I recently reported an in depth analysis for the global electronics industry, specifically pointing out the lackluster performances year to date, and a downward trending forecast for the remainder of the year.
The electronics industry in Japan seems to be bucking this trend. However, major electronics companies in various regions are not letting the grass grow beneath their feet as they have already begun formulating new business plans.
Bad news continues to pour into in from many different sources. The severity of this news differs from one company to the next; however, it all points to a pessimistic forecast for the technology manufacturing industry.
Below are a few examples of actions taken from companies that range from employee redeployments (a nice way of saying layoffs), to forced vacations, during a company shut down.
Taiwan’s largest EMS (electronics manufacturing services) provider reduced its workforce by 10,000 employees during the first three quarters of 2008. Most of these layoffs came from their Chinese operations, and the company plans to lay off another 10,000 employees by the end of 2008.
The company scheduled a one-month shutdown / vacation in the middle of January to coincide with the Chinese New Year holiday, and most administrative employees in their main offices will have their work week reduced to four days.
This reduction in payroll stems from weak personal computer sales felt across the globe.
A large EMS provider in Singapore has a similar plan and announced a mandatory shut down for two weeks during the upcoming Christmas holiday as well as an additional two weeks over the Chinese New Year.
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This affects all this particular company’s manufacturing plants in China and is blamed on lower-than-expected orders from North America and Europe. The Singapore EMS provider also projects a 10% to 20% reduction in their work force at large manufacturing plants in Far Eastern countries over the next few months, and will institute new payment terms to vendors to improve their own cash flow. The company will also look into operations in the U.S. and Eastern Europe to improve and stabilize its bottom line.
Many EMS companies are planning long holidays during Christmas and the Chinese New Year, and are asking employees to lower their expenses. In some cases, they eliminated all overseas business trips.
Meanwhile, a significant Taiwanese manufacturer of mother boards reduced its orders for components and materials by 20% to 30% in the middle of October. This reduction was without warning, and the company’s new standing orders are likely to remain at this level for the next few months.
Add to this, the operating capacity utilization rates for several LCD panel manufacturing companies in Taiwan declined to less than 50% which has certainly sent ripple effects throughout the workforce causing even more layoffs in China and Taiwan.
The majority of display module manufacturers in Korea lowered their production rates between 10% and 20% throughout the fourth quarter while they appear ready to reduce production rates even further during the first quarter of 2009, if necessary. Accordingly, printed circuit board manufacturers and flexible circuit manufacturers in Korea are facing serious declines in orders.
Having said all of this, management teams from Japanese electronics companies have a more optimistic outlook toward the future.
They have not displayed a knee jerk reaction to the slowdown, and instead, have adopted a wait-and-see approach, hoping for a quick rebound.
However, the Japanese industry cannot be the exception to this global downturn.
In my opinion, many of these Japanese electronics companies cannot survive in the long run if they do not take appropriate action now.
Source: EPT Newsletter, December 2008
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