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Challenging times ahead... Print E-mail
Friday, 25 July 2008

Regional growth of electronic equipment, semiconductors and printed circuit boards provide timely insight into business conditions in the key electronic centers of the world. Chart 1 shows the 3-month growth of electronic equipment shipments by area. Note Taiwan/China’s large growth-decline (from +36.7% in October’07 to +14.7% in April’08). 14.7% growth is not bad, but for Taiwan & China it is the lowest level since early 2002!

PCB shipment growth has deteriorated even more (Chart 2) as Taiwan/China dropped to almost ‘0 growth’ in March. Semiconductor chip shipments to a region (Chart 3) portrayed an apparent recovery in April, but in some cases these increases may have been due to corrections.

What are ‘corrections?’ Although U.S. end-market demand flattened in April (Chart 4), chip shipments to N. America were still growing (up 6% per Chart 3). Per Chart 5 N. American semiconductor purchases have historically been ‘out-of-sync’ with electronic equipment. In 2006 N. America over bought chips, and in 2007 it then cut purchases—presumably to reduce inventories. In 2008 N. America accelerated chip purchases again to catch up with finished equipment demand. N. American semiconductor growth crossed the electronic equipment line in April and appears headed towards ‘overshooting’ again in coming months (excess inventory building). PCBs are doing the same thing (Chart 6).

Inventory building in a slowing economy is not good. As end market demand wanes, future component orders will inevitably be limited to reduce excess stocks.

Charts 7 and 8 show the 3/12 growth of Taiwan/China’s and N. America’s ‘electronic food chains.’ The same Y-axis scaling was used for both charts to allow easy comparison of the two regions. In recent years N. America has cycled around the ‘no growth’ line while Taiwan/China has been in ‘plus territory’ since 2002.

However 2008 is becoming an increasingly difficult year. Extremely high energy, material and transportation costs and sharply reduced consumer spending will throttle end market demand.

Watch your inventories carefully and be wary of order cutbacks as your customers rethink their needs. Be prepared for hefty price increases to offset dramatically higher material and energy costs.

Charts 9 and 10 contain my colleague Ed Henderson’s most recent predictions on regional GDP and electronic equipment growth.

EMS & PCB markets:

EMS market:
• EMS Industry grew at the annual rate of 17% in 2007, generating $268.1 billion in revenues.—IDC
• iSuppli trimmed its 2006 through 2013 growth forecast for global EMS revenue from 9.3% to 8%.
• Technology Forecasters revised its five-year forecast for the EMS industry downward to 11.2% and raised its ODM sector growth rate to 11.9%

Taiwan’s PCB makers plan to raise prices by between 5% and 15% in 3Q’08 to recoup added expenses from higher labor costs in China, rising gold and copper prices and tight capacity.—Industry sources

Electronic manufacturing services & related assembly activity

Acu-Rite (Jamestown, NY) completed the first stage of its $5 million expansion and factory renovation which included dividing its open manufacturing area into separate, enclosed sections for PCBA, electronic assembly and ‘clean’ assembly.

Adeptron completed $6 million in equity financing with R.H. Global Technologies.

API Alliance received an assembly contract for data destruction devices from Proton Data Security.

Bantam Electronics received a manufacturing contract from JBM Electronics for compact wireless routers.

Benchmark Electronics rented 10,000 sq.m. at Brasov Industrial park in Romania.

Celestica entered into a manufacturing contract with EMC in Brazil for networked storage systems.

Compal:
• asked notebook OEMs for price increases.
• will close its plant in Manchester, UK.
• is setting up plants in Poland and Brazil to reduce its excessive focus in China.

Connectronics Romania, a subsidiary of the Connect Systems group, Belgium, opened a 16,000 sq.m. factory in Oradea, Romania.

Continental invested approximately EUR 24 million in its Budapest, Hungary, plant in 2007 and intends to increase this amount in 2008.

CT Production purchased a three-head APP 654 conformal coating machine.

CTS Corporation authorized the repurchase of up to one million of its outstanding shares of common stock.

Dell expects to have 2,500 workers at its computer assembly plant in Lodz, Poland, by year end 2008.

EB (Elektrobit) cut 59 jobs at its plants in Oulunsalo, Oulu and Kajaani, Finland.

Elcoteq transferred its mobile phone production in Estonia to Hungary and reduced the number of employees at two plants in Estonia from 3500 to 2000 to control labor costs.

EN ElectronicNetwork’s co-founder Rüdiger Hornhardt retired from executive board and GM position.

Flex Circuits added LED placement equipment from Essemtec.

Flextronics:
• CEO Mike McNamara expects the company to add about $3 billion of business from organic growth opportunities.
• named Paul Read CFO after Thomas Smach resigned.
• acquired CEAG’s FRIWO mobile power business unit.
• sold its Multi Vendor Division of ServiceSource Europe to former management members George Buchan, Mark Hesketh and James Bruce.
• had rejected by Russia’s Federal Antimonopoly Service its plans to produce LCD televisions for the Russian market at Elcoteq’s former St. Petersburg plant.
• former VP Claes Winzell was appointed president and CEO of EIS by Semcon.

Foxconn/Hon Hai:
• donated RMB60 million to Sichuan, China, earthquake victims.
• received ‘Investor of the Year 2007’ award in the Czech Republic.
• is building a 32,000 sq.m. assembly facility for HP PCs in St. Petersburg, Russia.
• is setting up a cell phone plant in Broward County, Florida.
• is building a R&D center in Kaohsiung, Taiwan, scheduled to have 3,000 workers.
• launched its first Green Series motherboards.
• is establishing Hong Hai University, an EMBA school for the company’s future executives and successor to Terry Gou.
• is entering the contract notebook PC business in 2009.
• was ranked No. 5 Among ‘Top 1000’ firms in China, HK & Taiwan in 2007 by CommonWealth.

Fujitsu Telecommunications is moving its PCB manufacturing from Birmingham, UK, to Texas by September 2008.

Global Innovation selected Cimnet Systems, a Consona ERP solution, for streamlining operations.

Hormann Electronics, Cork, Ireland, entered into receivership.

IEC Electronics acquired Val-U-Tech (wire harness assembler in Victor, N.Y).

Incap:
• named Sami Mykkänen president and CEO.
• is building a new plant in Tumkur, India.
• entered into a contract manufacturing agreement with Finland’s Slot Machine Association.

Jabil:
• added $150 million to its existing 8.25% senior notes due March 2018 in the 144a private placement market.
• received a manufacturing services contract for Location Based Technologies’ PocketFinder.

Jurong Technologies sold its plastic injection molding operations in Singapore, Malaysia and China to MAP Technology Holdings for $26.3 million.

Kimball Electronics plans to build a 70 million zloty (US$32 million) factory in Poland for electronic components for the automotive and medical industries.

Kitron received new orders from Kongsberg Defense & Aerospace for military RadioLink worth NOK 28.2 million.

Kovio moved its headquarters to a 95,000 SF facility in Milpitas, CA. The new facility supports volume production of printed silicon electronics.

LaBarge received a $1.6 Million PCBA contract for military radar systems from Lockheed Martin and a $12 million contract from Northrop Grumman for its MESA radar system.

Mara Technologies purchased four Assembléon pick & place machines.

MSI:
• entered the automobile electronics market by acquiring Jovialtek.
• held talks with Flextronics regarding the sale of its OEM motherboard business which would allow it to focus on its branded business.

PartnerTech and Biotage expanded their cooperation and signed a new agreement to manufacture instruments for DNA analysis and microwave synthesis.

PartnerTech’s customer center in Åtvidaberg obtained medical device manufacturing accreditation” in Japan.
 
Plexus secured a manufacturing contract for Irisys’ thermal imagers.

Prism Electronics received a PCBA order from ERB for rail signaling equipment for the Gautrain Rapid Rail Link project.

Radius Group Sweden is investing €1 million to construct a new PCB assembly department for power supply applications in Karlskrona, Sweden, after management decided to bring back production from the company’s EMS providers.

Raven Industries elected Daniel Rykhus a member of its board of directors.
 
Rommtech-3S (Rommens and Security Smart Systems JV) opened a CEM plant in Vratsa, Bulgaria.

Sanmina-SCI:
• will close its plant in Forserum, Sweden, in fall 2008.
• former workers in Guntersville, Alabama, became eligible for extended unemployment benefits from the U.S. Labor Dept.

Solectron’s former site in Cwmcarn, Wales, was partially rented to Relats UK.

Suntron joined Bay Area Houston Economic Partnership.

TT electronics condensed five global electronic manufacturing services businesses into one integrated manufacturing services division.

TVAB is constructing a new plant in Poland to open September 2008.

Viasystems deployed Kinaxis RapidResponse in Mexico and China.

Winland Electronics:
• elected Thomas Goodmanson chairman.
• Sr. VP of sales and marketing Dale Nordquist resigned to pursue his new role as president and CEO of Zareba

Materials & process equipment

1-Source Electronic Components and ChipChecker teamed up to provide a suite of material management services for wholesale buyers of electronic components.

3M Electronic Solutions and Arrow Electronics extended their distribution agreement to include the Americas, Europe and Asia Pacific.

ACE Production Technologies introduced a nitrogen peel-off jet that can improve fine-pitch selective soldering results.

Agilent Technologies introduced a flying leads probing solution for debugging embedded designs.

Applied Materials formed a new solar group, SunFab Operations, which is co-led by Mark Pinto and Randhir Thakur.

Assembléon introduced a new pick & place machine (MC-12) with a top speed of 36k components per hour.

Astro’s former employees secured exclusive distributorships in UK & Ireland for Fuji, Vitronics Soltec and Autotronik equipment by forming a new sales/service company, Productivity Partner Ltd.

Asymtek:
• appointed Chris Brown regional sales manager, UK and Ireland.
• introduced its Spectrum™ S-822 fluid dispensing system with dual-shuttle configuration.

Bando Chemical entered the PCB material market with silver nanoparticles that enable low-temperature sintering.

Blakell Europlacer will distribute EVEST equipment in the UK and France.

Contax received orders for two Universal System through-hole machines from TridonicAtco UK.

DesignAdvance:
• introduced CircuitProbe™, which enables bi-directional cross-probe between layout and schematic (PDF).
• released CircuitSpace v2.2.

Dow Chemical raised prices on all its products by up to 20%.

DYMAX received MIL-I-46058C and IPC-CC-830B certification for its conformal coating Multi-Cure® 987.

Essemtec:
• appointed Florian Schildein marketing manager.
• launched a batch manufacturing solution for customers producing sensor strips on flex PCBs with LED components.

Etek Europe became a representative of Control Micro Systems’ Gen4 PCB laser marking product line in the UK, Czech Republic, Hungary, Romania, Bulgaria, France and Germany.

Five Star Technologies introduced new conductive polymer thick films that enable fine line screen printing.

GÖPEL broke ground for a third building in Jena-Göschwitz, Germany.

Heller appointed Luan Kuqi GM of its new office in Schwabach, Germany.

Hexion Specialty Chemicals filed a ‘Form CO’ with the European Commission regarding the proposed merger with Huntsman.

Huntsman raised prices by as much as 25% “in response to sharp and sustained increases” in costs.

IPTE debuted an in-line, multi-test handler for parallel operation for test or flash programming.

JUKI introduced its high-speed mounting machine FX-3 and dispenser KD-2077, which have an optimized mounting speed of 74,000 chips per hour.

Lincoln International appointed Franklin Harris managing director.

Manncorp released an economical batch-type lead-free reflow oven designed to meet the needs of short-run assemblers with limited budgets or floor space.

MYDATA acquired German distributor Royonic.

Orbotech opened a new demonstration and training center for electronics assembly solutions in Hameln, Germany.

Panasonic F. S. commercialized a new series of insertion machines for components with wires that can reach speeds of 0.08 seconds per component.

Polar Instruments & Xact PCB extended integration between Polar’s Speedstack controlled-impedance PCB stackup system and Xact’s Gemini-X PCB registration, prediction and control system.

Reflex Photonics released its Light on Board HyperDense product line for ultra-short reach optical interconnects.

Renesas and Mitsubishi developed a solder ball machine that can deposit 13-µm-diameter balls using a lead-free solder alloy of silver and tin (Ag-Sn).

Shenmao Technology increased its ASP for solder bumping paste to compensate for higher metal costs.

Tongtai Machine & Tool acquired 70% of Chin Jig Precision Machine for NT$28 million.

Tyco Electronics’ automotive facility in Greensboro, North Carolina, received the 2007 Gold award for Safety from the N Carolina Department of Labor.

Valor Computerized Systems:
• appointed Dan Hoz acting president and CEO after Ofer Shofman retired.
• Samsung Techwin formed a technology partnership that integrated Samsung Techwin’s pick & place machine with Valor’s vPlan and vManage software systems.
• established a technological partnership with Guilin University of Electronic Technology
• integrated its vManage MES solution to World Fair International’s operations.

Recent forecasts:

PC shipments will rise 13% YoY globally to 296 million units in 2008, and continue to grow by 10% in each of the two following years.—IDC

Low-cost PC market will reach $3 billion in worldwide revenue by 2012.—IDC

HDD shipments will grow at a 9%+ CAGR globally between 2007 and 2012.—IDC

Disk storage systems capacity shipments will grow at a 53% CAGR globally from 2007 to 2012.—IDC

Cellular modem shipments will exceed 200 million units globally by 2013.—ABI Research

Spending on WiMax infrastructure, including base stations and equipments will grow to $3.5 billion globally in 2011, more than tripling from 2006.—IDC

Femtocells shipments will reach 100,000 units globally in 2008 and increase to double-digit millions by 2010.—ABI Research

Digital camera shipments will increase 15% globally YoY to 113.12 million units in 2008.

Large-sized (10 inches or longer) LCD market will grow 20% globally YoY to $88.9 billion in 2008.—iSuppli

Touch panel market is on track to grow to $3.3 billion and 660 million units globally by 2015.— DisplaySearch

GPS-enabled handsets shipments will exceed 550 million units by 2012.—ABI Research

Navigation devices and systems revenues are will reach US$62 billion by 2012.—ABI Research Forecasts
 

Electronic equipment end markets:

Japan’s PC shipments grew 0.1% YoY to 13.04 million units in fiscal 2007.—MM Research Institute

Worldwide motherboard shipments reached 148.8 million units in 2006.—MIC

Worldwide server shipments grew 7.6% YoY to 2.3 million units and revenue increased 4.3% to US$13.6 billion in 1Q’08.—Gartner

Global supply of 2.5-inch HDDs may run short in 3Q’08 due to fast growing demand for use in Eee PCs, mini notebook PCs and UMPCs.

Worldwide sales of wireless LAN equipment, including independent and dependent access points and WLAN switches and controllers, increased 20% YoY to $1.9 billion in 2007.—Infonetics Research

Intel is investing $1B in a WiMax JV between Sprint Nextel and Clearwire.

TV unit shipment growth slowed to 1% YoY globally in Q1’08.—DisplaySearch

Worldwide plasma display panel module shipments reached 3.65 million units in 1Q’08.—Displaybank

Mobile phone sales increased 13.6% globally YoY to 294.3 million units 1Q’08.—Gartner

India had 234 million users of mobile phone services at the end of 2008.

India’s electronics, computer software and services export value rose 41.5% YoY to $36.6b in 2006-2007.

Japan’s mobile phone shipments rose 6% YoY to 51.67 million units in 2007.—JEITI

Mobile navigation on-board device shipments were up 130% globally YoY to 39.0 million units in 2007.—Canalys

 

 
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