BANNOCKBURN, IL – Growth is slowing worldwide for the electronics manufacturing industry, and the outlook is less optimistic than in previous quarters, although it is still generally positive, according to IPC.
Based on responses from 82 companies that make up a representative sample of the industry, global third quarter 2019 sales growth, averaging 3% percent, was at its lowest level since the quarterly survey began in mid-2017. Sales growth respondents predicted for the current quarter is down further, averaging 2.6%.
This quarter’s composite score for the current direction of the business environment also fell to its lowest level since mid-2017. It remains in positive territory, but just barely, said IPC. Current-state scores for Europe and the Americas turned negative this quarter. Sales, orders and profit margins are moving in a positive direction on balance, while labor and material costs, ease of recruiting, inventories and order backlogs are having a negative impact on the current state.
The industry’s expected direction in the next six months is generally optimistic, with all business indicators looking positive. Among the industry segments, PCB fabricators are the most optimistic about the next six months. Overall, however, the six-month-outlook score continued to weaken compared to the first three quarters of this year. This indicates the industry expects its health to remain generally good through the first quarter of 2020, despite some slowing.
The respondents’ outlook for the next 12 months remains positive but is down substantially from previous quarters. While many respondents in all segments described the 12-month business outlook as very or somewhat positive, only PCB fabricators were unanimous in reporting a positive outlook. The composite scores on the business outlook for the next 12 months are positive in all regions except Asia, where the score declined to neutral (0 on the index). The uncertainty of trade relations between the US and China is a contributing factor to the lackluster 12-month outlook for respondents in Asia.
A ranking of opportunities that will drive the industry’s future business growth showed the Internet of Things (IoT) and smart systems are the number one driver, followed closely by growing markets and 5G/high-speed communications. Defense and aerospace topped the list of growing vertical markets cited. Medical device and LED lighting markets were also cited.
Respondents also ranked a list of major concerns about conditions in the business environment in terms of their impact on future business growth. Economic uncertainty is the leading concern. Asked about conditions or trends significantly increasing costs, respondents predominantly cited the tight labor market and trade conflicts.