A double-digit increase in revenue coupled with a steady decline in volume highlights the continuing product mix shift towards higher value products.
The Ministry of Economy, Trading and Industry’s (METI) March production data for the Japanese PCB industry contained several surprises for me. One was that the Asian printed circuit industry posted some positive activity over the last few months. Another was that the total March revenue from shipments for the entire PCB product lines was 89,461 million yen, representing an 11% increase from the previous month and a 10.4% growth from the same month in 2006. Total production volume reported was 207.7 thousand square meters; an 8.9% increase from the previous month but a 5.3% decrease compared to the same month in 2005.
Two key points must be addressed while interpreting these results. The first point reflects on the dynamics of a relatively large increase compared to the previous month. The pattern of history relative to industry volume growth increases during March, due in part from the fiscal year ending that month. But this year’s March increase is much greater in terms of percentage compared to normal years. It may be overly optimistic to view this as a turnaround for the industry; however, it is a strong sign of a recovery after the long slow season.
The second point speaks to the double-digit increase in revenue and the decrease in volume compared to the previous year. Simply put, circuit board manufacturers switched product lines to ones with much higher margins, such as HDI circuit boards. They now work the same hours but make more money. This trend is industry wide and not just related to specific circuit categories but is inclusive for all kinds of circuit boards.
Other segments that have increased volume growth during the year include double-sided rigid boards, multilayer rigid boards, and double-sided and multilayer rigid/flex. Rigid IC substrates could be a stand-out relative to shipment increases. This industry segment increased shipments by more than 50% compared to the same month in 2006. It is hard to cite examples of this much of a dramatic increase in such a short period of time within the industry.
DKN Research analyzed the PCB production data from Taiwan and China, and found a couple more surprises. Taiwanese rigid PCB manufacturers typically post declines for shipments in February, averaging about a 20% decrease. Since the semiconductor industry posted a similar decline earlier for the month, industry analysts expected the same for PCB manufacturers. Surprisingly, the resilient Taiwanese manufacturers had a significant rebound during March (+18.4%), and recovered most of the lost volume posted for February. Shipments for flexible circuit manufacturers still declined in March. PCB imports and exports unexpectedly decreased in China during February, which is very abnormal for this season. I did not have the data for March at press time.
We can only speculate as to the reasons for the upswing in the global market. The first possibility is that it’s caused by the release of Vista, the new operating system from Microsoft. PC manufacturers lowered production in the fourth quarter of 2006 then increased production during January expecting a huge jump in PC sales from the January release of Vista. Unfortunately, sales from PCs loaded with Vista were lackluster, and PC manufacturers once again reduced production during February. However, the versatile Taiwanese manufacturers changed business direction and increased March shipments.
Another possible contributor to the boom is the Motorola Shock. It was well publicized when Motorola posted a huge loss for the first quarter this year. The company has since bounced off the ropes, changing its manufacturing direction. Motorola began outsourcing the manufacturing of its cellular phones, and many of its subcontractors and suppliers for parts and materials lost a huge chunk of business in a short period of time. Taiwanese manufacturers created other streams of business from new customers such as Apple and Sony Ericsson, which made up for lost business from Motorola.
I could list some more possible reasons for this jump, but they are very negligible, having little effect within the global market. Please feel free to contact me with any information connected to this market spike.
Headlines
Japanese PCB manufacturer Meiko held the groundbreaking ceremony for its new PCB manufacturing plant in Vietnam.
LG Philips created a new 14.1" full-color flexible display based on the electronic paper technology of E-ink. The company also developed a new full-color 4" flexible display based on the a-Si TFT organic EL technology formed with metal foil substrates. Another display device manufacturer in Japan, TMD, developed a new full-color 4.3? LCD device with wider view angles for outdoor use.
Japanese electric and electronics company Hitachi reported a 32.7 billion yen loss with its new sales record. The TV business (58.4 billion yen) and disc drive business (33 billion yen) made the major losses. Sharp plans to invest 500 billion yen for a new LCD manufacturing plant in Sakai-shi, Osaka. The new plant is expected to begin operation in 2008.
Japanese industry organization JEITA reported March cellular phone shipment in Japan was 4.842 million units, a 16.6% decline from the same month in 2006.
Toray, a plastic material supplier in Japan, developed a new heat resistant plastic reinforced by vegetable fibers. PCD&M
Dominique Numakura is president of DKN Research. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
