The U.S. electronics industry’s business environment was relatively stable in 2006. Domestic electronic equipment orders (other than March’s spike and October’s dip) were flat from February to November (Chart 1). Globally 2006 was a year of solid growth (other than the Q4 FY06 personal computer dip due to Microsoft’s Vista delay and microprocessor shortages). World electronic equipment production grew almost 10% based upon semiconductor shipment data (Chart 2).

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What can we expect in 2007? Higher interest rates will limit consumer and business spending, but with Vista’s Q1 FY07 release, OEM inventories well in control, strong demand for consumer electronics, and an increasing appetite from developing nations, 2007 should still be a decent year.

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There are some recent signs that growth is tempering. PCB capital equipment spending is slowing following a boom in 2006. Material costs (driven by skyrocketing oil and metal prices in 2006) now appear to be receding. Copper (Chart 3), which peaked at USD 3.75/lb in May 2006, was approaching USD 2.50/lb in early January. Copper pricing is viewed as a global indicator of industrial activity because of copper’s pervasive usage--not only in PCBs, but also building construction wiring, power and phone lines, and industrial machinery. Easing copper prices imply that global demand has cooled. Tin pricing, by comparison, continues to rise--presumably due to the “lead free” trend.

Annualized and three-month growth rates show that through November all the key members of the domestic food chain (other than computers and rigid PCB orders) enjoyed decent growth. The 3/12 rate of change is the leading indicator. PCB orders had “outgrown” electronic equipment orders for much of 2006 and were due for a “correction.” However, since electronic equipment demand is holding and inventory levels are appropriate, a sharp downturn in 2007 is unlikely.

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Chart 4 summarizes Henderson Ventures’ global electronic equipment production forecast by year by country. Be careful if you sell PCB capital equipment, otherwise expect slower growth this year but no disasters.

PCB Fabrication

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Aspocomp:

• Appointed Henry Gilchrist Sr. V.P., Asian operations.
• Cancelled plans for a captive backup power facility for its proposed manufacturing unit in India. Plant construction is scheduled to begin in early 2007 and be completed September 2007.
• Cut 113 jobs in Salo and Padasjoki, Finland since volume manufacturing has been transferred to Asia.

Cicor Technologies formed a strategic alliance with Reinhardt Microtech, which will be integrated into a division in early 2007, and also acquired a 36% shareholding interest in ESG Holding PTE Ltd., Singapore.

Elprint added rigid and flex capabilities to its Bergen facility.

Elprinta:

• Purchased Barco’s manufacturing services division and renamed it Multiboard.
• Will expand PCB capacity at its newly acquired Poperinge, Belgium facility.

Endicott Interconnect Technologies placed a follow-on, multiple-system order for ESI’s UV-laser drilling systems.

Firan Technology Group renewed its buried capacitance ‘R’ license with Sanmina-SCI. Firan’s Chatsworth, Calif. and Toronto facilities are licensed under the agreement.

Ibiden completed construction of its second plant in Beijing for handset multilayer boards.

Ichia Technologies is considering spending USD 60-70 million to build a plant in the Philippines.

Incap is using its new Kuressaare, Estonia factory for volume manufacturing and its Vuokatti, Finland factory for prototype and low-volume manufacturing.

Kinsus Interconnect is investing USD 50 million in a PCB manufacturing plant in China.

Meadville Technologies Group plans to generate as much as USD 200 million from an IPO in Hong Kong in Q1 FY07.

Meiko Electronics Vietnam was licensed to proceed with its USD 300 million PCB plant in Northern Ha Tay Province, Vietnam.

M-Flex’s appeal for approval to withdraw the voluntary general offer for MFS Technology Ltd. was denied by the Singapore Securities Industry Council.

Sakai Denshi and Sojitsu set up a flex circuit JV in Vietnam.

TTM Technologies is closing its Dallas, Ore. facility and transferring PCB production to its Logan, Utah and Redmond, Wash. facilities.

Unimicron is investing USD 500 million to build a new PCB plant in Changshu, China.

Viasystems hired Greg Lucas as Technical Account Manager.

Yeti Electronics was taken over by Fair Friend.

Materials & Process Equipment

Advance SCT acquired:

• 80% of the copper smelting business of TTM Industries for USD 15.5 million
• 100% of metal scrap recyclers Tsing Technologies and PT Nuansa Citra Cemerlang for USD 1.2 million each.

Agfa Materials expanded its distribution agreement with CCI Eurolam to cover Spain and Portugal.

Cookson Electronics Assembly Materials is:

• Closing two sites in the U.S. and transferring its ALPHA solder paste, cored wire, and wave-soldering flux manufacturing to Mexico
• Moving its corporate headquarters and R&D functions to New Jersey.

Harima Kasei is building a new soldering materials manufacturing facility in the Czech Republic.

Henkel acquired solder sphere manufacturer Accurus Scientific.

Kurabo and Taiyo Ink co-developed a new thermoplastic polyimide film “Midfil” as an alternative base material for flexible circuits.

MacDermid was sold to Court Square Capital Partners and Weston Presidio for over USD1.3 billion.

Matsushita Electric Works opened Panasonic Electric Works Electronic Materials (Suzhou)--boosting its laminate capacity by 2.4 million square meters per year.

Mentor Graphics hired Happy Holden as Senior Technologist.

Mitsubishi Materials doubled its manufacturing capacity of high-purity copper balls for PCB electroplating to 40,000 tons/year.

Nordson Corp. purchased testing and inspection equipment manufacturer Dage Holdings.

Taiflex is constructing a CCL plant with a monthly capacity of 400,000 square meters per month, in Kunshan, China.

TopFlex, a JV between Matsushita Electric Works and ThinFlex, inaugurated its halogen-free coverlay plant in Kunshan, China.

Tyco Electronics became an independent company and promoted Thomas Lynch to CEO.

Electronic Manufacturing Services & Related Assembly Activity

Benchmark promoted Gayla Delly to president and Donald Adam to CFO.

Carolina Electronic Assemblers acquired Hagemeyer North America’s wire harness assembly business in Clayton, NC.

Elcoteq Hungary added 2,500 employees in 2006 and is investing EUR 54 million to expand capacity.

Elitegroup acquired Uniwill on December 25, 2006.

First International Computer is investing USD 20 million to double motherboard production capacity in Santa Rita do Sapucaí, Brazil.

Flextronics:

• Completed its USD 243 million acquisition of International DisplayWorks.
• Entered a manufacturing agreement with Raymarine in Hungary for logistics services, testing capabilities, and manufacturing services.
• Will close its Tampoi and Malacca, Malaysia facilities and transfer the work to a new RM 500 million industrial campus in the Port of Tanjung Pelepas in Johor.

Foxconn acquired a 64% stake in CCM maker Altus Technology for NTD 1.197 billion.

Gigabyte transferred its own-brand motherboard and graphics card business to Gigabyte United Incorporated--a JV with Asustek Computer--on December 7.

Kimball Electronics acquired Reptron Electronics for USD 0.68 per share.

Plexus:

• Hired Lee Connellee as director of corporate facilities and Tim Diana as director of strategic services.
• Promoted Chris Ruchala to director of project management for the Neenah design center and Mike Boyd to director of test project management.

RiverSide Electronics received IPC certification for its lead-free electronics assembly process.

Solectron:

• Global Services is investing over CEK 100 mil to open a service center in Plzen, Czech Republic in spring 2007.
• Had RM 3.5 million worth of computer components stolen from a transit warehouse on Christmas Day in Penang, Malaysia.