Mid-year perspective Mid-year perspective
Mid-year perspective
Jon and Walt Custer
Mid-year perspective Soft demand early, flat mid-year, growth returning in late 2007
W
ith all the major OEMs now having reported their 1Q’07 results, we see (Chart 1) that sales rose about 7%, profits increased 23% and inventories rose 9% compared to first quarter 2006. However, compared to the fourth quarter of 2006, the ratio of inventories/sales (Chart 2) rose noticeably in 1Q’07. When inventories are high in the face of weakening end market demand, new component orders are trimmed. 20070605
Although component and process equipment sales dropped in early 2007, end market growth was still reasonable (Chart 3). With the exception of medical equipment (small sample size) and PCB process equipment, all sectors grew. Large EMS companies and Taiwan/China ODMs did especially well, suggesting that outsourcing is still alive and well. Regionally, electronic equipment sales growth (Chart 4) has stalled in all areas 20070605
Electronic Equipment Suppliers Composite of 61 Public Companies 250
Revenue, Net Income & Inventory
$ Billion
150 100 50
Revenue
1
2 3 00
4
1
2 3 01
4
1
2 3 02
4
1
2 3 03
4
1
2 3 04
4
1
2 3 05
4
1
2 3 06
4
1 07
137 142 146 154 131 136 128 136 120 123 124 136 125 131 136 153 146 154 151 170 156 161 162 179 168 177 181 197 180
Income
10 10
Inventory
9
5
-3 -24 -15
-2
2 -12
-2
-0
5
4
7 10 10 11 11 13 12 12 12 17 13 10 15 18 16
59 61 65 67 68 60 53 48 45 44 42 39 38 39 38 38 40 41 42 41 41 41 42 42 44 47 49 48 47
-10
6
4
2
9
-2
5 6 6
Semiconductors Passive Components Component Distributors EMS-Large EMS-Medium ODM PCB PCB Process Equip -8
0 -50
Global "Electronic Foodchain" Growth 1Q'07 vs. 1Q'06
Electronic Equipment Military Business & Office Instruments & Controls Medical Telecom Internet Computer Storage SEMI Equip
+7%
200
except SE Asia. While Japan, the USA and Europe saw 3-month growth rates at or below zero, a composite (Chart 5) of 101 Taiwan-listed electronic equipment makers (with significant manufacturing in China) hovered at +30% 3-month growth. All the action is in SE Asia! Custer Consulting Group’s world PCB shipment composite (Chart 6) showed a significant slowdown in early 2007. Comparing the 3-month (3/12) growth of world printed circuit, semiconductor and electronic equipment sales (Chart 7) it
3
8
20 26
3 -5
0
5
10
15
20
25
30
% Change
Chart 1.
Chart 3.
20070531
20070604
Inventory/Sales Ratio
Large Component Distributors, Semiconductor, EMS & Quarterly Inventory/Sales ($) OEM Companies 0.85 Semiconductor EMS OEM Distributor
0.80 0.75 0.70 0.65
Global Electronic Equipment Shipment Growth
1.6
Taiwan/China Europe Japan USA 0
3/12 rate of growth
1.5 1.4 1.3
0.60
Chips
0.55
1.2
0.50
1.1
0.45
1
Distr
0.40
0.9
0.35
EMS
0.30
0.8 OEM
0.7
0.25
0.6 3
00
4
1
2
01
3
4
1
2
02
3
4
1
2
03
3
4
1
2
04
3
4
1
2
05
3
4
1
2
06
3
4
1
07
2
1
4 7 10 1 00
Chart 2.
4 7 10 1 01
4 7 10 1 02
4 7 10 1 03
4 7 10 1 04
4 7 10 1 05
4 7 10 1 4 06 07
CALENDAR YEAR
CY
5 Component Distributor, 18 Semiconductor, 12 EMS and 60 OEM Company Composite
20
9
0
Computer 13, Internet 2, Storage 9, Telecom 6, SEMI 14, Medical 4, Instruments 7, Military 6
0.20
17 8
Chart 4.
Global SMT & Packaging - July 2007
www.globalsmt.net
Mid-year perspective would appear that chips and PCBs are now ‘overcorrecting’ compared to end market demand, and a turnaround should occur in late 2007. The WSTS group recently revised its 2007 semiconductor growth forecast downwards (Chart 8), which is consistent with the conclusions we have considering the early 2007 inventory bloat and the relative growth dynamics of PCBs, chips and equipment in Chart 7. Based upon current conditions, Chart 9 compares likely growth by sector in 2007 vs. actual growth in 2006. 2007 is definitely a ‘lowdown’ year although most signals point to a rebound in 2008. Flextronics acquisition of Solectron Chart 10 shows the combined quarterly revenues, net income and inventories of a Flextronics/Solectron merged company. At $30 billion total it is a huge EMS company. However Foxconn (Chart 11) has larger revenues and a much more aggressive growth trajectory.
2005 to 2010 when it will reach $6.3 billion. - Freedonia Group • The silver conductive ink market for printable electronics will grow to $1.2 billion by 2014, compared with $176 million in 2007. • Composite resin prices are rising: Demand for many raw materials feed stocks for unsaturated polyester and vinyl ester resins have increased due to demand in competing applications. • Dwindling global rare metal stocks imperil innovation. Platinum, indium, tantalum, hafnium, zinc and copper stockpiles are quickly depleting.
China • China is leading the Asian EMS/ODM market per In-Stat. Asia’s contract electronics manufacturing market will grow from US$122 billion in 2006 to US$282 billion in 2011. Asia will capture 55% of the global EMS market in 2011, up from 45% in 2006. • Although China will dominate the EMS/ODM market, India, Thailand, and Vietnam will emerge as major new players. • China widened the trading band of the Yuan against the dollar to 0.5% above and below its central parity rate from 0.3%. China’s central bank also raised benchmark deposit and lending rates. • China’s electronics industry profit was 12.1 billion Yuan (US$1.57 billion) in the Q1’07, down 14.2% from the previous year. Materials • US electronic chemicals demand is expected to grow 7.7% annually from
20070609
Taiwan/China Electronic Equipment Producers Composite of 101 Manufacturers
20070608
Components • The worldwide chip market is expected to grow 2.3% on an annualized basis to US$253.5 billion in 2007. - WSTS • The global automotive semiconductor market is expected to grow by 4.1% to US$13.2 billion this year and increase to US$17.2 billion in 2010. - ITIS • Worldwide silicon wafer shipments
World Electronic Equipment, PCB & Semiconductor Shipments
NT$ (billions)
Converted @ Constant 2005 Exchange Rates
3/12 rate of change 408
PCB
1.5
"0" Growth
SIA
El Equip
1.3
308
1.1 208
0.9
108
8
0.7 0.5
3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 00 01 02 03 04 05 06 07
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 02 03 04 05 06 07
CALENDAR YEAR
CALENDAR YEAR Taiwan listed companies, often with significant manufacturing in China
Source: Custer Consulting Group & Henderson Ventures
Chart 5.
20070608
Chart 7.
20061120
World PCB Shipments
Converted @ Constant 2005 Exchange Rates 50
Assumptions: Europe monthly ratio = SIA European semiconductor ratio Japan & N. Americas from JPCA & IPC data Taiwan/China based upon 28 large company composite Rest of Asia growth = Taiwan/China composite Data scaled to match Henderson Ventures annual totals
$ Billion Assumptions: Europe monthly ratio = SIA European semiconductor ratio Japan & N. Americas from JPCA & IPC data Taiwan/China based upon 28 large company composite Rest of Asia growth = Taiwan/China composite Data scaled to match Henderson Ventures annual totals
45 40
Worldwide Semiconductor Market by Geography WSTS Forecast 350.0
$ Billions
300.0 250.0
35
150.0
30
213.1
204.4
200.0 149.4
138.9 140.8
227.4
247.7 253.5
279.2
293.8
166.3
100.0 50.0
25
33.3
20
34.8
39.7
42.6
48.3
1 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 99 00 01 02 03 04 05 06 07
CALENDAR YEAR Source: Custer Consulting Group - synthesized from Henderson Ventures annual estimates and N. American, Japanese & Taiwan/China monthly PCB shipments and SIA European chip shipments
Chart 6.
www.globalsmt.net
0.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Japan
32.8
46.7
33.1
30.5
38.9
45.8
44.1
46.4
47.6
50.9
52.5
Europe
31.9
42.3
30.2
27.8
32.3
39.4
39.1
39.9
41.5
44.8
46.9
N. America
47.5
64.1
35.8
31.3
32.3
39.1
40.7
44.9
41.5
44.5
46.7
Asia Pacific
37.2
51.3
39.8
51.2
62.8
88.8
103.5
116.5
122.9
139.0
147.7
WSTS 5/2007
Chart 8.
Global SMT & Packaging - July 2007
21
Mid-year perspective acquired EMS company ECR AG, Rotkreuz, Switzerland. Armistead Technologies is focusing its business model on reverse engineering PCB assemblies. BYD Company Limited is spinning off its handset components manufacturing and PCBA service business, BYD Electronics, on the Hong Kong Stock Exchange to fund battery, automotive, and spare parts expansion projects. Celestica • formed a strategic alliance with Aperto Networks to develop and manufacture multiple WiMAX platforms. • teamed with U4EA for co-marketing and development to provide OEM building blocks for reliable VoIP for WiMAX. Cerebra Integrated Technologies recently expanded its SMT facility at Peenya, India, and is looking for acquisition opportunities. Circuit Service subsidiary Changzhou CSI achieved ISO 9001:2000 certification.
increased 1% QoQ to a total of 2,100 million square inches in Q1’07. - SEMI • Worldwide semiconductor manufacturing equipment billings were $10.75 billion and bookings were US$10.50 billion in Q1’07. - SEMI • Europe’s semiconductor distribution market achieved a quarterly growth of 4.8% to 1.48 billion euros in Q1’07 - DMASS. • Worldwide connector industry revenues will grow 7.6% YoY to $43.1 billion and reach $60 billion by 2011. - Bishop and Associates • Taiwanese PCB manufacturers operating in China account for 40% of total Chinese PCB production value. This is expected to increase to 50% by 2010. Lai Kuo-en, chairman of South China PCB Friendship Association. EMS & related assembly activity Adeptron Technologies acquired Pacific Circuit Assembly for $2.25 million. AEMtec and Ventizz Capital Partners 20070607
CirTran changed its stock symbol to CIRC and sold its headquarters facility and leased it back to finance new and on-going projects. C-Mac achieved Class K accreditation enabling it to enter American aviation and space satellite markets. CTS and Ambient formed a strategic alliance where CTS provides full turnkey EMS services and Ambient provides engineering and design expertise for Broadband over Power Lines solutions. Delta Group Electronics, Rockledge, Florida, opened a manufacturing plant in Dubnica nad Vahom, in Slovakia for complete power systems and power supply products including rectifiers, inverters and controllers. Efore inaugurated its new 10,600 sq. meter plant in Suzhou, China. Elcoteq appointed Mike Liang Sr. VP, Human Resources, Tommi Pettersson VP of Account Management in the Communications Networks, Jason Phillips VP of Account Management in the Personal Communications business and Suresh Babu Communications Networks Product Development Services Director of Elcoteq India. Electronic Systems hired Charles Stranko as director of program management and rehired Deb Cardinal as director of the materials organization. Electronica ITEL and DigiProces set up an EMS JV in India; Indic Electronics Ltd, with Indian entrepreneurs Anil Gupta and Alok Garg. EMS Technologies Defense & Space Systems implemented the SEA Lean Enterprise System. Enics is providing manufacturing and logistics services to Atlas Copco Tools. Flextronics: • Is purchasing Solectron to create a combined $30 billion EMS company.
Global "Electronic Foodchain" Growth 2006/2005 vs 2007/2006 2006/2005
4.0 Henderson 3.4 Ventures
Combined GDP
Electronic Equipment
2007/2006
9.4 Henderson Ventures
6.7
13.1
Rigid & Flex PCBs
CCG
2.0 8.9
Semiconductors
2.3
WSTS
18.8
Semi Capital Equipment
-1.5
-5.0
Gartner
0.0
5.0
10.0
15.0
20.0
25.0
% Change
Chart 9.
Flextronics+Solectron
20070610
20070527
Foxconn Electronics (Hon Hai), Taiwan
Combined Revenue, Net Income & Inventory 10000
Revenue, Net Income & Inventory
$ Millions +26%
350
8000
250
4000
200
2000
150
0
100 50
-2000
Revenue Income Inventory
0 1
2
00
3
4
1
2
01
3
4
1
2
02
3
4
1
2
03
3
4
1
2
04
3
4
1
2
05
3
4
1
2
06
3
4
1 07
5150 6322 7815 8935 8533 7094 6840 6605 6271 6160 6457 6988 5877 5922 6317 6849 6656 6920 7152 6967 6369 6494 6283 6643 6030 6762 7604 8415 7579 150 -251 221 258 -71 -97 -580 29 -120 -254 -2607 -5 -91 -3391 -279 -26 5 100 54 172 71 36 111 142 67 142 222 125 136 2966 3938 5352 6312 6670 5727 4630 4152 3632 3381 3150 3007 2782 2702 2611 2677 2690 2963 2874 2794 2762 2698 2832 2892 3084 3723 4130 4134 4362
CY
Chart 10.
22
+41%
300
6000
-4000
NT$ (Billions)
Revenue Income Inventory
h 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 99 00 01 02 03 04 05 06 07
10 1 5
13 2 5
14 2 7
16 2 7
14 2 8
18 2 8
26 3 15
33 3 14
31 3 14
30 2 14
38 4 15
44 4 13
43 4 15
58 4 16
64 4 18
80 5 14
60 5 15
CY
FLEX
61 5 19
98 108 79 6 7 6 30 26 26
96 111 137 135 142 164 235 175 185 230 318 246 8 8 9 7 9 11 13 10 13 15 22 16 30 33 42 40 43 55 56 60 72 87 81 84
2317
Chart 11.
Global SMT & Packaging - July 2007
www.globalsmt.net
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Mid-year perspective • cut 100 jobs in Outu, Finland. • moved into a new 100,103 SF industrial facility in Milpitas, CA. • paid its CEO a $1.25M salary for FY’08. • manufacturing contract with Lego Billund, Denmark, has experienced difficulties resulting in Lego postponing 900 scheduled layoffs. Foxconn: • hired TIs Asia president, Terry Cheng. • has about 20 business development projects underway in China. • began building its technological industrial park in Wuhan, Hubei Province, Central China, in April 2007. • May set up a high-tech industrial park in Nanning, China, for IT, consumer electronics, energy and energy-saving industries. • is investing $1 billion to construct an industrial park in Shenyang, China, for R&D on nano copper and magnesium alloy spare parts in vehicles, IT and electronics. • is investing US$3 billion to build a manufacturing base in Wuhan, China, which will produce 30 million DSCs and 15 million LCD monitors annually and have up to 200,000 employees. • is spending $147 million for a second LCD and computer components factory in Kutna Hora, Czech Republic, with 5,000 employees. • and Quanta are collaborating on One Laptop Per Child notebook cases. Foxconn, HP and Intel may jointly develop an innovation technologies center in St. Petersburg, Russia. Foxconn Electronics’ former VP Jonathan Yang became new country manager and technology solutions group general manager of Hewlett Packard, Taiwan. Hon Hai Precision: • remained the largest manufacturing enterprise in Taiwan in terms of revenues with sales exceeding NT$1 trillion. • is building an industrial park in Yingkou, China, for manufacturing electronics, including PCBs. • will likely become the primary beneficiary of Hewlett-Packard’s plan to farm out assembly contracts for its household desktop PCs and enterprise desktop PC. Goepel and Volkswagen developed a fully automatic inspection system for testing infotainment ECUs. Global Innovation named Kevin Devine VP of Sales and Marketing. High Tech Computer: • acquired Dopod International for US$14.5 million. • is expanding brand recognition to
support its business model switch from a CEM to an OEM. Incap: • acquired TVS Electronics EMS unit in India for EUR 7.4 million. • plans to expand in India and has targeted the industrial, telecom and healthcare sectors as its largest growth drivers. Jabil: • assets in Hungary, Scotland, India, Italy, France and China were auctioned off by X-Line Asset Management. • is manufacturing LTX’s X-Series test systems in Penang, Malaysia. • opened its 55,000 SF manufacturing facility in Ho Chi Minh City, Vietnam, in June, 2007. • plans to build a $100 M plant in Saigon Hi-Tech Park to assemble circuit boards, printers, data servers and high-tech medical equipment. Jutron appointed Tommi Rainola president and CEO. Key Tronic sold its Las Cruces, New Mexico, facility to Adevco for $4.3 million. Kimball Electronics: • appointed Kevin Stokes VP, Global Technical Services. • is closing its Gaylord, MI facility by year end 2007. Kitron is expanding capacity in Lithuania, adding 100 employees. Microsoft is building a factory in Doumen, China, (where Flextronics is located) and looking for a new partner to produce its Zune media player device. Nam Tai Electronics appointed John Farina CFO. Northstar Electronics received a US$6,307,191 contract from Lockheed Martin Aeronautics for components for the P-3 Service Life Extension Program. NOTE consolidated its supplier base from 300 to 70. PartnerTech received a SEK 30 million manufacturing contract for OptoPlan°Øs fiber optic sensor system. Perlos: • lost its EUR1.7M R&D funding grant from the Finnish Funding Agency for Technology and Innovation after it discontinued its manufacturing operations in Finland. • sold its Special Products and Connectors business to Valukumpu Ltd. Plexus: • hired software engineers Samie Ghauri and John Reid for its European Design Centre in Livingston, Scotland. • named Ginger Jones CFO replacing retiring Gordon Bitter. Probe Manufacturing entered obtained two 12-month contracts worth $649,103 for
24
Global SMT & Packaging - July 2007
EMS services with Mettler Electronics. Remploy is closing 32 of its 83 factories and merging 11 sites with other facilities. PCB manufacturing will be concentrated at its Bolton and Barking sites. Rimaster installed a Minitor logistics and purchasing information system at its Polish plant. Sanmina-SCI: • closed its Newisys, Texas, subsidiary. • laid off 150 temporary employees in Tourlaville, France, due to an expired Alcatel contract. Simclar appointed William Sim director and member of its audit committee. Smart Modular Technology purchased its eighth Koh Young solder paste inspection system which Christopher Associates delivered to SMT°Øs manufacturing plant in Santo Domingo, Dominican Republic. Solectron: • expanding its Shanghai, China, product development center, hiring over 100 engineers. • received a 2007 Vendor Excellence Award from Redbox Automated Retail. • received a biotech manufacturing contract from CSA Medical. Solectron Malaysia recovered RM1.2 million worth of stolen manufacturing equipment. Two Solectron managers were charged with possessing and selling stolen goods. Sparton is investing $2.7 million to expand its Blackman Township assembly facility near Jackson, Michigan. Suntron received AS9100 quality certification for its Gulf Coast Operations facility in Sugar Land, Texas. Taiwan Surface Mounting Technology spun off Regent Manner International Holdings in June and is investing the proceeds to expand its production lines from 90 to 110. Tellumat acquired EMS firm Rhomco, a division of Pertec. Trimble is outsourcing its SMT operations to contract manufacturers but will keep assembly work in-house. TXP appointed Eric Prince director of materials. Uchi Technologies is: • investing US$500,000 (RM1.69 million) to expand its Penang facility this year where about US$350,000 will be used to expand SMT activities. • building a new US$3.5 million (RM11.87 million) plant in Dongguan City, Guangdong, to start operations by 1Q’08. Materials & process equipment DEK:
www.globalsmt.net
Mid-year perspective • launched OptiGuard, a new stencil system that extends its VectorGuard stencil range. • received Intel’s Preferred Quality Supplier Award. Impact Coatings began shipping MaxPhase, a newly developed ceramic material to replace gold on electrical contacts. Lincoln International opened an office in Vienna and appointed Witold Szymanski managing director of Austria and Central/ Eastern Europe. Nan Ya Plastics raised copper clad laminate prices 10-15% in May and 5-10% in June. Nordson Corporation acquired YESTech Inc. (a manufacturer of AOI & XRay Systems for PCB Assembly) and PICO Dosiertechnik (a manufacturer of piezoelectric technology dispensing systems) for a total of $53 million. Rohm and Haas allocated $150 million, half of its $300 million 2007 R&D budget, for sustainability efforts, including new product development, energy efficiency and process improvements. Siemens appointed Peter Loescher CEO, Jeff Timms VP, Electronics Assembly Systems and Gunter Lauber president, A&D Electronics Assembly Systems.
Soldertec Global launched a new RoHS Reliability assessment service. Teradyne sold its Broadband Test Division to Tollgrade for $12 million plus the assumption of specified liabilities.
can be contacted at: [email protected] or visit www.custerconsulting.com
Walt Custer is an independent consultant who monitors and offers a daily news service and market reports on the PCB and assembly automation and semiconductor industries. He
Jon Custer-Topai is vice president of Custer Consulting Group and responsible for the corporation’s market research and news analysis activities. Jon is a member of the IPC and active in the Technology Marketing Research Council. He can be contacted at [email protected]
Reference Books by
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Global SMT & Packaging - July 2007
6/15/2007 8:02:48 AM
25
Jon and Walt Custer
Mid-year perspective Soft demand early, flat mid-year, growth returning in late 2007
W
ith all the major OEMs now having reported their 1Q’07 results, we see (Chart 1) that sales rose about 7%, profits increased 23% and inventories rose 9% compared to first quarter 2006. However, compared to the fourth quarter of 2006, the ratio of inventories/sales (Chart 2) rose noticeably in 1Q’07. When inventories are high in the face of weakening end market demand, new component orders are trimmed. 20070605
Although component and process equipment sales dropped in early 2007, end market growth was still reasonable (Chart 3). With the exception of medical equipment (small sample size) and PCB process equipment, all sectors grew. Large EMS companies and Taiwan/China ODMs did especially well, suggesting that outsourcing is still alive and well. Regionally, electronic equipment sales growth (Chart 4) has stalled in all areas 20070605
Electronic Equipment Suppliers Composite of 61 Public Companies 250
Revenue, Net Income & Inventory
$ Billion
150 100 50
Revenue
1
2 3 00
4
1
2 3 01
4
1
2 3 02
4
1
2 3 03
4
1
2 3 04
4
1
2 3 05
4
1
2 3 06
4
1 07
137 142 146 154 131 136 128 136 120 123 124 136 125 131 136 153 146 154 151 170 156 161 162 179 168 177 181 197 180
Income
10 10
Inventory
9
5
-3 -24 -15
-2
2 -12
-2
-0
5
4
7 10 10 11 11 13 12 12 12 17 13 10 15 18 16
59 61 65 67 68 60 53 48 45 44 42 39 38 39 38 38 40 41 42 41 41 41 42 42 44 47 49 48 47
-10
6
4
2
9
-2
5 6 6
Semiconductors Passive Components Component Distributors EMS-Large EMS-Medium ODM PCB PCB Process Equip -8
0 -50
Global "Electronic Foodchain" Growth 1Q'07 vs. 1Q'06
Electronic Equipment Military Business & Office Instruments & Controls Medical Telecom Internet Computer Storage SEMI Equip
+7%
200
except SE Asia. While Japan, the USA and Europe saw 3-month growth rates at or below zero, a composite (Chart 5) of 101 Taiwan-listed electronic equipment makers (with significant manufacturing in China) hovered at +30% 3-month growth. All the action is in SE Asia! Custer Consulting Group’s world PCB shipment composite (Chart 6) showed a significant slowdown in early 2007. Comparing the 3-month (3/12) growth of world printed circuit, semiconductor and electronic equipment sales (Chart 7) it
3
8
20 26
3 -5
0
5
10
15
20
25
30
% Change
Chart 1.
Chart 3.
20070531
20070604
Inventory/Sales Ratio
Large Component Distributors, Semiconductor, EMS & Quarterly Inventory/Sales ($) OEM Companies 0.85 Semiconductor EMS OEM Distributor
0.80 0.75 0.70 0.65
Global Electronic Equipment Shipment Growth
1.6
Taiwan/China Europe Japan USA 0
3/12 rate of growth
1.5 1.4 1.3
0.60
Chips
0.55
1.2
0.50
1.1
0.45
1
Distr
0.40
0.9
0.35
EMS
0.30
0.8 OEM
0.7
0.25
0.6 3
00
4
1
2
01
3
4
1
2
02
3
4
1
2
03
3
4
1
2
04
3
4
1
2
05
3
4
1
2
06
3
4
1
07
2
1
4 7 10 1 00
Chart 2.
4 7 10 1 01
4 7 10 1 02
4 7 10 1 03
4 7 10 1 04
4 7 10 1 05
4 7 10 1 4 06 07
CALENDAR YEAR
CY
5 Component Distributor, 18 Semiconductor, 12 EMS and 60 OEM Company Composite
20
9
0
Computer 13, Internet 2, Storage 9, Telecom 6, SEMI 14, Medical 4, Instruments 7, Military 6
0.20
17 8
Chart 4.
Global SMT & Packaging - July 2007
www.globalsmt.net
Mid-year perspective would appear that chips and PCBs are now ‘overcorrecting’ compared to end market demand, and a turnaround should occur in late 2007. The WSTS group recently revised its 2007 semiconductor growth forecast downwards (Chart 8), which is consistent with the conclusions we have considering the early 2007 inventory bloat and the relative growth dynamics of PCBs, chips and equipment in Chart 7. Based upon current conditions, Chart 9 compares likely growth by sector in 2007 vs. actual growth in 2006. 2007 is definitely a ‘lowdown’ year although most signals point to a rebound in 2008. Flextronics acquisition of Solectron Chart 10 shows the combined quarterly revenues, net income and inventories of a Flextronics/Solectron merged company. At $30 billion total it is a huge EMS company. However Foxconn (Chart 11) has larger revenues and a much more aggressive growth trajectory.
2005 to 2010 when it will reach $6.3 billion. - Freedonia Group • The silver conductive ink market for printable electronics will grow to $1.2 billion by 2014, compared with $176 million in 2007. • Composite resin prices are rising: Demand for many raw materials feed stocks for unsaturated polyester and vinyl ester resins have increased due to demand in competing applications. • Dwindling global rare metal stocks imperil innovation. Platinum, indium, tantalum, hafnium, zinc and copper stockpiles are quickly depleting.
China • China is leading the Asian EMS/ODM market per In-Stat. Asia’s contract electronics manufacturing market will grow from US$122 billion in 2006 to US$282 billion in 2011. Asia will capture 55% of the global EMS market in 2011, up from 45% in 2006. • Although China will dominate the EMS/ODM market, India, Thailand, and Vietnam will emerge as major new players. • China widened the trading band of the Yuan against the dollar to 0.5% above and below its central parity rate from 0.3%. China’s central bank also raised benchmark deposit and lending rates. • China’s electronics industry profit was 12.1 billion Yuan (US$1.57 billion) in the Q1’07, down 14.2% from the previous year. Materials • US electronic chemicals demand is expected to grow 7.7% annually from
20070609
Taiwan/China Electronic Equipment Producers Composite of 101 Manufacturers
20070608
Components • The worldwide chip market is expected to grow 2.3% on an annualized basis to US$253.5 billion in 2007. - WSTS • The global automotive semiconductor market is expected to grow by 4.1% to US$13.2 billion this year and increase to US$17.2 billion in 2010. - ITIS • Worldwide silicon wafer shipments
World Electronic Equipment, PCB & Semiconductor Shipments
NT$ (billions)
Converted @ Constant 2005 Exchange Rates
3/12 rate of change 408
PCB
1.5
"0" Growth
SIA
El Equip
1.3
308
1.1 208
0.9
108
8
0.7 0.5
3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 00 01 02 03 04 05 06 07
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 02 03 04 05 06 07
CALENDAR YEAR
CALENDAR YEAR Taiwan listed companies, often with significant manufacturing in China
Source: Custer Consulting Group & Henderson Ventures
Chart 5.
20070608
Chart 7.
20061120
World PCB Shipments
Converted @ Constant 2005 Exchange Rates 50
Assumptions: Europe monthly ratio = SIA European semiconductor ratio Japan & N. Americas from JPCA & IPC data Taiwan/China based upon 28 large company composite Rest of Asia growth = Taiwan/China composite Data scaled to match Henderson Ventures annual totals
$ Billion Assumptions: Europe monthly ratio = SIA European semiconductor ratio Japan & N. Americas from JPCA & IPC data Taiwan/China based upon 28 large company composite Rest of Asia growth = Taiwan/China composite Data scaled to match Henderson Ventures annual totals
45 40
Worldwide Semiconductor Market by Geography WSTS Forecast 350.0
$ Billions
300.0 250.0
35
150.0
30
213.1
204.4
200.0 149.4
138.9 140.8
227.4
247.7 253.5
279.2
293.8
166.3
100.0 50.0
25
33.3
20
34.8
39.7
42.6
48.3
1 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 7 9111 3 5 99 00 01 02 03 04 05 06 07
CALENDAR YEAR Source: Custer Consulting Group - synthesized from Henderson Ventures annual estimates and N. American, Japanese & Taiwan/China monthly PCB shipments and SIA European chip shipments
Chart 6.
www.globalsmt.net
0.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Japan
32.8
46.7
33.1
30.5
38.9
45.8
44.1
46.4
47.6
50.9
52.5
Europe
31.9
42.3
30.2
27.8
32.3
39.4
39.1
39.9
41.5
44.8
46.9
N. America
47.5
64.1
35.8
31.3
32.3
39.1
40.7
44.9
41.5
44.5
46.7
Asia Pacific
37.2
51.3
39.8
51.2
62.8
88.8
103.5
116.5
122.9
139.0
147.7
WSTS 5/2007
Chart 8.
Global SMT & Packaging - July 2007
21
Mid-year perspective acquired EMS company ECR AG, Rotkreuz, Switzerland. Armistead Technologies is focusing its business model on reverse engineering PCB assemblies. BYD Company Limited is spinning off its handset components manufacturing and PCBA service business, BYD Electronics, on the Hong Kong Stock Exchange to fund battery, automotive, and spare parts expansion projects. Celestica • formed a strategic alliance with Aperto Networks to develop and manufacture multiple WiMAX platforms. • teamed with U4EA for co-marketing and development to provide OEM building blocks for reliable VoIP for WiMAX. Cerebra Integrated Technologies recently expanded its SMT facility at Peenya, India, and is looking for acquisition opportunities. Circuit Service subsidiary Changzhou CSI achieved ISO 9001:2000 certification.
increased 1% QoQ to a total of 2,100 million square inches in Q1’07. - SEMI • Worldwide semiconductor manufacturing equipment billings were $10.75 billion and bookings were US$10.50 billion in Q1’07. - SEMI • Europe’s semiconductor distribution market achieved a quarterly growth of 4.8% to 1.48 billion euros in Q1’07 - DMASS. • Worldwide connector industry revenues will grow 7.6% YoY to $43.1 billion and reach $60 billion by 2011. - Bishop and Associates • Taiwanese PCB manufacturers operating in China account for 40% of total Chinese PCB production value. This is expected to increase to 50% by 2010. Lai Kuo-en, chairman of South China PCB Friendship Association. EMS & related assembly activity Adeptron Technologies acquired Pacific Circuit Assembly for $2.25 million. AEMtec and Ventizz Capital Partners 20070607
CirTran changed its stock symbol to CIRC and sold its headquarters facility and leased it back to finance new and on-going projects. C-Mac achieved Class K accreditation enabling it to enter American aviation and space satellite markets. CTS and Ambient formed a strategic alliance where CTS provides full turnkey EMS services and Ambient provides engineering and design expertise for Broadband over Power Lines solutions. Delta Group Electronics, Rockledge, Florida, opened a manufacturing plant in Dubnica nad Vahom, in Slovakia for complete power systems and power supply products including rectifiers, inverters and controllers. Efore inaugurated its new 10,600 sq. meter plant in Suzhou, China. Elcoteq appointed Mike Liang Sr. VP, Human Resources, Tommi Pettersson VP of Account Management in the Communications Networks, Jason Phillips VP of Account Management in the Personal Communications business and Suresh Babu Communications Networks Product Development Services Director of Elcoteq India. Electronic Systems hired Charles Stranko as director of program management and rehired Deb Cardinal as director of the materials organization. Electronica ITEL and DigiProces set up an EMS JV in India; Indic Electronics Ltd, with Indian entrepreneurs Anil Gupta and Alok Garg. EMS Technologies Defense & Space Systems implemented the SEA Lean Enterprise System. Enics is providing manufacturing and logistics services to Atlas Copco Tools. Flextronics: • Is purchasing Solectron to create a combined $30 billion EMS company.
Global "Electronic Foodchain" Growth 2006/2005 vs 2007/2006 2006/2005
4.0 Henderson 3.4 Ventures
Combined GDP
Electronic Equipment
2007/2006
9.4 Henderson Ventures
6.7
13.1
Rigid & Flex PCBs
CCG
2.0 8.9
Semiconductors
2.3
WSTS
18.8
Semi Capital Equipment
-1.5
-5.0
Gartner
0.0
5.0
10.0
15.0
20.0
25.0
% Change
Chart 9.
Flextronics+Solectron
20070610
20070527
Foxconn Electronics (Hon Hai), Taiwan
Combined Revenue, Net Income & Inventory 10000
Revenue, Net Income & Inventory
$ Millions +26%
350
8000
250
4000
200
2000
150
0
100 50
-2000
Revenue Income Inventory
0 1
2
00
3
4
1
2
01
3
4
1
2
02
3
4
1
2
03
3
4
1
2
04
3
4
1
2
05
3
4
1
2
06
3
4
1 07
5150 6322 7815 8935 8533 7094 6840 6605 6271 6160 6457 6988 5877 5922 6317 6849 6656 6920 7152 6967 6369 6494 6283 6643 6030 6762 7604 8415 7579 150 -251 221 258 -71 -97 -580 29 -120 -254 -2607 -5 -91 -3391 -279 -26 5 100 54 172 71 36 111 142 67 142 222 125 136 2966 3938 5352 6312 6670 5727 4630 4152 3632 3381 3150 3007 2782 2702 2611 2677 2690 2963 2874 2794 2762 2698 2832 2892 3084 3723 4130 4134 4362
CY
Chart 10.
22
+41%
300
6000
-4000
NT$ (Billions)
Revenue Income Inventory
h 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 99 00 01 02 03 04 05 06 07
10 1 5
13 2 5
14 2 7
16 2 7
14 2 8
18 2 8
26 3 15
33 3 14
31 3 14
30 2 14
38 4 15
44 4 13
43 4 15
58 4 16
64 4 18
80 5 14
60 5 15
CY
FLEX
61 5 19
98 108 79 6 7 6 30 26 26
96 111 137 135 142 164 235 175 185 230 318 246 8 8 9 7 9 11 13 10 13 15 22 16 30 33 42 40 43 55 56 60 72 87 81 84
2317
Chart 11.
Global SMT & Packaging - July 2007
www.globalsmt.net
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Mid-year perspective • cut 100 jobs in Outu, Finland. • moved into a new 100,103 SF industrial facility in Milpitas, CA. • paid its CEO a $1.25M salary for FY’08. • manufacturing contract with Lego Billund, Denmark, has experienced difficulties resulting in Lego postponing 900 scheduled layoffs. Foxconn: • hired TIs Asia president, Terry Cheng. • has about 20 business development projects underway in China. • began building its technological industrial park in Wuhan, Hubei Province, Central China, in April 2007. • May set up a high-tech industrial park in Nanning, China, for IT, consumer electronics, energy and energy-saving industries. • is investing $1 billion to construct an industrial park in Shenyang, China, for R&D on nano copper and magnesium alloy spare parts in vehicles, IT and electronics. • is investing US$3 billion to build a manufacturing base in Wuhan, China, which will produce 30 million DSCs and 15 million LCD monitors annually and have up to 200,000 employees. • is spending $147 million for a second LCD and computer components factory in Kutna Hora, Czech Republic, with 5,000 employees. • and Quanta are collaborating on One Laptop Per Child notebook cases. Foxconn, HP and Intel may jointly develop an innovation technologies center in St. Petersburg, Russia. Foxconn Electronics’ former VP Jonathan Yang became new country manager and technology solutions group general manager of Hewlett Packard, Taiwan. Hon Hai Precision: • remained the largest manufacturing enterprise in Taiwan in terms of revenues with sales exceeding NT$1 trillion. • is building an industrial park in Yingkou, China, for manufacturing electronics, including PCBs. • will likely become the primary beneficiary of Hewlett-Packard’s plan to farm out assembly contracts for its household desktop PCs and enterprise desktop PC. Goepel and Volkswagen developed a fully automatic inspection system for testing infotainment ECUs. Global Innovation named Kevin Devine VP of Sales and Marketing. High Tech Computer: • acquired Dopod International for US$14.5 million. • is expanding brand recognition to
support its business model switch from a CEM to an OEM. Incap: • acquired TVS Electronics EMS unit in India for EUR 7.4 million. • plans to expand in India and has targeted the industrial, telecom and healthcare sectors as its largest growth drivers. Jabil: • assets in Hungary, Scotland, India, Italy, France and China were auctioned off by X-Line Asset Management. • is manufacturing LTX’s X-Series test systems in Penang, Malaysia. • opened its 55,000 SF manufacturing facility in Ho Chi Minh City, Vietnam, in June, 2007. • plans to build a $100 M plant in Saigon Hi-Tech Park to assemble circuit boards, printers, data servers and high-tech medical equipment. Jutron appointed Tommi Rainola president and CEO. Key Tronic sold its Las Cruces, New Mexico, facility to Adevco for $4.3 million. Kimball Electronics: • appointed Kevin Stokes VP, Global Technical Services. • is closing its Gaylord, MI facility by year end 2007. Kitron is expanding capacity in Lithuania, adding 100 employees. Microsoft is building a factory in Doumen, China, (where Flextronics is located) and looking for a new partner to produce its Zune media player device. Nam Tai Electronics appointed John Farina CFO. Northstar Electronics received a US$6,307,191 contract from Lockheed Martin Aeronautics for components for the P-3 Service Life Extension Program. NOTE consolidated its supplier base from 300 to 70. PartnerTech received a SEK 30 million manufacturing contract for OptoPlan°Øs fiber optic sensor system. Perlos: • lost its EUR1.7M R&D funding grant from the Finnish Funding Agency for Technology and Innovation after it discontinued its manufacturing operations in Finland. • sold its Special Products and Connectors business to Valukumpu Ltd. Plexus: • hired software engineers Samie Ghauri and John Reid for its European Design Centre in Livingston, Scotland. • named Ginger Jones CFO replacing retiring Gordon Bitter. Probe Manufacturing entered obtained two 12-month contracts worth $649,103 for
24
Global SMT & Packaging - July 2007
EMS services with Mettler Electronics. Remploy is closing 32 of its 83 factories and merging 11 sites with other facilities. PCB manufacturing will be concentrated at its Bolton and Barking sites. Rimaster installed a Minitor logistics and purchasing information system at its Polish plant. Sanmina-SCI: • closed its Newisys, Texas, subsidiary. • laid off 150 temporary employees in Tourlaville, France, due to an expired Alcatel contract. Simclar appointed William Sim director and member of its audit committee. Smart Modular Technology purchased its eighth Koh Young solder paste inspection system which Christopher Associates delivered to SMT°Øs manufacturing plant in Santo Domingo, Dominican Republic. Solectron: • expanding its Shanghai, China, product development center, hiring over 100 engineers. • received a 2007 Vendor Excellence Award from Redbox Automated Retail. • received a biotech manufacturing contract from CSA Medical. Solectron Malaysia recovered RM1.2 million worth of stolen manufacturing equipment. Two Solectron managers were charged with possessing and selling stolen goods. Sparton is investing $2.7 million to expand its Blackman Township assembly facility near Jackson, Michigan. Suntron received AS9100 quality certification for its Gulf Coast Operations facility in Sugar Land, Texas. Taiwan Surface Mounting Technology spun off Regent Manner International Holdings in June and is investing the proceeds to expand its production lines from 90 to 110. Tellumat acquired EMS firm Rhomco, a division of Pertec. Trimble is outsourcing its SMT operations to contract manufacturers but will keep assembly work in-house. TXP appointed Eric Prince director of materials. Uchi Technologies is: • investing US$500,000 (RM1.69 million) to expand its Penang facility this year where about US$350,000 will be used to expand SMT activities. • building a new US$3.5 million (RM11.87 million) plant in Dongguan City, Guangdong, to start operations by 1Q’08. Materials & process equipment DEK:
www.globalsmt.net
Mid-year perspective • launched OptiGuard, a new stencil system that extends its VectorGuard stencil range. • received Intel’s Preferred Quality Supplier Award. Impact Coatings began shipping MaxPhase, a newly developed ceramic material to replace gold on electrical contacts. Lincoln International opened an office in Vienna and appointed Witold Szymanski managing director of Austria and Central/ Eastern Europe. Nan Ya Plastics raised copper clad laminate prices 10-15% in May and 5-10% in June. Nordson Corporation acquired YESTech Inc. (a manufacturer of AOI & XRay Systems for PCB Assembly) and PICO Dosiertechnik (a manufacturer of piezoelectric technology dispensing systems) for a total of $53 million. Rohm and Haas allocated $150 million, half of its $300 million 2007 R&D budget, for sustainability efforts, including new product development, energy efficiency and process improvements. Siemens appointed Peter Loescher CEO, Jeff Timms VP, Electronics Assembly Systems and Gunter Lauber president, A&D Electronics Assembly Systems.
Soldertec Global launched a new RoHS Reliability assessment service. Teradyne sold its Broadband Test Division to Tollgrade for $12 million plus the assumption of specified liabilities.
can be contacted at: [email protected] or visit www.custerconsulting.com
Walt Custer is an independent consultant who monitors and offers a daily news service and market reports on the PCB and assembly automation and semiconductor industries. He
Jon Custer-Topai is vice president of Custer Consulting Group and responsible for the corporation’s market research and news analysis activities. Jon is a member of the IPC and active in the Technology Marketing Research Council. He can be contacted at [email protected]
Reference Books by
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