IPC President and CEO Dr. John Mitchell: COVID-19 Global Industry Update

Estimated reading time: 13 minutes

Mitchell: So we started off summarizing some of the findings between our differences between our February and March surveys that you can find out on online there. So we shared with that some of the negativity about when it might be passing them in North America. So for instance, that nobody 10 days ago was predicting it to last beyond October of all the survey participants, although 25% said, “It’s too early to tell.” We’re curious to see what that might change to now over the past week because a lot of it’s been changing in just the past few days.
We also looked at, in terms of what they plan to spend in terms of a capex by quarter. The vast majority, two thirds or more depending on the second quarter of ‘20 or all of 2020. Basically most said it’s not changing their capital expenditures. There were about 12% that said it would decrease by more than 5%, but then also 6% says it’s going to increase by more than 5% and then there was some differences between there as well.
And then we did some GDP growth in terms of dropping into recession chances as well. Right now the projection that I think I saw was basically 2020 would not have growth was what they were looking at here in this one here, but so it technically would drop in a recession, but they’re expecting to bounce back in ‘21.

Matties: Good. So when you look at this, we’re just curious what concerns the IPC the most at this point?

Mitchell: So the most concerning thing is of course the safety of the people in these companies, right? So we’re trying to make sure everybody is aware what they need to do to make sure the people are safe. And safe has a couple of different nuances. One is obviously the health. We don’t want them to become sick or become ill. We want to protect their health. Another safety issue is regarding fear, okay? This is going to sound terrible. A lot of media is selling the fear of this stuff because it’s what people want to pay attention to, right? Part of this is helping them understand that there is a light at the end of the tunnel. Like I was sharing with you the China data, we’re about to put out an op ed that’s going to share that, “Look, this was just six weeks ago and China’s at 95% production. People are back at work for the most part. Things are starting to open up. We’re going to get past this people, we’re going to make it. So be safe, but don’t be overly concerned.” Does that make sense?

Matties: It does and we completely agree. We need calm and reasonable thinking to move us forward.

Mitchell: I mean, it’s not very helpful when, yes, people need to have food available to them and they’re working from home, et cetera. But if this wouldn’t have happened, people still would have been eating the same amount of food over the next six weeks or eight weeks or whatever, however long it takes us to get through this. So this run on the grocery stores isn’t necessarily super helpful. So take enough, but don’t fill up every last cupboard of everything so somebody else goes wanting.

Matties: So in this reorganization of the world, and obviously supply chains are being reconsidered, manufacturing strategies are being reconsidered, what lessons do you think are being learned at this moment?

Mitchell: Well, I think there was some learning with the tariff structure. If there’s anything good that I can point to, I always try to find the good in things, right? Anything that I can point to that was good about this tariff war and there’s not much good about it, but at least it taught the global industry, not just the electronics industry to get smarter about their supply chains. So the reason for that is the smarter we are, the better we can optimize and that is probably the one thing that is continuing to being learned here because now how much...
A lot of our business mentality is just in time, right? You don’t want to keep inventory. But now some people who had a little bit more inventory are suddenly looking like geniuses for the next couple of months. So it’s having people reexamined how they think of the business in light of these things. And so, I think those will be some of the lessons learned saying, “Hey, there might be different ways we might want to approach this.”

Matties: What’s your thought about how the administration is approaching this?

Mitchell: Let’s just say things are starting to be moved in a better fashion. I think there was some early losses of opportunity. I mean we sat down and everybody kind of... The things I don’t like is when people sit there and go, “Oh, that’s a China issue or China has caused this to us.” That’s not helpful at all. So those kinds of comments coming from anybody, administration or otherwise I think is just not helpful right now. Let’s look for solutions. Let’s protect people. And everything that’s going on in that direction is moving in the right direction. In some regards, I wish it was going faster and we had more clarity, but they’re enabling tools to be able to be used, which is good. And I don’t fault them for that at all.
So I’m glad that the administration and Congress is voting in these measures. Whether we end up needing them or not, it’s glad that they’re willing to act quickly enough to respond to that. And there’s governments across the globe that are doing the same thing. I mean there’s something like $500 billion Euro that’s available to ensure that no businesses will fail just in Germany, a similar program in the UK, Spain and France. And so that’s Western Europe basically saying, “We’re not going to let any business fail over this. We will cover you.”
There’s upwards of $1.3 trillion additional resources that the US Government is looking at offering. And so there is some question about that. I mean there’s a lot of unclarity. They basically said, “Hey, if you’re a small, medium-sized business, anybody wants that time off, you’re going to give them up to the two weeks paid time off, done and done.” Because it just literally got enacted two days ago, there’s a lot of lack of clarity from the businesses to say, “So are you going to reimburse us for that or is there something we can file on it?” They mentioned that it could come out of some of the getting tax credits for it, but it’s just not super clear. The only thing I would offer as a suggestion would be we need to get more clarity and it may be too early. I think we’ll get there.

I-Connect007: Do you have any additional thoughts that you’d like to share that we haven’t touched on?

Matties: I guess the only thing I would offer in conclusion, and I don’t know that we haven’t touched on it, but I would just reemphasize that we’re going to make it through this. The great thing about this industry is that we’re part of the solution. I mean we are creating the products that are going to help beat this, help shore up those who are ill, help make sure that we can keep talking to each other. The fact that you and I are able to still hold this call on this bandwidth is a testament to technology and the creation of it in such a fashion that allows it to work reliably so that even in this crisis where we’re not necessarily in the office where we anticipated being normally, it’s still working fine. And so the electronics industry is the backbone of all other industries. Every single other industry is reliant on us, and so we need to keep doing a good job and proceed forward.

I-Connect007: John, we certainly appreciate you taking the time today to share your thoughts with our readers.

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