* Concerns about abundant inventory reserves in the global electronics supply chain seem to be easing. With a reasonable amount of technology companies having reported earnings at this point, it appears the previous upward trend in inventories the past two quarters may be reversing. One of the stars of this worrisome metric is Avnet which managed to come out of the situation with good management performance metrics.
Specifically, while the inventory levels in electronics contract manufacturing companies appears to remain high compared to this same period a year ago, concern by investors does not seem to be growing because many believe the increase in inventory in the contract manufacturing sector may be a sign of common business practices moving forward as the contract manufacturing industry continues to undergo a prolonged period of pre-consolidation as while the long-anticipated capitulation point may be beginning to emerge.
* The recently released IPC book-to-bill ratio shows an upward movement on a month-to-month basis but is relatively unchanged for four consecutive periods. Bear Stearns derived a one-month value, compared to IPC’s rolling three-month value (an year-on-year comparison) and concluded the printed circuit board (PCB) industry remains in a continued weak demand environment. Industry PCB fabricators such as TTM Technologies and Merix may find it more difficult to pass along higher raw materials costs to their customers. Two electronics contract manufacturing companies with vertically-integrated printed circuit board service offerings include
Sanmina and Flextronics.
* Asia continues to be an attractive destination for electronics design and manufacture. In a recently released report by VentureOutsource.com, India comes out on top as the preferred destination for electronics product design when compared to other countries, excluding China. While competition between North American and European electronics services companies and Asian-based electronics contract manufacturing and original design manufacturing (ODM) companies remains healthy, there is no belief at this point the Asian competitors are intent on competing with the core markets of their counterparts.
* On the above Asia note, while not specifically related to the electronics industry, here’s an interesting 3-D animated view of the world using geographically-based economic data (G-Econ) to display economic activity by country / region. (Note the high-level activity by Japan with respect to the size of the island nation). The Yale University project director is Professor William Nordhaus.
VentureOutsource.com, January
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