N. America; a few bright spots on the horizon

Citation

(1999), "N. America; a few bright spots on the horizon", Circuit World, Vol. 25 No. 3. https://doi.org/10.1108/cw.1999.21725cab.020

N. America; a few bright spots on the horizon

USA

N. America ­ a few bright spots on the horizon

In spite of the "Asian Crisis" the US economy fared well in 1998 with low inflation, strong GDP growth (Figure 2) and low unemployment. However, the strong dollar versus the Continental European and Asian currencies coupled with the local Asian recessions significantly impacted US electronic equipment trade (Figure 3). Despite good internal (domestic) demand electronic equipment growth was somewhat stifled by reduced exports of communications equipment, instruments and measurement and control equipment.

Figure 2 US gross domestic product, quarterly change (1987$) Figure 3 US electronics exports and imports

Even with the reduced exports US electronic equipment growth was reasonable. Orders rose 12.1 percent and shipments 3.8 percent (Table I) as 1998 finished strongly for equipment bookings. Figure 4 shows the 12-month average $ orders for the largest equipment end markets and Figure 5 details the shares of each equipment category.

Table I

1998 US electronic equipment orders and shipments ($ growth)

		Orders		Shipments
		(%)		(%)
Computer and office	+20.5				+5.7
Communications	+16.4				­0.9
Search and navigation
(Military)	+3.1				+3.6
Measurement and control
(including instruments)	­6.2				+1.9
Total of above	+12.1				+2.9
Household audio and
visual			N/A		+3.8

Figure 4 US electronic equipment bookings, 12-month rolling average

Figure 5 US production of electronic equipment, 1998 estimate ($b)

Unfortunately PWBs did not fair as well as electronic equipment in 1998 as orders declined 1.7 percent impacted by price degradation especially from those Asian countries that were trying to "export themselves out of a recession". The weak Asian currencies versus the US$ did not help the situation. Table II shows that in general electronic components did poorly in 1998.

Table II

1998 US electronic components and related items

		Orders	Shipments
	Units	(%)	(%)
Semiconductors
(N. America)	$	N/A	­8.7%
Rigid PWB	$	­1.7%	+0.8%
Flex circuits	$	­2.7%	+2.9%
Rigid laminate
(including prepreg)	SF	N/A	­2.6%
Industrial production	$	N/A	+3.7%

Notes: N/A = data not available

Besides the trade deficit and currency issues poor inventory management created demand surges (and declines) which exacerbated PCB price degradation. Figure 6 shows microcomputer (PC) shipments on a quarterly basis. Notice the increasing seasonality of the personal computer industry. The pre-Christmas "stock building" boom is typically followed by a post-Christmas inventory reduction period. Since the PC industry consumes about one-third of the world's multilayer PCB production these demand surges followed by idleness create periods of low PCB capacity utilization. Last spring when PC production plummeted, the major Asian PCB manufacturers (supported by weak currencies) cut prices in an attempt to fill their factories. Globally PCB prices dropped as excess capacity flooded the market. Unfortunately this seasonality appears to be getting worse rather than better (Figure 6). Strong fall/winter PC demand encourages further multilayer capacity buildups on a global basis.

Figure 6 Microcomputer shipments to the USA

As we have entered 1999 what can we expect? Fortunately electronic equipment demand has improved, the US economy remains healthy and SE Asia is slowly recovering. The worst is probably over. Per Figure 7 N. American PCB orders increased 8 percent (December 1998 versus December 1997) and the one-month book/bill ratio jumped to 1.085. On a dollar basis PCB bookings are on an upward trend (Figure 8) and they should improve further. Figure 9 shows the three-month growth (3/12 rate of change) of electronic equipment versus PCB orders. The gap (equipment growing at +12 percent, PCBs declining at ­6 percent) cannot continue. I believe a short-lived PCB growth spurt will occur soon in the USA to "balance out" this chart. Longer-term 1999 should be a year of modest growth, perhaps aided with Y2K driven "replacement" purchases of personal computers later in the year.

Figure 7 December US PCB growth indicators

Figure 8 US rigid PCB bookings

Figure 9 US electronic equipment versus PCBs, $ bookings growth