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North America is Coming Back!
March 1, 2004 |Estimated reading time: 2 minutes
North America is Coming Back! By Walt Custer March 1, 2004
Finally, a good North American electronics trade show! The "co-located events" IPC PCB EXPO (printed circuits) and APEX (assembly) that were held February 24-26 in Anaheim, California were, jointly, the best electronics trade shows that North America has seen since the CY2000 bubble. Attendance was up substantially since 2003; the mood was positive; and most importantly, show attendees were not only visiting the booths but PLACING ORDERS. The aisles were busy the entire three days. On the last afternoon (typically a "dead" time), customers were on the floor doing business until after the show closed. Exhibitors never got a chance to visit their neighbors-a tradition on the normally slow last afternoon. North America is recovering, and the EXPO and APEX crowd confirmed it! Booth signups by exhibitors for 2005 were brisk.
The North American electronics industry's "vital signs" are generally good (at least relative to the 2001-2003 crash). Two key buyers' indices (Chart 1) are up strongly. The Institute for Supply Management (ISM)-formerly PMI-and the Electronics Supply & Manufacturing (ESM)-formerly EBI-are in expansion territory. Printed circuits, semiconductors, and semiconductor equipment are all expanding. In spite of the "Asian shift," North American demand is returning. Among the largest U.S. PCB makers, Merix and (most recently) TTM Technologies have announced significant capacity expansions-both based upon new facilities.
Electronic equipment orders were also up in January. Computers and related equipment (storage, peripherals, etc.) peaked in 1998-99, bottomed in 2001, and have been generally improving ever since (Chart 2). A steady recovery is evident.
Communications equipment orders (datacom and telecom) are the big news, however. After beginning a steady recovery in late 2002, orders boomed in late summer and early fall (Chart 3). However, in November and December 2003, the "communications recovery" euphoria ended as orders plunged to their lowest level in years. This massive year-end drop caused me to issue "storm clouds on the horizon" warnings in January and February. Fortunately, the January data (released in late February) showed a significant upturn. At the same time, inventories continued to decline (Chart 4).
It appears that in November and December, communications equipment orders "took a breather" from their torrid July-to-October growth spurt. Fortunately, in January they rebounded substantially. The storm clouds are clearing!
Total electronic-equipment order growth has felt the sting of the Nov/Dec communications drop. The 3/12 rate of change (three-month growth rate) for electronic equipment orders (Chart 5) has taken a dip. This will continue until probably March (when the December orders are no longer part of the three-month average). At the same time as equipment growth continued to slow in December, PCB order growth accelerated. I expect a downward PCB correction in 1Q'04 as PCB and equipment growth are brought into sync.
2004 still looks like a good year. Just ask the IPC PCB EXPO and APEX attendees!
Walt Custer www.custerconsulting.comwalt@custerconsulting.com