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EPTE Newsletter from Japan: PCB Industry on the Ropes

The Japanese Ministry of Economy, Trade, and Industry (METI) has released September’s production data for the electronics industry in Japan. A nine-month snapshot for the first three quarters of 2012 is now available and allows us to review market trends and assess plans for the remainder of the year.

Total revenue for the Japanese PWB industry in June 2012 came in at 45.3 billion yen; a 2.8% drop from the previous month and 14.3% drop compared to the same month last year. Total shipments equaled 1.40 million square meters; a 0.2% decrease from previous month and 6.9% decrease compared to the same month last year. Historically, business in Japan rebounds during September right after summer vacations. Shipments increase for October, November, and December from the year end shopping season. However, the data from September reflects a negative growth compared to August and the same month last year. The numbers also reflect a decrease in revenue. The decline in terms of percentage is larger than the percent decrease in volume. This means prices are dropping--not only is the volume dropping, but sales are also dropping. Market indexes for the third quarter are pointing downward after a negligible growth rate during the second quarter.

Three of the primary product categories from the Japanese PCB industry are posting troublesome sales data. Build-up multilayer boards, double-sided and multilayer flexible circuits, and rigid-base module substrates for semiconductors have experienced dramatic swings in monthly shipments since last autumn. Sales of build-up boards and rigid-base module substrates have declined month-over-month. Their lackluster sales volume could equal those from 2008 and 2009 when the industry hit an historic low during the global recession. Volume from double-sided and multilayer flexible circuits posted positive growth for the last four months; unfortunately revenue did not grow as much as the volume. This can be attributed to lower prices. The remaining market segments show a relatively stable sales trend, but the trend is heading slightly downward.

Two reasons explain the drop in sales. The first is a slowdown in business for domestic electronics manufacturers such as Panasonic and Sharp. Their market share has dropped considerably and these big companies are bleeding money. It will take a long time for them to recover from these huge losses. The second reason is that pricing pressures from the market are shrinking profit margins. Foreign PCB manufacturers are competing vigorously for the same customers--the only way to capture market share is to lower prices. Previously, Japanese manufacturers were very profitable with their double-sided and multilayer flex and rigid module substrate product lines. Their overseas customers preferred high performance and a high-quality product produced in Japan. But Korean and Taiwanese PCB manufacturers have greatly improved the quality of their products over the last few years. Not only are the products comparable to their Japanese counterparts, but their prices are considerably lower. This is eroding a customer base that was once loyal to Japanese manufacturers. 

Cumulative total revenue for the first nine months of the year decreased by 2.2% compared to the same period last year even though volume increased by 1.6%. The industry needs a remarkable turnaround during the last quarter to post a positive growth rate for the year. There's only one month left in the year, and I have not heard any singing or whistling from Japanese PCB manufacturers.

The Japanese PWB industry is facing a challenging business climate with problems that are not easy to solve. I don’t want to see the same kind of collapse that the American PCB industry experienced in the early 2000s. Let’s hope history does not repeat itself.

Dominique K. NumakuraDKN Research, www.dknresearchllc.com

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Headlines of the Week

(Please contact haverhill@dknreseach.com for further information on the news.)1. JX Nippon Oil & Energy (Major metal & oil supplier in Japan) 11/6The supplier has decided to close its photovoltaic cell silicon wafer business due to extreme global price completion.2. TOWA (Packaging company in Japan) 11/12The company has developed a new molding technology for the encapsulation of wafer substrates over 12 inches.3. SMM (Major metal product supplier in Japan) 11/15The supplier has installed a new manufacturing line and begun volume production of large (6 inch) sapphire substrates for LED devices.4. Unimicron (Major circuit board supplier in Taiwan) 11/22The supplier has increased its manufacturing capacity of embedded component PCBs to 3 million units per month in the fourth quarter of 2012.5. Hitachi Chemical (Major electronic material supplier in Japan) 11/26The supplier has developed a new glass material with a low melting point (220 to 300 degrees C) for the reliable encapsulation of ceramic and metal packages.6. AUO, Innolux (Major display suppliers in Taiwan) 11/27The suppliers are planning volume production of active matrix-type OLED panels in the first quarter of 2013.7. LGD (Major display supplier in Korea) 11/27The company has become a major supplier of the iPad Mini display panels for Apple--Taiwanese manufacturers don’t have enough capacity.8. SII (Major electronics company in Japan) 11/27The comapny has rolled out a new electronic dictionary with a 5.1” color display and touch panel screen.9. Toshiba (Major electronics company in Japan) 11/28The company has developed a new BIS-type CMOS image sensor with 13 million pixels for smart phones and tablet PCs. 10. TSMC (Major semiconductor manufacturer in Taiwan) 11/30The manufacturer is considering expansion of its manufacturing capacity to receive new orders for iPhone and iPad MPUs.Recent Articles from DKN Research

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