Trends & Observations - Sep '05

* In spite of lackluster performance in the US domestic printed circuit board (PCB) market, TTM Technologies remains one of the more stable companies. While its business model is not immune to pricing pressure, the company is operating at 70% capacity utilization and has a debt-free balance sheet. The Company was also named one of Fortune Magazine's 100 fastest growing companies.

* Troubled demand outlook for servers, storage, networking and telecom infrastructure markets does not seem to be letting up. Relative to the enterprise market, some OEMs are significantly discounting end-of-quarter pricing. Consumer electronics demand also appears to be showing signs of weakness but we suspect this will rebound as the holiday season approaches.

* Weak end-market demand is translating to OEM pricing sensitivity with outsourcing partners. Some OEMs are considering changing providers if offered significant savings. We believe some providers with relatively low capacity utilization may be likely to accept additional business under less than ideal terms.

* Some EMS companies appear to be off-loading their inventory requirements onto to their component suppliers. This can be partly explained by better supply chain management practices. However, we also believe better purchase positioning by EMS providers is being used to leverage more favorable contractual terms as EMS providers continue to represent a larger portion of the total spend on board-level devices.

VentureOutsource.com, September 2005