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Electronic Industry Growth Resumes
September 22, 2003 |Estimated reading time: 1 minute
Electronic Industry Growth Resumes By Walt Custer September 22, 2003
After almost a three-year downturn, global business conditions are finally improving. Growing end-market demand and increasing inventory replenishment activity will be coupled this autumn with the normal pre-holiday "seasonal upturn." All these factors combined should ensure that the companies that "survived" the last three years will finally enjoy better business. Per Chart 1, the entire global electronics "food chain" will enjoy modest growth in 2003, and this upturn should continue at an accelerating rate in 2004 and beyond.
Of course China and other "low-cost areas" will benefit the most, but all geographic areas can expect improving conditions.
In the USA, electronic equipment orders (Chart 2) have shown steady improvement since last November. The initial U.S. recovery "drivers" were strong military, medical and security electronics orders, but now improving computer shipments (partially "homeland-security" driven) and an up-tick in Internet infrastructure orders are supporting a growing demand for the "higher-end" PCBs. Lead times are stretching out, and downward PCB price pressures have been tempered. Looking forward to next year, the "fixed telecom" companies are finally predicting a recovery in 2004 as new wired infrastructure is needed to support the 3G mobile and Internet buildups. With all major end-markets growing, the "food chain" suppliers will inevitably benefit.
Europe (Chart 3) will be delayed in its recovery compared to the USA, due to the strong euro's negative effect on exports, the EEC limits on expansionary monetary policies, and relatively high debt the Western European telecom companies incurred while over-investing in the 2000 boom.
Also, both Western European and North American growth will certainly be tempered by the shift in manufacturing to China and lower low-cost areas, but still everyone should benefit.
How can we monitor the world recovery? Global semiconductor shipment data provide a timely quantitative measure of electronic equipment assembly activity (chip consumption) by region. Per Chart 4, Southeast Asia has been expanding since mid-2001 and Japanese growth renewed in early 2002. Based upon the SIA data through July, Western Europe and North America are finally showing the first hints of growth. The August and September data should be even more encouraging.
The recovery is underway. In my future PCB007 columns, I'll monitor the upturn in each sector. But we are definitely on our way. It feels good to finally be in the growth portion of the business cycle.
Walt Custer www.custerconsulting.comwalt@custerconsulting.com