Walt Custer’s EIPC Business Outlook Webinar: ‘You Can’t Sugarcoat This Stuff!’

Estimated reading time: 9 minutes

Custer had access to a lot of European data, and he gratefully acknowledged Michael Gasch and Hans Friedrichkeit for providing previously unpublished figures. According to current data from Gasch, the value of European PCB production in 2019 was 1.7 billion euros. Germany took the largest share at 42.6%, followed by Austria and Switzerland 17.1%, Italy 11.8%, France 8.5%, the U.K. 8.6%, Spain 2.4%, Belgium, Netherlands and Scandinavia 4.2%, and Central Europe 4.8%. Russia and former Soviet Union countries were not included in these figures. The graph of European PCB production by year showed a fall in 2019 over 2018 of about 5%. Over the longer term, there had been a substantial decline since 2000 as more and more business went to Asia, and the curve had been substantially flat since 2012.

European PCB production categorised by technology showed multilayers to constitute about 41% and double-sided plated-through about 17%. By end market, the industrial sector has been about 41%, the medical sector about 20%, and there had been no great change in market segmentation from 2010 to 2019. In summary, between 2013 and 2019, revenues had fallen from 1.8 billion euros to 1.76 billion and staff numbers from 16,700 to 15,800. The total number of companies had dropped from 272 to 187 over the same period. Europe’s top 41 PCB companies in 2019, as listed by Gasch, had Würth Group as largest followed by AT&S, KSG Group, Schweizer Electronic, and Elvia.

Custer listed Gasch’s comments on the European PCB industry:

• In February and March, there was hope that because of the coronavirus in China, a lot of business would come to Europe, and then came the coronavirus not only to Europe but to the world.
• The general opinion has changed in April, and now it is that PCB suppliers (as well the whole supply chain from component distributors to EMS companies) are suffering. The lockdown all over Europe, the halt of production (but especially in the automotive sector) has led initially to corrections and postponements but later to hefty cancellations of orders. As the global production of vehicles expects a decline of 20–25% this year, suppliers to this industry and its subcontractors will have a long dry season.
• The only exception is the medical segment, but it depends on the discipline (ventilators good/dentists bad).
• The prospects are not good. In addition, we have in Europe the coming Brexit, and in this poker round, all is still open (and most likely it leads to a very hard Brexit, which will hurt the U.K. more than the EU, especially under coronavirus aspects).
• Unemployment rises as well in Europe, but unlike the “promised land USA,” we have, in most countries, a functioning social net. With the impending civil war in “God’s own country,” consumers will be hesitant to spend money—especially as they may lose their jobs. And this will have consequences for the rest of the world if there are no takers for the products offered.

Hans Friedrichkeit commented:

• Europe’s recovery will be a rocky road until the second half of 2021.
• The German economy is likely to contract by 6.6% this year and then grow by 10.2% from this low level next year. This is the result of the update of the ifo (Leibniz Institute for Economic Research at the University of Munich) economic forecast for 2020/2021 based on the evaluation of the ifo survey conducted among companies in May.
• On average, they consider a normalization of their own business situation within nine months to be the most likely case, according to German ifo Institute on 5/28/2020.
• After a sharp slump of 12.4% in the second quarter of 2020, the economy should, therefore, recover by the middle of next year.

The economic forecasts he provided indicated that German GDP would be down 7% in 2020, with inflation at 1%. Equivalent figures for the Eurozone were 7.5% and 0.7%, and for the U.K., 7.5% and 1.2%. These forecasts were in line with those of the most recent world data from the IMF and the World Bank.

Friedrichkeit reckoned German PCB production to have shrunk by approximately 11% to around 750 million euros in 2019, compared with 840 million euros in 2018 and 790 million euros in 2017. His rough estimate for German PCB production in 2020 was 640 million euros, corresponding to a fall of 15%. The good news was that with 3.6 million new passenger car registrations in 2019, Germany was showing 5% growth compared with 2018. In contrast, the bad news was that after having shrunk by 9.3% in 2018, German passenger car production shrank again by 8.9% in 2019 and 19% of car manufacturers and suppliers were introducing or planning short-time working in the first quarter of 2020.

In general, the automotive market was in difficult times. Bosch had anticipated that global automobile production would shrink in 2020 for the third year in succession and expected a further decline of 2.6% to around 89 million vehicles worldwide—almost 10 million units fewer than in 2017. The company was preparing for a flat level of production in the coming years and did not expect global automobile production to increase before 2025.

Custer discussed the world market for PCB process equipment, laminate, and materials. Process equipment suppliers were down 2% in the first quarter. Materials suppliers were down 7% during the same period and, surprisingly, rigid and flex laminate were up about 4%. Anyone selling into the printed circuit manufacturing industry could expect a flat year in 2020.

Custer then looked at the world market for PCBs by region. Taiwan and China were clearly the biggest, although their demand was seasonal. Adding-up the whole market, he believed that shipments would be down about 5% on the year. Newly published World Semiconductor Trade Statistics figures were predicting 6% growth in shipments, although Custer considered them over-optimistic. For the European economy, most of the end markets were negative, and the purchasing managers’ index was below 1. The latest economic data from the World Bank had Europe down 9.1% and a recovery in 2021. “It looks like a couple of tough years,” he stated.

Custer’s closing comments were that although the market had reached the bottom and begun to improve, the coronavirus pandemic would significantly impact 2020. Trade disputes would impact long-standing regional alliances, Brexit and U.S.-driven impulsive market actions would remain as problems, and electronic assembly might shift globally to countries less affected by tariffs. However, many good new electronic products are on the horizon, and 5G offers exciting opportunities for the next decade.

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