The overall combined (flex and rigid) book to bill ratio falling below parity is no surprise to us. We have been saying since June that the overall activity levels have been weak at best. We have received a lot of phone calls from suppliers here in the U.S. asking how our business is. They state the same concerns that their shops are generally slow and have been for three to four months now. The activity levels are just not there. This is also evident in the poor earnings reported by many public firms in the U.S., with even bleaker forecasts. Despite those earning reports, stocks still remain stable – but not for fundamental reasons. Our management team is split down the middle on why the trend is slow.
Some of us feel there is a great amount of capital on the sidelines. Much of this potential capital is holding off because of uncertainty. Uncertainty of the upcoming elections, policies and leadership decisions are not the fertile ground for economic progress – especially electronics manufacturing. Or could it just be cyclical and an unstable economy sputtering along and this is just part of one of its downswings before it rises. Let’s hope it is the former and when the leadership is fixed for four more years, let’s hope the investment capital begins again.
PCB Solutions’ strategy will always be to provide the best possible service to our customers to differentiate us from our competition. In addition, we just have to be more aggressive at fighting to earn the business so our new customers can experience what our existing customers enjoy. Our business is set for a record year in 2012 and we plan to carry the momentum into the upcoming 2013 manufacturing year.
PCB Industry Growth Rates and Book-to-Bill Ratios Announced
Rigid PCB shipments were down 5.3 percent in September 2012 from September 2011, and bookings decreased 1.8 percent year over year. Year to date, rigid PCB shipments decreased 4.7 percent and bookings increased 0.8 percent. Compared to the previous month, rigid PCB shipments were up 10.3 percent and rigid bookings were flat with 0 percent growth. The book-to-bill ratio for the North American rigid PCB industry in September 2012 slipped to 1.00.
Flexible circuit shipments in September 2012 were down 19.9 percent, and bookings were down 20.9 percent compared to September 2011. Year to date, flexible circuit shipments decreased 5.8 percent and bookings decreased 9.7 percent. Compared to the previous month, flexible circuit shipments increased 5.3 percent and flex bookings were down 4.4 percent. The North American flexible circuit book-to-bill ratio dropped to 0.71.
For rigid PCBs and flexible circuits combined, industry shipments in September 2012 were down 6.7 percent and bookings decreased 3.3 percent, compared to September 2011. Year to date, combined industry shipments were down 4.8 percent and bookings were down 0.2 percent. Compared to the previous month, combined industry shipments for September 2012 increased 9.8 percent and bookings decreased 0.3 percent. The combined (rigid and flex) industry book-to-bill ratio in September 2012 fell below parity to 0.97.
“North American PCB sales in September continued below 2011 sales, but improved over the preceding month, following normal seasonal patterns,” said Sharon Starr, IPC director of market research. “Sharp declines in flexible circuit orders over the past three months pushed the overall PCB book-to-bill ratio below parity,” she added, “but the volatility of the flex business means this effect will probably be short-lived.”
The book-to-bill ratios are calculated by dividing the value of orders booked over the past three months by the value of sales billed during the same period from companies in IPC’s survey sample. 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.
Book-to-bill ratios and growth rates for rigid PCBs and flexible circuits combined are heavily affected by the rigid PCB segment. Rigid PCBs represent an estimated 90 percent of the current PCB industry in North America, according to IPC’s World PCB Production Report.
The Role of Domestic Production
IPC’s monthly survey of the North American PCB industry tracks bookings and shipments from U.S. and Canadian facilities, which provide indicators of regional demand. These numbers do not measure U.S. and Canadian PCB production. To track regional production trends, IPC asks survey participants for the percent of their reported shipments that were produced domestically (i.e., in the USA or Canada). In September 2012, 80 percent of total PCB shipments reported by survey participants were domestically produced. Domestic production accounted for 79 percent of rigid PCB and 83 percent of flexible circuit shipments in September by IPC’s survey participants. These numbers are significantly affected by the mix of companies in IPC’s survey sample, which change slightly in January, but are kept constant through the remainder of the year.
Bare Circuits versus Assembly
Flexible circuit sales typically include value-added services such as assembly, in addition to the bare flexible circuits. In September, the flexible circuit manufacturers in IPC’s survey sample indicated that bare circuits accounted for about 43 percent of their shipment value reported for the month. Assembly and other services make up a large and growing segment of flexible circuit producers’ businesses. This figure is also sensitive to changes in the survey sample, which may occur at the beginning of each calendar year.
Interpreting the Data
Year-on-year and year-to-date growth rates provide the most meaningful view of industry growth. Month-to-month comparisons should be made with caution as they may reflect cyclical effects and short-term volatility. Because bookings tend to be more volatile than shipments, changes in the book-to-bill ratios from month to month may not be significant unless a trend of more than three consecutive months is apparent. It is also important to consider changes in bookings and shipments to understand what is driving changes in the book-to-bill ratio.
The information in IPC’s monthly PCB industry statistics is based on data provided by a representative sample of both rigid and flexible PCB manufacturers in the USA and Canada. IPC publishes the PCB Book-to-Bill Ratio and the PCB Statistical Program Report each month. Statistics for the previous month are not available until the last week of the following month.