Printed Circuit Board Monitor

The road to recovery for America, and for the rest of the world, is far from complete.   While there are many that proclaimed a few short years ago that America was out of its recession, there are a lot of analysts that say we have never left it.  And there are a few specific analysts that say we are not going to be leaving it anytime soon.  Take this interview from Nouriel Roubini, a New York University Professor, with Bloomberg’s Caroline Connan noting that 2013’s world economy could the perfect financial storm. Roubini states so soberly that much of the foundation for the possible global disaster stems from “greedy bankers,”  “banker bailouts” and “the euro-zone crisis.”   This and other interviews are quite revealing and one would assume very shocking…if you haven’t been paying attention.

So where does this leave us with the printed circuit board industry and electronic manufacturing in general? The results for printed circuit boards for the past couple of months have bordered on – stable.

Here are the past four months’ Book to Bill ratios provided by IPC:

April Rigid PCB  – 1.03

April Flex PCB – 1.16

May Rigid PCB – 1.02

May Flex PCB – 1.17

June Rigid PCB – 1.01

June Flex PCB – 1.16

July Rigid PCB – .99

July Flex PCB – 1.20

 

This summary from IPC’s Sharon Starr is positive in June but will the positive story continue?

“North American PCB sales and orders were up in June compared to the previous month, which is consistent with seasonal patterns,” said Sharon Starr, IPC director of market research. “Rigid PCB business continued below last year’s levels, but orders continue to outpace sales, which is encouraging,” she added. “The June book-to-bill ratios remained in positive territory for the seventh consecutive month and maintained an especially strong performance in the flexible circuit segment of the industry.” 

While we eagerly await August’s figures (that come out at the end of September), this allows us some time to speculate on the current feeling. I would have to say here in July and August that my OEM and EMS customers, and U.S. based PCB suppliers have noticed a slowdown in activity –generally.  Does that spell a preemptive slow down or just a summer “everyone is on vacation” slow down?  Sharon goes on in July’s results published in August to say that July’s numbers were down but reflect common summer trends in the industry.

Let’s have a look at an indicator we at PCB Solutions like to follow – the SOXX Index (^SOXX).

According to Wikipedia, The PHLX Semiconductor Sector (SOX – {SO stands for SiO sub 2/sub , a material used to produce semiconductor }) is a Philadelphia stock exchange capitalization weighted index that is a composite group of thirty companies primarily in design, distribution, manufacture, and sale of semiconductors:  Altera, Applied Materials, Advanced Micro Devices, Atheros Communications, Avago Technologies, Broadcom, Cree Inc., Hittite Microwave, Intel, KLA Tencor, Linear Technology, Lam Research, MKS Instruments, Marvell, Micron Technology, Netlogic, National Semiconductor, Nvidia, Novellus Systems, Power Integration, Rubicon Technology, Sandisk, ST Microelectronics, Teradyne, Taiwan Semiconductor Manufacturing Corporation, Texas Instruments, Veeco Instruments, MEMC Electronics Materials, and Xilinx.

Looking at our experience in the past, we see a certain time period lag behind this index. Meaning, we see an increase or a decrease in activity / sales based on the fluctuation of this index.  Based on where the index is now, we are nowhere near November 2008 lows.  The average of the 52 week low / high is 388 and is just closed at 396. Even 2 year lows of around 320 are nothing to be too scared about.   3 month low is above 350 once again saying there is nothing to be too scared about for future sales or reductions in the near short term.  Growth trends, however, are limited in the vision of this index.

One potential flaw or challenge with this index nowadays, compared to 3 years ago, that can’t be overlooked is that the market and a lot of stocks are have a portion of weight on the bankers.  The market today weighs some of its movement on what the Federal Reserve is going to do. If QE6.5 is announced, the market goes up; and a lack of QE hints result in a drop in the market. Market fluctuations are less about financial fundamentals and leaning more towards government pumping the economy with printed money.

Generally, however, the index does show us a stable look into the future for the next 3-6 months.  We also have this comment from IPC’s news release about the Book to Bill Ratio: “A ratio of more than 1.00 suggests that current demand is ahead of supply, which is a positive indicator for sales growth over the next two to three months.”  The overall BTO was 1.01. IPC also came out in August with a detailed report showing that there would be growth throughout 2014 in the printed circuit board industry.

Let’s hope the next few months and beyond show some positive sales growth. We would generally see things in the middle now. There is evidence of growth and there are things to be concerned about.  We can only hope IPC is right and Nouriel Roubini’s analysis of a potential catastrophe does not happen – ever.  However, it is a wise position to keep a careful eye on the PCB market and be able to adjust to the potential shifts that could rapidly happen.

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