Business Climate for 2015

Prospects for Electronics Industry:-

We have compiled the business climate review shown below as part of BPA’s PCB Information Service which provides essential data for those involved in the PCB supply chain.

Perhaps the price of oil is a good global yard-stick for the current state of economic activity. Crude oil prices have hit a four-year low after Saudi Arabia unexpectedly cut the price of oil sold to the US. Brent crude fell below $70 at the time of writing. Falling oil prices means generally falling demand unless this was prompted by over-supply. In fact OPEC output is still pegged to December 2011’s agreed levels of 30 million barrels a day. This fact alone would indicate a current slow-down in activity. One important bright spot has been the US which has seen some of the highest growth in GDP in the G20 – in excess of over 3% towards the latter part of 2014 and is set to continue into 2015. The strength of the largest economy in the world should help with demand pull.

Europe has suffered from low growth and to a certain extent depressed confidence recently. The ECB has at least acknowledged this and has proposed some initiatives but more Quantative Easing is not ruled out in 2015. Inflation is running dangerously low at 0.4% and there is a real risk of deflation.

China, a big driver of growth in electronics production has been reported as slowing below the target of 7.5% set by the central plan, this measure recently has been unofficially thought to be nearer 6% in reality. Growth in China’s manufacturing sector slowed in October, an official survey suggests, reinforcing concerns about a slowdown in the wider economy. The country’s Purchasing Managers Index (PMI) fell to a lower-than-expected 50.8, from 51.1 in the previous month. (Any score above 50 represents growth.) Recently released figures showed the wider Chinese economy growing at its slowest pace for more than five years. Growth between July and September was 7.3% compared with a year earlier, down from 7.5% in the previous quarter.

There has however been some positive news and indeed the telecoms sector in China has invested heavily in 2014 and certainly significantly added to PCB and laminate demand at least for the first two quarters of 2014. In particular Chinese telecom equipment maker Huawei has reported a 19% jump in sales to 135.8bn yuan ($21.9bn) for the first six months of the year. It said it expects to make an operating profit margin of 18.3% for the period.

Huawei has traditionally concentrated on making telecoms network equipment, but has benefited by diversifying into fast-growing sectors such as smartphone manufacturing. It is now one of the world’s largest smartphone makers.

Figure 1: SUMMARY OF GLOBAL CAPACITY UTILISATION TREND

SUMMARY OF PCB GLOBAL CAPACITY UTILISATION TREND

Turning to PCB and Laminate supply for the third quarter, in Asia the reported capacity utilisation has edged slightly (see Figure 1) but has fallen in Europe and The US. The US is harder to reconcile but it would seem it is a short term phenomenon as the IPC report the latest book-to-bill ratio moving back into positive territory for October.

Prices have also fallen slightly as well as order books compared to the last quarter. The reduction in capacity utilsation prices and order book backlog is in keeping with the anecdotal information that has been passed onto BPA during recent industry supply chain discussions. These same conversations have indicated a potential softening in demand for 2015 compared to 2014. We are in a more stable period of the electronics industry growth cycle and as such most regions will experience single digit growth next year.

Our soon to be published Five Year Forecast will detail these growth rates and more importantly forecast in volume and value terms, the market for PCBs and laminate materials out to 2018.  Read more about our PCB Information Service or contact m.hutton@bpaconsulting.com for more details.

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BPA Consulting Ltd
Dorset House, Regent Park
297 Kingston Road
Leatherhead, Surrey
KT22 7PL

Tel: +44 (0)1306 875500
bpa@bpaconsulting.com
www.bpaconsulting.com
Company No.: 3709460

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