Walt Custer’s Annual Update from productronica 2017

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Industry consultant Walt Custer of Custer Consulting sat down with me at productronica 2017 to once again inform our readers with his yearly update and perspective on what’s happening in the industry. And guess what? It’s good news! Pertinent charts referenced in our conversation are included, but if you want more, Walt invites you to click the link at the end of this conversation and email him directly.

Patty Goldman: Walt, it is good to see you at productronica. How are you doing and how’s the show?

Walt Custer: I'm doing fine. The show is very upbeat. It's busy, and everybody is in a good mood; I think that reflects business conditions. As I look around the world, virtually all areas are growing again. The leading indicators are up, and electronic equipment growth is good, and I think everybody is reflecting a little better times.

Goldman: That's all good news.

Custer: It is. I always try to give both sides of current business conditions , but this year things are mostly good,  probably the best in four or five years .

Goldman: Did you anticipate this?

Custer: Slightly. I won't take credit for it, but the leading indicators have been up for six to nine months. And the future looks good. By industry, printed wiring boards aren't growing as much as, say, semiconductors, but I think some of the semiconductor growth may be some double ordering, and inventory building. I have a chart which shows growth by sector of the global electronicsupply chain. Electronic equipment is up this quarter by about 4.5%, but semiconductors are growing at 22%. That growth imbalance  worries me (Figure 1).


Goldman: That doesn't sound right, does it?

Custer: No, semiconductor growth seems excessive based on end-market demand.  Part of this imbalance is because memory chips are now much more expensive (Figure 2). They were in short supply, so prices were raised. But I also sense there may be some double ordering going on that would boost that growth rate, which means there will be a downward correction at some point in time. Semiconductor capital equipment is booming too. It's up about 28% in the third quarter. Almost all the end markets for electronic equipment are up.


Goldman: Well, let me ask you this. I keep hearing about shortages in the copper foil supply, the resin supply, and even the glass fabric supply. Our industry is pretty picky, and other industries are not as picky and have better pricing. What do you see coming with regard to that?

Custer: I think that was a big issue, but right now the industry is taking a little relaxation period because we're very seasonal, driven by consumer goods, like computers, and cellphones. From a seasonal point of view, we peak in November, and then we slow down for about three months. So that will take some of the pressure off supply that we’ve felt through the busy season. Companies are trying to add capacity to copper foil, but you can't do it overnight. I understand that's a 12- or 18-month cycle or so.

Goldman: I believe it has to do with how long it takes to build the drums that are used to electrodeposit the copper foil.

Custer: So yes, that was a big problem. I looked at some data on Taiwan and China for printed wiring board and laminate monthly sales. For a while, a few months ago, laminate sales were going up much more than printed wiring boards, which indicated there were price increases. But in the last month, they dropped down on the trend line with printed wiring boards, so that suggests to me that the strong price pressure on laminates has eased a little bit over the last couple of months. We’ve finished the busy season for this year, and we're going into the Christmas and first quarter downturn, so my guess is that that the shortages will ease a bit short term.


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