SAN FRANCISCO, July 8 -- Wall Street analysts are taking aim at the PCB industry, knocking down forecasts through summer's end.

Last Thursday Morgan Stanley cut earnings estimates for Sanmina-SCI, claiming weakness in the company's PCB and enclosures businesses

On Tuesday, a Deutsche Bank analyst warned that inventories at OEMs have reached excessive levels and some paring was taking place. In a statement, analyst Chris Whitmore wrote, "The fact that Merix's capacity utilization was 90-95% in the May quarter and the company still lost money speaks volumes to the industry's weak pricing power. Going forward, we believe PCB fundamentals will get worse."

"[P]eaking growth rates, in conjunction with capacity additions, contracting leadtimes and rising raw material prices will result in a tough second half of 2004 and 2005," Whitmore wrote.

In recent conference calls with analysts, Park Electrochemical and Merix warned of inventory build in the communications sector. In one highlighted instance, Cisco's inventories increased 20% quarter-on-quarter in April while sales rose 4%.

According to IPC, the 90-day moving average of PCB shipments has increased 42% year-on-year through May, while shipments of computers and office equipment and communications equipment are up just 20%. Through May, PCB shipments were up 36% growth and electronics equipment just 17%. Historically, when shipments of PCBs outpace that of equipment, a correction is imminent. 

"We believe growth rates for PCB fabricators are peaking after outpacing end-market growth the last few quarters," Whitmore wrote.

Typically, the PCB industry swoons during the summer as buyers shun Best Buy in favor of the beach. Business returns in the early fall as companies prepare for the back-to-school and holiday buying seasons.