2002, a decline of 30.4% from 2001 (Chart 9). The market was kinder to companies in "growth" technology segments such as lithography and photomask, copper interconnect, factory automation, contact probe, flip chip, and interconnect bonding in general. Companies more strongly dependent on capacity increases and "Greenfield" activity were more negatively affected.
Walt Custer Custer Consulting Group Phone: 707 785-1777 FAX: 707 785-1988 www.custerconsulting.com/ E-mail: walt@custerconsulting.com walt@custerconsulting.com This article was originally published in CircuiTree magazine and is reprinted here with permission.