Trends & Observations - Mar '06

* Flexible PCB vendors are seeing an increase in orders and visibility improvements. Margin increases can be expected with some of the better-managed vendors. Automobile manufacturers continue to increase their percentage use of flexible PCBs in existing and upcoming car models. The global handset market is also contributing to demand increases.

* The PCB industry overall remains healthy as the EMS industry moves through the first portion of 2006. Some lead times are extending with a few product pricing increases. Demand seems solid and those board manufacturers serving the broadest based end-markets should perform well.

* There is some talk of inventory concerns in the EMS space, particularly with some tier-1 providers. VO believes liability risk is mitigated with certain providers posting increased sales guidance for upcoming quarters and reminds readers to be more wary of potential liability issues with providers that are lowering their guidance and near-term sales y/y, q/q.

* China's GSM market grew 60% y/y in January. Chinese-branded handset manufacturers posted a 25% increase in shipments y/y. On the components side of the business, the Chinese market continues to be a source of revenue for non-tier1 handset chipset vendors such as MediaTek. The other fast-growing market for handsets and components is India which is likely to be much harder for smaller vendors to break into since it is estimated tier-1 components vendors already control more than 90% of the Indian market.

VentureOutsource.com, March 2006