PCB orders (green bars) dipped in September (Chart 1) after a half-hearted recovery in July and August.

Chart 1.

Unfortunately N. American printed circuit bookings had been “outgrowing” electronic equipment demand in mid-2004, and September saw a downward “adjustment” to bring PCBs in line with end-market growth.

In early November we received a strange surprise. The U.S. Department of Census reported a massive surge in September electronic equipment orders. Hallelujah, we have finally “recovered!”

Unfortunately the overwhelming cause for this increase was one huge, non-recurring military satellite order.

Chart 2.

Chart 2 shows total monthly U.S. electronic equipment orders and shipments and the yellow arrow highlights the impact of the satellite order. Without a little “digging” into the DOC data we could have easily concluded that overall electronic demand was booming again. Not so. It’s most likely a 1-month “blip.”

Chart 3 shows electronic equipment orders by end-market.

Chart 3.

The satellite order was reported in “defense communications,” a subset of total datacom and telecom “communications” equipment (green line). Although the satellite order put communications equipment in the spotlight, all sectors improved modestly in September. At the same time inventories remained in control.

Semiconductor shipments to a geographical area (chip consumption) are a timely barometer of electronic assembly activity worldwide.

Chart 4.

In early November the SIA issued a new multiyear forecast for chip shipments (Chart 4). Sadly 2005 is projected to be “down year” in N. America with semiconductor shipments off 5%. Worldwide demand is expected to be flat. On further analysis early 2004 was very strong and then demand slowed in the second and third quarter. We are now growing again but the 2004/2005 “annual flatness” SIA forecast is partially due to a comparison that includes a very strong 1Q’04.

Chart 5.

SE Asia has gained tremendous share in electronic assembly (moving from about 25% of the world in 1999 to almost 43% today). Most of this gain came at N. America’s expense--both due to outsourcing and shifts to “low cost” manufacturing as well as the sharp decline in telecom/datacom demand (N. America’s prime market) following the 2000 “bubble.”

Based upon the above information it appears our early 2004 recovery has now stalled and we all need to adjust our businesses for a flat 2005 with the only growth coming in SE Asia.

That’s life as I see it.

PCB Fabrication

Advanced Circuits was named to Deloitte & Touche’s Technology Fast 50 Program for the sixth consecutive year.

Airex appointed Mamoru Kuroiwa, president succeeding Toshiyuki Takenaka who resigned for health reasons.

Aspocomp’s sales growth may slow in 2005 due to production capacity limits. It is reviewing new plant options. Acquisitions are not ruled out.

AT&S completed installation of its third and fourth production lines at its Shanghai plant. It has built four production lines in China since the beginning of 2003. AT&S is also planning a second plant in Shanghai costing 80-100 million euros.

Elec & Eltek will spend HK$400-500 million on capacity expansion in its PCB and LCD business to support growth in component demand from China’s electronics manufacturers. About HK$300-400 million will be spent on increasing its PCB production capacity by about 10% to 42 million square feet a year.

Kingboard Chemical Holdings offered to buy shares it doesn’t already own in Hong Kong’s Elec & Eltek International Holdings. Kingboard already owned 27.7%.

Europrint opened a 1.1 billion Hungarian forints, 120-person factory in Felsotarkany, northeastern Hungary. It will export 70% of its production to EEC countries and sell the rest domestically. Europrint targets sales of 1.2 billion forints (4.9 million euro) for 2004.

One Way Circuits (Norfolk, UK) acquired Circast Electronics (Warwickshire, UK). Both manufacturing plants will continue to operate under their existing names.

Lenthor Engineering (Milpitas, CA) was approved by DSCC for fabrication of Defense related rigid-flex and flex interconnect PCBs under MIL-PRF 50884.

Parlex signed a $5 million working capital line with Bank of China. Jon Kosheff, CFO and Treasurer, stated “stand-alone financing for our China operations is a critical step to sustaining our growth plans. Our China business grew 65% over the past year. Further, we expect similar growth in China to continue during fiscal 2005 with first quarter revenues exceeding plan.”

PPC Electronic, Switzerland laid off 50 of its 270 employees. Chairman Giorgio Dognini said that the continuing price competition on the world market required an increased concentration on high-end-products.

Unitech Printed Circuit Board and Advance Printed Circuit Board, Taiwan are increasing 4-layer HDI board capacity used in SD/MMC memory cards. Unitech will raise capacity to six million units by year-end, up from three million at present.

Yu Fo Electronic, Taiwan will increase its monthly PCB production capacity at its Hueizhou plant in Guangdong from 46,000 square meters to 140,000 square meters by 2005.

Materials & Process Equipment

Cookson Electronics set up its India research center in Bangalore and plans a manufacturing scale SMT assembly line for electronics assembly and semi conductor device packaging in a year. The company also appointed Steve Corbett chief executive of its Electronics division, reporting to Nick Salmon, CEO of Cookson Group.

Dielektra, after being divested by Park Electrochemical, was purchased out of insolvency by local management and continues to supply laminate from its Cologne, Germany plant. Juergen Lakomy is the president.

Dover Corporation expanded its subsidiary structure from four to six reporting market segments and concurrently realigned its 49 operating businesses into 13 more focused business groupings.

Dow Chemical increased its epoxy resin prices in North America. The increases are in addition to those previously announced in September (effective October 1, 2004) which included Dow’s full line of epoxy resins and hardeners.

DuPont Printed Circuit Materials has outsourced its European dry film photoresist slitting & finishing operations to Wrapid and relocated its customer service center to Luxembourg.

DuPont Electronic Technologies and Cheil Industries (part of the Samsung Group) formed a 50/50 joint venture to manufacture Pyralux® adhesiveless, flexible copper clad laminate in Gumi, Korea. Startup is in 3Q’05 with an initial capacity of 100,000 square meters per month.

Excellon Automation appointed Kurt Weber VP, Advanced Manufacturing Technology and Yaron Shani, Director of Engineering.

Gia Tzoong Enterprise, Gold Circuit Electronics, HannStar Board and Yang An Electronics have recently introduced rigid-flexible PCBs to the market.

Kanebo will sell its glass fiber operations to Nitto Boseki. The operations generate about 2.3 billion yen in sales and employ 83 workers.

Mitsui Chemicals will start sample shipments of Aurum thermoplastic polyimide resin in Japan and other Asian markets. It has a Tg of 250C and can be molded by extrusion. 70-80% of Japan’s polyimide film is used for flex circuits.

Resolution Performance Products increased all off-list prices in the Americas region for its liquid and solid epoxy resins by five cents per pound. A spokesman stated “continued strong demand has caused increasing tightness in supply for epoxy resins and its precursors, particularly Bisphenol A. Some customers are having difficulty obtaining sufficient epoxy resin to support growth in their business.”

Taiwan Union Technology’s new laminate plant in Changshu, Jiangsu Province (China) will begin operations in 1Q’06 with 300,000 square feet in monthly capacity.

Taiflex will set up two flex laminate plants in Kunshan (Jiangsu Province) with construction finished in 2Q’05.

Electronic Manufacturing Services & Related Assembly Activity

BenQ may set up manufacturing lines in Slovakia due to the tariff reasons.

Celestica may produce parts in Russia as local demand for personal computers and communications equipment grows.

Elcoteq Network agreed with Vitelcom Mobile Technology to manufacture CDMA phones for the local market in Manaus, Brazil. It is also building a manufacturing facility for the first “Made-in-India” mobile telephones. The 1000-person facility will be on 2500 square meters of land in the Electronics City, near Bangalore. Elcoteq manufactures handsets for Sony Ericsson, Motorola, Philips, and Aastra.

Elcoteq will also provide inbound raw materials logistics management and post production service through Tradeport Hong Kong logistics centre to serve Elcoteq’s South China manufacturing facilities. The company will spend $100 million on a new 1500-person telecom equipment production plant in St. Petersburg, Russia.

Flextronics cut 150 jobs at its 620-employee factory in Laval, France, blaming market share loss by Alcatel, its main customer. It bought Brazilian fixed-line maintenance firm TSP Telecommunication Services. With the acquisition, Flextronics will be able to offer maintenance service to the Telefónica network in São Paulo and the rest of Latin America.

Flextronics will acquire Agilent’s camera module business. “Agilent’s market-leading camera module business, coupled with our existing ODM and camera module capabilities, will strengthen our component offering and industry-leading position in the mobile communications market,” said Flextronics CEO Michael Marks.

Foxconn Electronics will produce automobile parts and components in China as part of its diversification efforts, which include recent investments in telecommunications equipment and TFT-LCD products.

Hon Hai Precision Industry plans to raise as much as HK$1.2 billion from an initial public offering in Hong Kong by the end of this year. Its parent Hon Hai is the biggest electronics firm in Taiwan.

Kaga Electronics plans to improve its EMS business, boosting sales from 53.3 billion yen last fiscal year to 100 billion yen in fiscal 2007.

Nokia launched a new 50 million euro production hall at its Komarom, Hungary plant, doubling its production capacity and making it Hungary’s leading exporter.

NOTE AB will lay off 195 employees at three of its units in Sweden, relocating most of its production to EEC countries in Central Europe.

Panasonic is cutting 500 people at its Pentwyn, Cardiff, Wales, UK plant, switching production of TVs and set-top boxes to the Czech Republic.

Pemstar announced restructuring programs to save $5 million annually. It will reduce its Americas region workforce and manufacturing capacity in order to enhance productivity and cut costs.

Royal Philips Electronics is selling its Kwidzyn, Poland television assembly plant to Jabil Circuit.

Siemens may transfer up to 400 jobs at Siemens VDO, its automobile electronics division, from Wurzburg, Germany to the Czech Republic.

Sanmina-SCI received the Customs Trade Partnership Against Terrorism (C-TPAT) certification from U.S. Customs and Border Protection (CBP). C-TPAT is a joint government-business initiative designed to strengthen supply chain and border security, and to ensure the continued free flow of international trade.

SMTC appointed. John Caldwell President and CEO. It also named Patrick Dunne Sr. VP, Operations. It also filed for a one-for-five reverse stock split of its outstanding shares of common stock effective October 4, 2004.

SMTC plans to lay off 150 employees in the third and fourth quarters as it moves most of its assembly operations to Mexico. The layoffs, which will cost between $2 million and $3 million, are part of its ongoing restructuring plan to return to profitability after three years of losses.

Solectron appointed Matti Virtanen Sr. VP and president of Europe, the Middle East and Africa. His prior experience includes Nokia, Hewlett-Packard and Compaq. It is hoping to gain European revenues from networking equipment. Matti Virtanen said that areas such as WiFi will become more important as the pressure to reduce prices grows.

In addition, Solectron sold its Microtechnology business to Francisco Partners. The business produces frequency control products and hybrid microcircuits. It also sold C-MAC MicroTechnology to Private Investors. The financing comes from two funds: Francisco Partners and Shah Capital Partners.

Finally, Solectron will manufacture AMD’s new Personal Internet Communicator, a new consumer device developed to provide affordable computing and Internet access in high-growth markets.

Sypris Solutions acquired ArvinMeritor’s Commercial Vehicle Systems, Kenton, Ohio facility.

Visteon will invest 40 million euros in a new 400-employee manufacturing facility in Nitra, Slovakia, to support new business with Kia and PSA Peugeot Citroen. Production will begin in the spring of 2006. Visteon has plants in Czech Republic (Novy Jicin, Rychvald and Hluk), Poland (Praszka and Poznan) and Hungary (Szekesfehervar).