Click for results from August 2009 survey.
Given the abundance of bad news, the worst recession since the Great Depression, consumer spending flat for the first time since the 1940s, and signs showing a poor first quarter, participants in the electronics supply chain could be viewed as surprisingly optimistic in VentureOutsource.com’s most recent survey. The survey was sponsored by Digi-Key Corporation, one of the world’s fastest growing distributors of electronics components. Website: www.Digi-Key.com.
Respondents gave an average score of 4.2 regarding how the current economic situation is impacting their company…on a scale of 1 to 10, 1 being ‘very negative’ and 10 being ‘very positive’.
When asked about the next 6 months, these same respondents answered with an average score of 4.6, a small, but significant increase, pointing to a belief that the business environment in the tech sector will improve.
Meanwhile, respondents were also neutral (average score of 4.9) regarding prospects for their company’s profits for the next 6 months.
All in all, a score between 4 and 5 could be viewed as optimistic.
There was a difference in how participants responded, based on their role in decision making at their company; what type of firm they belong to; and what product areas they are active in.
VentureOutsource.com recently launched its ‘Electronics Supply Chain Business Outlook Survey’, asking its readership to comment on the current economic situation, from their perspective in the technology supply chain.
The generated responses from 233 people who were asked 12 questions about their expectations regarding the current and future business environment; employment, business volume, and product pricing. (See methodology)
Respondents were asked to rate their views on these questions on a scale of 1 to 10 (1 being the most negative and 10 for the most optimistic response).
The survey also asked respondents to describe the type of company they work for; what product areas their business unit or corporation are active in; their role in the decision making process; and what level they can speak to business ‘units’ versus their overall corporations.
Tables 1 through 3 show the number of respondents by their type of company versus three other demographic categories.
Table 1: Company Type, Product Area
Table 2: Company Type, Decision Making Role
Table 3: Company Type, Business Level
Electronics original equipment manufacturers (OEMs) accounted for 42% of survey respondents; 18% of respondents described themselves as electronics manufacturing services (EMS) companies or original design manufacturers (ODM); respondents from semiconductor companies and electronic equipment manufacturers each accounted for 13% of all responses; and component companies and distribution and logistics firms each accounted for less than 10% of the survey.
82% of the respondents said they participate in their company’s decision making process at some level. In looking at respondents in more detail in Figure 1 from a decision making perspective, 36% indicated they ‘participated in’ the decision making process for their organization while 46% said they were the ‘key decision maker’ for their organization; the remaining 18% said they have ‘a view into’ the decision making process.
Fig. 1: Respondents, Decision Making Role
Looking at this even more closely, 40% of survey respondents indicated they were answering the questions with regards to their business unit, only. Meanwhile, the remaining 60% of respondents were responding with influence into their corporations’ decision making — at the top level.
In terms of their overall outlook, respondents were surprisingly neutral, providing an average score of 4.7 on a scale of from 1 (very negative) to 10 (very positive), across 9 key questions regarding current and near-term business conditions.
Figure 2 compares average scores for the Overall Outlook Index across product areas and company types.
Fig. 2: Overall Outlook Index, Company Type, Product Area
Figure 3 and Figure 4 show the average scores for the Current Index, which averages scores from 5 questions regarding the current quarter, and the averaging of scores across 4 questions regarding the future 6 months and for the full year, thus generating a Future Index.
Fig. 3: Current Outlook Index, Company Type, Product Area
Fig. 4: Future Outlook Index by Company Type, Product Area
The Current Index came in at 4.6 and the Future Index was only marginally better, at 4.8. Table 4 and Table 5 show the average scores for the questions used to build these indexes.
Table 4: Average Response for Current Index, Components Questions
Table 5: Average Response for Future Index, Component Questions
The data show the electronics supply chain remains pessimistic and appears to believe we have not yet seen the bottom of the recession, without any significant difference between these two indexes. A higher score on the Future Index would have indicated a belief that the market would recover before the end of the year.
Respondents from consumer companies were a bit more positive in their overall outlook when compared to other types of companies, achieving a mean score of 5.3.
Diversified companies tended to be more pessimistic with an Overall Outlook score of 4.1. This difference may be due to different perspectives on the market.
Also, there were only 10 participants that were from primarily consumer firms, and most of these respondents were key decision makers. Conversely, diversified companies had a larger number of survey respondents yet key decision makers from the diversified company demographic category made up a smaller number of respondents.
Respondents that identified themselves as EMS / ODMs were generally more optimistic at 5.4, while respondents from semiconductor, distribution and logistics, and components manufacturing firms were more pessimistic, giving average scores of 4.2, 4.0, and 3.4 respectively. This same general pattern was replicated in the Current Index and Future Index. Again, key decision makers were over represented in the EMS / ODM category and were under represented in the other three categories.
The respondent’s role in the decision making process is significant because key decision makers were much more optimistic in their views on the current economic environment.
Figure 5 shows the three index scores for each role in the decision making process. Those respondents with either a ‘view into’ or that ‘participate in’ the decision making process of their companies generally responded with a lower score (between 4.2 and 4.5, on average) for all three indexes.
Fig. 5: Responses, Role in Decision Making
Key decision makers were much more optimistic, with mean scores of 5.3, 5.1, and 5.4 on the Overall, Current, and Future Indexes, respectively.
This difference between key decision makers and other participants is significant. Is there a disconnection between these two groups — in how they are viewing current circumstances and, possibly, what data they each have access to, in addition to their basic expectations regarding performance?
Another possibility is, perhaps, are key decision makers are less conservative and therefore are more willing to accept risk while the other survey respondents tend to be more conservative because of their role in the organization?
The data cannot answer these questions, but it is an important consideration to keep in mind — how different groups evaluate the same data and which group will prove more insightful.
Despite the overall neutral position participants took on the business conditions and activity, they clearly felt confident in their opinions. On average, respondents scored their confidence in their responses at 7.7.
Figure 6, which displays responses relative by score, shows the majority of respondents (82%) gave a score of 7 or higher. This high confidence demonstrates that the respondents believe they understand the current market and that it is impacting their business performance and, more importantly, that they do not see a significant recovery in the next 6 months.
Fig. 6: Responses, Participant Confidence Level
On the other hand, participants did significantly increase their individual ratings between the current quarter and the future when they answered questions regarding the impact of the economy on their business, business volume expectations, and employment conditions, despite the relatively similar scores on the Current and Future Indexes, which averaged their specific scores on individual questions. Figure 7 presents the average rate of increase for the three core questions.
Fig. 7: Average Ratings Increase, Current Quarter, Future
On average, respondents’ sentiment was more than 20% higher regarding how they see business conditions impacting their business in 6 months and whether they expect shipments / orders to increase or decrease for this calendar year versus their current views. Sentiment increased 14% in how respondents see employment condition for the next 6 months versus the current quarter.
While the scores do not indicate a recovery, they do show an expectation for the business environment to improve somewhat from our current situation.
Future findings
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Methodology
VentureOutsource.com’s Electronics Supply Chain Business Outlook Survey was put online and made available to industry clients and Website readers on March 20, 2009. The survey was also sent directly to individuals in electronics corporations, organizations and agencies who use, offer and are employed in electronics contract manufacturing and / or technology supply chain and outsourcing services. Survey participation was voluntary. Survey questions designed to define survey respondent demographics did not collect any personally identifying information. The survey closed April 25, 2009. Survey questions focusing on indicators of respondent satisfaction or emphasis were posed with a scoring basis of 1 to 10 (1 = very negative experience or expectations and 10 = very positive experience or expectations) per survey question / criteria.
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