Weak July & August orders – yes, that is what we have been blogging about that somewhere in June-July someone put on the brakes. Activity slowed and we could feel these trends beginning at the first of June. PCB Solutions is still stable and doing well, plus on target to hit our yearly sales goals but we definitely notice lower activity overall.
The upside of the report is its general parity. We are just not seeing dramatic declines in the book to bill ratio and that is favorable. No apparent signs that chip makers are pulling back aggressively as the ^sox index continues to just remain stable and float along right in the middle of its 52 week range (and 2 year range for that matter). However, as we know, fundamentals are less of a determinant to stock movement compared to banker’s money flowing in from the fed. The ^sox use to be so reliable but has become just another check in our projections of the future of the flex and rigid flex printed circuit board market.
PCB Industry Growth Rates and Book-to-Bill Ratios Announced
Rigid PCB shipments were down 0.1 percent in August 2012 from August 2011, and bookings increased 1.3 percent year over year. Year to date, rigid PCB shipments decreased 4.7 percent and bookings increased 1.1 percent. Compared to the previous month, rigid PCB shipments were up 7.2 percent and rigid bookings increased 14.1 percent. The book-to-bill ratio for the North American rigid PCB industry in August 2012 strengthened to 1.02.
Flexible circuit shipments in August 2012 were up 1.7 percent, and bookings were down 14.7 percent compared to August 2011. Year to date, flexible circuit shipments decreased 3.4 percent and bookings decreased 8.5 percent. Compared to the previous month, flexible circuit shipments increased 0.3 percent and flex bookings were up 13.8 percent. The North American flexible circuit book-to-bill ratio dropped sharply to 0.87, due to weak orders in July and August.
For rigid PCBs and flexible circuits combined, industry shipments and bookings in August 2012 were both flat, with 0 percent growth compared to August 2011. Year to date, combined industry shipments were down 4.6 percent and bookings were up 0.2 percent. Compared to the previous month, combined industry shipments for August 2012 increased 6.6 percent and bookings increased 14.1 percent. The combined (rigid and flex) industry book-to-bill ratio in August 2012 decreased slightly to parity at 1.00.
“Both rigid PCB and flexible circuit orders in August showed solid growth over the prior month, but weak flexible circuit orders over the past two months caused a decrease in the book-to-bill ratio,” said Sharon Starr, IPC director of market research. “Flexible circuit orders tend to be volatile, however, and the August results should not be interpreted as a trend. Based on seasonal patterns, we expect to see a stronger performance in September.”
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’sWorld 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 August 2012, 82 percent of both rigid PCB and flexible circuit shipments reported by survey participants were domestically produced. 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 August, 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.