Market Outlook
by Walt Custer and Jonathan Custer-Topai
August 4, 2006
2H’06: Seasonal Upturn, 2007: Modest Growth
The U.S. manufacturing sector continues to expand--but at a slowing pace as higher interest rates and energy costs limit business and consumer spending. The June Institute for Supply Management’s (former Purchasing Managers’) index dipped to its lowest level since mid-2005 (Chart 1), however it still remains in growth territory (values above 50).
Domestic electronic equipment orders (Chart 2), after a military electronics driven bubble in March, cooled in April and May. The military sector (Chart 3) was the major culprit for recent end-market order fluctuations. Note however that although bookings frequently fluctuate wildly, defense electronic shipments are about 60% greater than in 2000 and have been growing at a relatively steady pace.
Globally SE Asia continues to gain electronic assembly share--using total semiconductors shipped to a region as a guide (Chart 4). Asian assembly (primarily consumer goods) took a post holiday breather in 1Q’06 but appears to again be in a growth mode as it heads for the “fall busy season.”
N. America saw business improve in late 2005/early 2006 but then slowed in 2Q’06. A combination of limited capacity in “low cost” SE Asia, the RoHS ramp up and general supply concerns appeared to have pushed business back to the U.S. Robust (and probably excess) domestic PCB ordering occurred. Chip shipments to N. America were amplified by inventory building in 1Q’06 (followed by lowered demand and inventory reductions in the second quarter).
As we approach this year’s fall “busy season” component inventories and orders appear to be in reasonable control. N. American rigid PCB order growth is now back in sync with electronic equipment (Chart 5).
Looking forward expect a seasonal upturn beginning in late summer but also expect 2007 to be a year of muted growth due to rising costs and interest rates. Chart 6 gives my colleague Ed Henderson’s recent multiyear forecasts by region for electronic equipment production.
General Business Conditions
With the price increase of epoxy resin, glass cloth and copper foil, Japanese laminate manufacturers are raising prices by as much as 28%. Copper foil prices rose 40% and epoxy resin and glass cloth rose 10%. This is the fourth CCL price increase in less than two years. Japanese laminators are shifting low-end laminates to their overseas plants and are concentrating on higher value products in Japan (source: H. Nakahara).
IPC awarded Congressman John Hostettler the Rollin “Rolly” Mettler award for legislative excellence. Hostettler strongly supported Crane Naval Surface Warfare Center as the PCB technology steward for the Department of Defense.
PCB Fabrication
AT&S began trial production in its second plant in Shanghai in mid July with mass production planned for August.
CMK is building a new $110 million MLB plant in Thailand to be operational in April 2007. It is also expanding and updating its plants in Japan and China for $90 million (source: H. Nakahara).
Compeq will expand cellphone HDI board capacity by 30-40% this year. It expects to ship 180-200 million cell phone boards in 2006. The company will also reduce capital by 3.4% by cancelling 43 million shares @ 10.00 TWD each.
Coretec achieved ISO14000:2004 certification in Toronto.
Dai Nippon Printing licensed its i-B2it technology to Samsung Electro-Mechanics. It also started volume production of embedded passive boards for mobile phone modules.
Daisho Denshi is completing a new $130 million IC substrate plant near Nikko (source: H. Nakahara).
Firan Technology Group promoted Michael Labrador to VP and General Manager. It also reached a 3-year collective agreement with the Canadian Auto Workers concerning FTG Circuits, Toronto.
Founder started building its high-end flex circuit project at its Electronics Industrial Base in Chongqing, China.
Fujitsu is spending $135 million to expand its PCB plants in Vietnam and Japan (source: H. Nakahara).
Ibiden is spending $550 million, half of which is for PCB expansion. Its second plant in Beijing has 35,000 sq. meters of floor space and has been operational since June. In addition, its second Philippine plant is operational, doubling its flip-chip package substrates to 15 million pieces per month, mostly “Northbridge” for Intel (source: H. Nakahara).
Integrated Performance Systems began trading OTC under the symbol ‘IPFS.’
Jiangyin Hannstar Board will launch its IPO in Hong Kong by year end.
JVC will expand its PWB business using the low cost build-up process VIL (Victor Interconnected Layers) in digital VCR and IC packaging. Kingboard Chemical Holdings raised its stake in Elec & Eltek International to 95%.
Meiko will invest 3 billion yen to build a PCB substrate plant in Hubei Province, China in 2008. It will invest 12 billion yen in Japan and China to increase rigid/flex and MLB capacity.
The company also spent $100M to expand its Wuhan, China facility. Finally, it will spend an additional $100 million for Phase II and an additional $100 million to erect a third plant in Nansha, China. Final MLB capacity will be 5,000,000 sq. ft./month (source: H. Nakahara).
Photocircuits appointed Steven Lach CEO and Gary Meier VP Sales & Marketing.
Ruwel was sold to consortium of investors led by Bear Stearns. Ruwel’s management W. Sehner and R. Ebeling will continue as shareholders. Ruwel will build an 80 million euro plant in Romania’s Tetarom I industrial park in the northwestern city of Cluj Napoca.
SOMACIS pcb industries and SIMEST-MAP will construct a new PCB plant in Chashan, Dongguan City which will have 30-layer capability.
Titan Global Holdings changed its stock symbol from TTGLE to TTGL
Toppan-NEC Circuit Solution will enlarge its IC substrate business 400% to 10 billion yen in 2006. High pin count flip chip substrates will be the major products.
Texas Prototypes appointed Robert Walden COO and hired David Heim as Director of Design for Manufacturability.
Toppan Printing unveiled a new embedded passive and active board technology where resistors and capacitances are formed by a screen printing and LSI chips are embedded inside of the 6-layer boards.
Tyco Printed Circuit Group delayed opening its 80,000 SF Salem plant due to market conditions. Its executive VP Douglas Soder was appointed to SEA Board of Directors.
Materials & Process Equipment
Acculogic has acquired Scorpion Technologies AG.
Agfa-Gevaert split into three independent businesses: Graphics, HealthCare and Materials. Separately it raised silver phototool prices by 5-10%.
Arlon’s parent, Bairnco instituted a “rights plan” to ward off an unsolicited $12 per share offer by Steel Partners II.
Blakell Europlacer, N. America appointed John Perrotta VP of N. America.
Concoat has changed its name to HumiSeal Europe.
Everett Charles Technologies will consolidate atg Test Systems and Luther Maelzer into one business unit.
Gould Electronics spun off its TCR embedded resister product line into a separate company.
GSI Group appointed Dr. Sergio Edelstein CEO.
Halogen-free laminates are now approaching 15-20% of total laminate production in Japan (source: H. Nakahara).
Hitachi Chemical expects 10% revenue growth in 2006. Its new thin laminate “Cute” targets niche market between thin rigid boards and flexible circuits.
Huntsman Advanced Materials expects sales of $20-30 million in India and China in the next 5 years.
Laservia developed a conveyorized blind microvia laser drilling system.
Matsushita Electric started volume production of MLB laminates at its new Suzhou, China plant.
Matsushita’s Panasonic Electronic Device and Yamanashi Matsushita will merge October 1, 2006 to form Panasonic Electronic Device Yamanashi.
Mitsubishi Gas Chemical will increase its monthly capacity of BT resin laminates by 300,000 square meters, and raised copper laminate and prepreg prices by 10-25% due to rising raw material costs.
Mitsui Chemicals fabricated a new flexible copper-clad laminate with an optical waveguide that can transmit both optical and electronic signals.
Nikko Metals will increase its capacity of RA copper foil for flex circuit applications 20% to 7.2 million square meters per month.
Panasonic’s Enns laminate plant suffered 3 million euros in damage from a fire June 13, 2006.
Park Electrochemical appointed Howard Elliott VP, R&D; Anthony Digaudio VP of Marketing and David Dahlquist Product Director.
PENTAX sold its PCB direct write technology to ORC Manufacturing.
Printar raised $8 million from investors Apax Europe, DOR Ventures, and Orbotech founder Ami Caspi.
Rohm and Haas Electronic Materials sold its Ronascreen inks and solder mask business and its Durashield V42 thick copper filler products to Electra Polymers.
Sauquoit Industries is offering its new CircuiteX technology that enables etching of circuits on fabrics.
Shin-Etsu Chemical developed a heat resistant composition used as an adhesive or sealant for PCBs.
Tamura developed two new solder masks (white and black).
Tohto Kasei will double its halogen-free, flame-retardant epoxy resin capacity to 6000 tons/yr. at Chiba Prefecture.
Ube Chemical will invest 3 billion yen to increase capacity of both monomers and films of U-pilex polyimide film.
Union Tool will invest 700 million yen in a new plant in Taiwan.
Yunnan Tin and KJP International opened a new JV tin refinery in Singapore to produce 36,000 tons at full capacity, about 10% of total world demand.
Electronic Manufacturing Services
Adeptron Technologies and CVIC Software Engineering of China formed an EMS collaborative business agreement for N. America.
Air Computer (Argentine computer assembler) will invest $5 million in a new motherboard plant to start operations in 2007.
Asustek Computer said RoHS regulations “made prices fall much, much lower because everybody wants to clear stock at the same time.”
Celestica closed its assembly line in Saumur, France with production transferred to the Czech Republic.
CTS obtained a new $100 million credit facility for general corporate purposes, including strategic acquisitions.
Elcoteq, Pecs, Hungary added 650 workers to fulfill new handset orders.
Electronic Systems achieved ISO13485:2003 Medical Device Quality Management Systems certification.
EPIC Technologies CEO and President, John Sammut and COO and VP of Operations, Jochen Lipp were named Ernst & Young Entrepreneur Of The Year 2006 Award Winners in Central Great Lakes Region.
Flextronics will add 1,200 workers to its Hungarian workforce by the end of the year. The company also assumed The Lego factory in Kladno, Czech Republic in an outsourcing deal in which it will manufacture Lego products Mexico and Czech Republic. Finally, it is setting up its third Indian facility in Sriperumbudur near Chennai and plans on engineering and technical collaborations with a number of Indian universities.
Foxconn (Hon Hai) will expand its ODM handset business through handset-design acquisitions in S. Korea.
Gigabyte will become a handset contract manufacturer.
Harris will add 200 skilled jobs to its RF Communications division which expanded its PCB assembly capability by 30,000 SF in Rochester, NY.
Integrated Microelectronics established a strategic partnership with Japanese EMS company Pulax.
Inventec Appliances will invest $ 4 million for an assembly plant in the Czech Republic – starting up in early 2007.
Jabil Circuit will buy back $200 million worth of shares. It received a subpoena from U.S. Attorney regarding stock options. Finally, Jabil will close its Ayr, Scotland plant and move the work to the Far East, eliminating 217 jobs.
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