Q3 Analysis of Asian printed circuit board sector

By Dominique Numakura

The Japan Ministry of Economy, Trading and Industry (METI) recently released September production data for the Japanese printed circuit board industry. With three quarters of data under behind us, let's review performance from the first three quarters and provide forecasts for the last quarter and fiscal year 2008.

Japan printed circuit boards

September's total revenue from Japanese circuit board manufacturers came in at 82.74 billion yen, representing an 18.4% increase from August and a 5.2% increase from the same month last year.

Figures for September's total shipments or volume equaled 2.083 million square meters, representing a 12.8% increase from the previous month and a 4.6% decrease for the same month last year.

The typical business cycle within the Japanese electronics industry is a decline in production during August due to long summer vacations, followed by a production upswing in September in preparation for the Christmas holiday spending spree.

However, production fluctuations during August and September were more extreme than usual this year and were not specific to any one market segment.

This trend was widespread amongst most product categories including flexible circuits and module circuits, and in most cases September's shipments were larger than July's shipments.

The segments that bucked this trend were single sided flexible circuits and other module circuits; the majority of these are substrates used in LCD driver modules. Unfortunately, their performance continues to weaken and continues a decline that began several months ago.

Management from circuit board manufacturers are stumped with predicting future business trends and providing accurate forecasts using current market statistics. They are in the midst of a year-long slump, and expect more downward pressure on business after the doom and gloom financial crisis reported in September from the United States.

Most major Japanese manufacturers of rigid printed circuit boards and flexible printed circuits restated their earning and volume projections for fiscal year 2008, and expect lower revenues and incomes compared to their original annual budget and targets.

Taiwan and Korea

The business trend from the Taiwanese circuit board market is rather strange.

Market data shows a continuous increase for several months leading up to October. Now, unfortunately, Taiwanese manufacturers hit a wall and business has turned sour.

The slump has lasted throughout the fourth quarter, and forecasts are pessimistic regarding a quick recovery over the next quarter, or two, because of slow demand for personal computers and cellular phones. Those in Taiwan are not alone; Korean circuit board manufacturers are also in a slowdown that began with the third quarter.

China

I can not provide reliable trend analysis for the Chinese circuit board industry because the statistical market data is not readily available; however, the growth rates of the circuit board imports have been declining over last several months. Information for October came in with negative growth compared to the same period last year. This certainly suggests the slowdown is widespread and the Chinese electronics industry is not immune.

What the future holds

The increase in business during the third quarter in Japan and Taiwan could be a flash in the pan caused by a push to decrease all inventory in distribution pipelines.

The market trend in fourth quarter is one I will pay particular attention to, and will report on current market conditions once the data has been digested.

Source: EPT Newsletter, December 2008

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