North American comments; a difficult year for PCB fabricators

Citation

Custer, W. (1999), "North American comments; a difficult year for PCB fabricators", Circuit World, Vol. 25 No. 2. https://doi.org/10.1108/cw.1999.21725bab.014

North American comments; a difficult year for PCB fabricators

USA

North American comments ­ a difficult year for PCB fabricators

Keywords Electronics industry, Printed circuit boards, USA

In 1998 North American electronic equipment orders grew approximately 10.5 percent and shipments 10.0 percent versus 1997. Figure 2 shows both monthly and 12-month average orders for military electronics, instruments and controls, communication and computers and office equipment. Notice that the monthly orders are above the 12-month average indicating continued growth. By comparison rigid printed circuit board orders declined about 2 per cent in 1998. Price degradation, inventory and ordering imbalances, seasonal demand fluctuations and increased PCB imports join to explain 1998's much lower growth for PCBs versus electronic equipment. Figure 3 shows North America's rigid PCB book-to-bill ration from 1996 to the present.

Figure 2 Total electronic equipment bookings

Figure 3 North American rigid printed circuit boards three-month average book/bill ratio

Figure 4 US PCBs vs. total electronic equipment

Figure 5 PCB vs. equipment bookings (North America)

Figure 6 US electronic equipment vs. PCBs ($ bookings growth)

Figure 7 US PCBs vs. electronic equipment bookings

Table I Top North American PCB manufacturers (PCB FAB and total ­ 1998 estimate ($m))

	PCB	Total
Viasystemsa	950	1,050
Hadco/Zycon/Continental	800	870
Johnson Matthey	405	Large
Photocircuits	340	340
Dii Group	280	900
Tyco/Amp	270	22,700
Sanmina/Altron	250	1,000
Dynamic/Details	235	235
IBM	215	77,000
Praegitzer	205	220
Merix	135	135
Sheldahl	100	115
Viktron	93	133
Automata/Kam	80	80
Toppan West	80	80
3M	80	Large
Adflex Solutions	80	144
Circuitwise	75	75
Bureau Electronics	74	74

Note:Includes Richmond, CiroCraft, Forward, ISL, Ericcson, Mommers, Zincocelere PCB Fabs

Table IINorth American PCB manufacturers ­ public data quarterly sales and net income ($m)

		Last year		This year		Quarter
		sales	Inc.	sales	Inc.	ending
Adflex	AFLX	55.1	2.6	36.1	­2.6	9/98
Altron	ALRN	51.5	3.5	51.8	2.7	9/98
Circuit Sys	CSYI	20.5	1.2	25.1	1.2	10/98
Circuit World	TSE:CWW	2.9	0.1	3.4	0.1	9/98
Hadco	HDCO	173.2	11.3	217.1	0.4	10/98
Merix	MERX	46.6	­0.6	30.0	­1.9	11/98
M-Wav	MWAV	4.6	0.1	3.6	0.0	9/98
Parlex	PRLX	13.7	0.7	15.5	0.2	9/98
Praegitzer	PGTZ	42.6	1.1	55.4	0.6	9/98
Sanmina	SANM	160.6	­5.4	194.2	19.4	9/98
Sheldahl	SHEL	29.0	­7.6	28.5	­3.0	11/98
Viasystems		216.8	­9.4	263.0	­15.7	9/98
Total		817.1	­3.4	923.7	1.4
Income %			­0.4		0.1

Note:Includes foreign sales

Figure 4 shows the annual growth rates (12/12 rate of change) for electronic equipment versus PCBs. After some severe fluctuations from 1983-85 PCB growth was in relative balance with electronic equipment until 1995. Unfortunately since then PCB orders have cycled significantly. The result has been periods of overcapacity and price degradation in the printed circuit industry. The "Asian Crisis" and the increasing seasonality of personal computers have exacerbated this situation.

Figure 5 shows the "PCB Content" of electronic equipment from 1984 to 1998. In 1984 approximately 2.7 per cent of the content of electronic equipment was PCBs, growing to 3.4 per cent today. The fluctuations off the trend line indicate PCB/equipment order imbalances. Based on this chart PCBs must experience a period of "catch up" growth to come back into balance with equipment. Figure 6 shows this PCB/equipment order imbalance in a different way ­ using 3/12 (or three-month) growth rates. Notice that most recently equipment is growing at a +10.8 per cent rate while PCBs are declining at a ­9.4 per cent rate. Figure 7 "dissects" Figure 6 by showing the 3/12 growth rates for orders of the four electronic equipment categories versus PCBs. Computer and office equipment (+19.1 per cent growth) leads the charge, while communication equipment is up 10.1 per cent and military up 14.3 per cent. Only instruments and control equipment orders are down (-8.2 per cent) ­ probably due to reduced exports (Asian crisis related).

Table I lists the larger N. American PCB manufacturers (data based upon public disclosures and my estimates). Table II shows the most recent quarterly sales and net income (vs the same quarter in 1997) of the North American PCB manufacturers that report their data publicly. Notice that Sanmina (and its new subsidiary Altron) whose primary business is PCB assembly (rather than fabrication) is the most profitable. The North American PCB manufacturers are still facing difficult times that will most likely extend into 1999.

During the December '98 IPC TMRC meeting I forecast 3-8 per cent growth for North American PCB growth in 1999. We will see!

Here is some recent inventory news:

Printed circuit boards

The Dii Group completed the acquisition of Hewlett-Packard's Printed Circuit Organization's operations in Boeblingen, Germany. The operation, now called Multek Europe, manufactures high-performance printed circuit boards for multiple Hewlett-Packard divisions and outside customers. The purchase price was approximately $75 million, excluding working capital, and the transaction includes a three-year supply agreement in which Multek will provide boards to HP for use in its servers, workstations, test and instrumentation, and medical products.

Sanmina Corporation, San Jose, California, became a component of the Nasdaq-100 stock Index, effective 30 December 1998. Sanmina Corporation, with a market capitalization of $3.2 billion, provides electronic contract manufacturing services, including the manufacturing of complex printed circuit board assemblies and subassemblies, multilayer printed circuit boards and custom cable and wire harness assemblies, and the testing and assembly of electronic systems and sub-systems. Sanmina's customers include a diversified base of original equipment manufacturers.

Sanmina completed its merger with Altron. Altron is now a wholly owned subsidiary of Sanmina and each outstanding share of Altron Common Stock was converted into 0.4545 shares of Sanmina Common Stock. Jure Sola, Sanmina's CEO, said, "With the addition of Altron, we now have more than 1.6 million square feet of manufacturing space and facilities in the USA, Ireland and the UK. Samuel Altschuler, Altron CEO, said, "We are delighted to be a part of the Sanmina family and look forward to helping Sanmina capitalize on its market opportunity in the $95 billion global Electronic Manufacturing Services market".

Sanmina has expanded is manufacturing capacity for substrates for single-and multi-chip ball grid arrays, chip scale packages, and direct chip attach interconnects. Array packages are gaining increased popularity in the telecommunications and datacommunications markets. "We are seeing increased demand for BGA and CSP substrates," stated George Dudnikov, vice-president, PWB Engineering and Strategic Marketing. The global market for advanced interconnect products is currently estimated at $8-12 billion and is forecast to experience significant growth through 2004.

Praegitzer Industries has leased office space in Tualatin, Oregon, for its corporate headquarters, currently located in Dallas, Oregon. The relocation will enable Praegitzer's Dallas manufacturing facility to expand operations and increase capacity.

Tyco International is acquiring AMP for at least $51 a share in stock, or $11.3 billion. The accord with Tyco came nearly four months after AlliedSignal launched a $10 billion takeover bid for the embattled electronic-connector maker. Subsequently C-MAC Industries purchased AMP's 50 per cent interest in Carolina Circuits.

Assembly

Celestica and International Manufacturing Services entered into a definitive merger agreement. The total transaction value, including consideration for shares, stock options and assumption of debt, is approximately US$160 million, making it the largest acquisition in Celestica's history.

Celestica will invest 26 million Irish pounds and create 500 new jobs at its plant in Swords, County Dublin ­ more than doubling its output.

Celestica acquired Accu-Tronics, Raleigh, North Carolina. Founded in 1990, Accu-Tronics provides full service electronics manufacturing, specializing in quick-turn prototyping and high complexity, low to medium volume assembly as well as rework and repair services.

The Dii Group's wholly-owned contract electronics subsidiary, Dovatron International entered into an agreement with Mylex to expand its role in the manufacture of Mylex's high performance disk array (RAID) controllers and complementary computer products for network servers, mass storage systems, workstations and system boards. Dovatron will assemble printed circuit boards in several of its facilities, and will test and configure products in space leased from Mylex in its Fremont, California facility. The company also announced that Orbit Semiconductor will divest its wafer fabrication facility and adopt a fabless strategy to complement its ASIC design, gate array, and mixed signal product lines.

Solectron announced plans for a new 358,000 square-foot manufacturing campus in Suwanee, Georgia. Solectron currently leases facilities in Duluth and Braselton, which will be merged into the Suwanee campus. Solectron expects to move into the new campus by May 1999. Solectron completed a 230,000 square-foot expansion to its manufacturing campus in Austin, Texas. The facility now has 680,000 square feet of capacity. Solectron established a presence in Austin in 1996 with the acquisition of Texas Instruments' Custom Manufacturing Services business.

SCI Systems completed the plant acquisition from Ericsson Telecom of certain manufacturing assets from Ericsson in Leganes, Spain, a suburb of Madrid. SCI will provide manufacturing services to Ericsson from that location under a multi-year supply agreement and has offered employment to associated Ericsson workers. Financial terms of the acquisition were not disclosed.

SCI Systems will assume all manufacturing of Intergraph's computer products under a multi-year supply agreement. SCI also will acquire some of Intergraph's manufacturing assets in the deal. Terms of the transaction were not disclosed. The deal highlights a growing trend toward contract manufacturing in the technology sector. Contractors are facilitating the rise of the "virtual company", one that does little besides design and market a product. This move has been accelerated as more computer-related firms outsource manufacturing amid tough competition and shrinking margins.

SCI Systems completed new "greenfield" manufacturing facilities in Apodaca, Nuevo Leon, Mexico, a suburb of Monterrey, Tlajomulco, Jalisco, Mexico and Huntsville, Alabama.

The 100,000 square foot Apodaca facility is the first phase of a planned multiphase project on the site and will employ several hundred people. The 110,000 square foot Tlajomulco facility is the first phase of a planned multiphase project on the site and is expected to employ more than 1,000 people during its first year of operations. The Tlajomulco facility will serve primarily multinational OEM customers and their domestic US end markets; it will complement existing SCI facilities in Guadalajara, Mexico City and Monterrey, Mexico. Initial products to be manufactured at the Tlajomulco facility will include controller cards, direct broadcast satellite receivers, subassemblies for a large US OEM and finished printers for a large US multinational OEM. The Guadalajara area was selected because of its continued importance as an industrial center in Mexico, its readily available and skilled labor, and the opportunity to leverage off of existing SCI resources in the area. The new plant will be served by an existing SCI Logistics Center in San Antonio, Texas.

The 182,000-square-foot Huntsville facility is the first phase of a planned multiphase project on the site and is expected to employ several hundred people during its first year of operations. This is the second new manufacturing facility completed in Huntsville in calendar year 1998. The facility is dedicated to serving a large multinational OEM customer in the high-end consumer electronics market.

Solectron has finalized a manufacturing partnership with Mitsubishi Electric Corporation, the parent company of Mitsubishi Consumer Electronics America. The partnership includes the transfer to Solectron of the manufacturing assets of MCEA's Cellular Mobile Telephone division located in Braselton, Georgia.

Smartflex Systems agreed to purchase certain assets of Tanon Manufacturing out of bankruptcy. Tanon, which has facilities in West Long Branch, New Jersey and Fremont, California provides contract manufacturing electronic services, for quick turn, prototype, and high-mix, intermediate volume products.

Smartflex Systems has purchased certain assets, including inventory, of the Methuen, Massachusetts division of EA Industries for $2.4 million in cash. No liabilities were assumed. EA/Methuen has a current annualized revenue run-rate of approximately $7.0 million.

C-MAC Industries, a major Canadian-based contract manufacturer and the owner of PCB manufacturer Carolina Circuits and will purchase R&M Metaltek, a manufacturer of precision sheet metal enclosures and components including cabinets, frames, rack mounts and faceplates with sales of approximately CDN$ 35 million in 1998.

Walt Custer