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EPTE Newsletter from Japan: PCB Industry Running out of Options

The Japanese Ministry of Economy, Trade, and Industry (METI) has released June’s production data for the electronics industry in Japan. Now that a six-month snapshot for the first half of 2012 is available, it is possible to review market trends and assess plans for the remainder of the year.Total revenue for the Japanese PCB industry in June 2012 came in at 52.99 billion yen: this marks a 7.1% increase from the previous month and 2.7% increase compared to the same month last year. Volume shipped totaled 1.42 million square meters, a 4.6% increase from the previous month and 0.3% increase compared to the same month last year. This growth seems insignificant, but the gain could signal that the bottom was reached last year.Second-quarter growth was positive this year. The growth in 2011 for the same period of time was negative compared to 2010. Could this signal a rebound for the industry? The optimists will answer yes, while the pessimists will take a wait-and-see attitude. Cumulative total revenue for the first half of the year was down by 1.5% compared to the same period last year, even though volume increased by 1.8%. In past newsletters* I pointed out the dreadful performance of the industry in 2011 (it was almost as bad as the worst year ever, 2009). Unfortunately, the latest performance data is showing signs of a worsening market.The main reason for my pessimism with market projections is the volatility in sales for three of the prime product categories in the Japanese PCB industry. Build-up multilayer boards, double-sided and multilayer flexible circuits, and rigid base module substrates for semiconductors have posted dramatic swings in monthly shipments since last autumn. Revenue predictions are continually updated and, on average, most manufacturers are losing business. A few events can explain this instability. A few years ago, most Japanese PCB manufacturers' customers were domestic electronics companies and device manufacturers. Japanese PCB companies enjoyed relatively high margins due to their technological capabilities and high benchmark for quality. However, the Japanese electronics market has changed very quickly during the last few years, and no one expected such a quick transformation. Flat-panel TVs made in Japan are no longer a part of the global market, causing Panasonic and Sharp to suffer huge losses from non-performing investments in this segment. Several Japanese semiconductor manufacturers have lost their competitive edge--industry giants such as Elpida Memory and Renesas Electronics are suffering the worst financial setbacks in their histories. The new Apple and Samsung smartphones have made inroads into the Japanese market. Japanese electronics companies' budgets cannot withstand the higher costs associated with domestic PCB manufacturers, so these companies are trying to shift their business to the overseas markets. 

Some of the larger manufacturers have had success in securing substantial orders. But unfortunately, new markets are not as friendly as those to which the Japanese manufacturers are accustomed. Price dictates almost every decision, and potential customers (and even loyal ones) will switch vendors to save money. This causes extremely volatile swings in business.

Japan's PCB industry does not have many options left. Incremental improvements will not rescue the entire industry. Management teams must generate long-term survival plans and execute strategies as soon as possible. Time and money are running out...      Dominique K. NumakuraDKN Research, www.dknresearch.com

*To view past issues of the newsletter, click here. Headlines of the Week(Please contact haverhill@dknreseach.com for further information on the news.)1. Showa Denko (Major chemical company in Japan) 7/27 The company terminated production of carbon nano tube “VGCF-H” for composite resins in June. 2. ASE/SPIL (Major IC assembling firms in Taiwan) 8/2 The firms have increased their use of copper wire bonding; will reach 60% by the end of 2012.3. Hitachi Consumer Electronics (Device manufacturer in Japan) 8/2The manufacturer has commercialized a new gamma ray camera with 256 pixels. The sensor device can distinguish cesium 137 and iodine 131.4. Kyocera (Major electronic device manufacturer in Japan) 8/6 The manufacturer has commercialized a new, two color inkjet printer head with a resolution of 300 dpi and a printing speed of 152 meters/min.5. DNP (Major printing company in Japan) 8/8 The company has begun the volume production of encapsulation materials, back sheets and back electrode sheets, for photovoltaic cells.6. Sharp (Major electronics company in Japan) 8/9 The company has unveiled a new portable-type lithium ion battery with 400W capacity for use as a back-up power source.7. Toshiba (Major electronics and electric company in Japan) 8/16 The company has developed a new motor magnet without dysprosium, a rare earth element.8. TEL (Major equipment supplier in Japan) 8/13 The supplier has agreed to acquire FSI International, a cleaning machine manufacturer in the U.S., to expand product lines.9. TOK (Specialty chemical company in Japan) 8/16 The company has created a new joint venture in Korea for the local manufacturing and distribution of photo resists with Samsung C&T.10. N Tech (Device manufacturer in Japan) 8/23The manufacturer has developed a new, light weight and small-sized heat pipe module for power LED with 100 ~ 1000W. It is 50% lighter when compared to traditional heat sinks. 11. DIC (Specialty chemical company in Japan) 8/22The company has commercialized a new pressure-sensitive adhesive tape with high heat conductivity and low flammability for power devices.Recent Articles from DKN ResearchTo view the complete list of DKN Research articles, click here.