The document is a newsletter from Flatfield discussing various topics related to the electronics industry and broader economy. It provides updates on copper clad laminate capacity expansion plans, Apple warning of economic deceleration especially in China, and Flatfield winning an innovation award for their customer portal. It also summarizes commodity price changes in December and January and discusses ongoing fab capacity constraints and component shortages.
1. THE PCB IMPACT|January 2019
A FLATFIELD MULTIPRINT PUBLICATION - by JUSTIN OLEJNIK
WE LOOK AT WHATS
GOING ON WITH THE
PRICE OF GOLD.
WE SPEND 24 HOURS
IN HONG KONG!
WHAT IS HAPPENING
IN THE ELECTRONIC
COMPONENTS
MARKET?
3. THE IMPACT| THE HOT TOPICS| - WHATS BEING TALKED ABOUT?
Huawei become the second
biggest smartphone
manufacturer, overtaking
Apple, with Samsung holding
on to the top spot
$83 Billion cash injection by
China’s central bank early
January, easing concerns of a
cash shortage that would put
further pressure on China’s
slowing economy.
The UK government suffered a
crushing commons defeat of
its proffered Brexit agreement;
leaving the Prime Minister
Theresa May facing a vote of
confidence, albeit one that she
was expected to survive.
A giant leap for China as they
land their Chang’e 4 lunar
probe landed on the far side of
the moon and promptly
conducted experiments
culminating in the first every
propagation of organic matter
on a lunar surface
China foreign direct
investment in the US
dropped significantly during
2018 to just $4.8 Billion,
from a high of $46 Billion in
2016, research from the
Rhodium group showed. The
decline comes amid
continuing trade tension
between the US and Chinese
governments and pressure
from Beijing for Chinese
companies to reduce their
global holdings and reduce
debt levels.
The partial government
shutdown is inflicting greater
damage on the United States
economy than previously
estimated, the White House
acknowledged on Tuesday, as
economists doubled
projections of how much
economic growth is being lost
each week as the standoff in
congress continues.
New estimates show that the
shutdown, now in its fourth
week, is beginning to have
real economic consequences.
The analysis, and other
projections suggests that the
shutdown has already hurt
growth and could ultimately
push the United States
economy into contraction.
Scientists have announced
they have found a further
round of repeating radio
waves in a galaxy over 3
billion light years from earth.
These bursts of low
frequency radiations,
generating more energy
than the sun does in a day
occur randomly and
immediately disappear and
have baffled scientist as to
their origin.
4. THE IMPACT| THE NEWS
COPPER CLAD LAMINATE MANUFACTURERS
TO EXPAND CAPACITY DURING 2019.
Copper Clad Laminate Manufacturers are
continuing with plans to expand their CCL
manufacturing capability during 2019, despite
continued volatility and unrest within the PCB
industry according to Digitimes.
Taiwan Union, ITEQ and Elite, three of Taiwan’s
largest CCL manufacturers have confirmed that
new production lines will be coming on stream
during 2019. The additional capacity, expected to
be on stream by the end of Q2 2019, is expected
to add an additional 1.5 Million sheets of CCL into
the market place.
Digitimes quoted industry sources as stating that
the planned capacity increases were based on the
rebound effect that the electronics market had
shown during the last couple of years, but
prospect of slowing momentum within the
industry, in part driven by the current slow down
in the Chinese market place may lead to an
oversupply situation.
APPLE PREDICTS ECONOMIC DECELERATION.
Apple the global electronics giant, and the worlds
first trillion dollar business, has warned that the
world is facing “economic deceleration” in “Greater
China” an area comprising Mainland China, Hong
Kong and Taiwan, which represents over 20% of
Apple’s global revenues.
The situation in Mainland China, is particularly
complex for Apple, China being a core component of
its supply side operations, relations of which are
becoming increasing difficult in light of the growing
rhetoric between the U.S and Chinese governments.
The US markets performed poorly during December,
and 2018 looks likely to be the worst financial year
for the US since the dark days of 2008. The situation
in Europe is not particularly much better, with the
challenges of Brexit and the unrest amongst French
voters is continuing into 2019 as the French
economy veers towards a potential recession.
The early warning by Apple of these political and
economic pressures on its products performance in
the global market place, could be harbinger of
things to come.
FLATFIELD ROUNDS OF YEAR WITH
PRESTIGIOUS INNOVATION AWARD
Flatfield were the proud recipients of a bonze award
in the “innovation category at the 2018 SAP awards.
The in house team of Jeroen Van Eck and Jeroen
Verbeek, collected the marquee award for
innovation for their work on creating the “Flatfield
Portal” the always on Portal gives customers live
access to the data that is important to them in
managing their PCB supply chain, and is fully
integrated with Flatfields SAP management system.
Albert Van Der Wijk, CEO, Flatfield, commented “This
award exemplifies the commitment that Flatfield
has in putting customer technology at the heart of
our business, and is a glowing endorsement of the
hard work, excellence and innovative thinking of
Jeroen Verbeek and Jeroen Van Eck in bringing the
customer portal to fruition”
For more information on the Flatfield Portal why not
check out the website www.flatfield.com
5. FLATFIELD, A BUSINESS WELL INVESTED FOR THE FUTURE.
Majority owned by Dutch private equity company “Standard Investment” as part of their growth
division, “Standard Investment” focus on accepting challenges, creating value, and being actively
involved in all of their acquisitions.
For Flatfield the challenge was to take a high growth company, and develop an entrepreneurial spirit,
providing the additional investment to focus on optimisation, efficiency and customer facing
technologies and tools, and positioning the business firmly as one of Europe’s major PCB companies.
Managing €90m of
investment
18 Businesses in
Portfolio
3000
employees
globally
Revenues in excess of
€1Bn
6. THE IMPACT| DATABANK|JANUARY VERSUS DECEMBER COMMODITY PRICES
COPPER
$2.65/lb
UP FROM $2.58
IN DECEMBER
(UP 2.7%)
GOLD
$1290/
Ounce
UP FROM $1242
IN DECEMBER (UP
3.8%) but still
downward trend
across the year.
Tantalum
$152K/
Tonne
UP 16% from
December 2017 -
note that tantalum
isn’t traded on a
commodities
market basis.
JET FUEL
$2.26/GAL
FLAT FROM
DECEMBER
$/€ 1.14
$ to €
$ HAS
WEAKENED
MARGINALLY TO
THE €
OIL
$59.48/
Barrel
UP FROM $58.10
IN DECEMBER (UP
2.5%)
USD/
China Yuan
0.15
USD weakened
against the Yuan
from December.
Caixin
PMI index
49.7
The Caixin
Purchasing
Managers Index
fell to 49.7 in
December from
50.2 in
November. The
index dropped
primarily off the
back of Chinese
Manufacturing
activity which
contracted in
December for
the first time in
19 months
An index number
above 50
indicates growth,
below 50
contraction
7. THE IMPACT| TRACK|GOLD PRICES - USED IN THE SURFACE FINISH AND INTERCONNECTION OF PCB’S ($ PER OUNCE)
US$1,100.00
US$1,120.00
US$1,140.00
US$1,160.00
US$1,180.00
US$1,200.00
US$1,220.00
US$1,240.00
US$1,260.00
US$1,280.00
US$1,300.00August
Septem
ber
October
Novem
ber
Decem
ber
January
US$1,175.00
US$1,201.00
US$1,234.00
US$1,220.16
US$1,250.40
US$1,290.10
Gold Remains the haven of choice for
investors
Whilst gold prices still remain significantly depressed
from the record highs of 2011 ands 2012, prices are
starting to creep back toward the $1300 level which
many investors and analysts see as being
psychologically important.
Gold prices have gained 11% since the lows seen
during the middle of 2018, and a level of above $1300
which indicates a sustained upturn in the cost of the
metal now looks possible.
The recent defeat of the British governments Brexit bill
has thrown wide open the possibility of the UK leaving
the EU without a trade agreement, and this uncertainty
is providing a safe haven for gold.
The price of Gold is also reflecting the current economic
malaise seen in China, with China reporting its first
down turn in exports for over two years, and poor
economic data out off the US with the US economy
underperforming significantly at the back of 2018,
putting pressure on the federal reserve to halt rate
increases, and weakening the $ further.
It seems that the new era of Geo politics will continue
to push the cost of gold higher in coming months
potentially above the $1300 significant barrier.
Prices
Rising
Global politics looks set to
continue to put pressure on the
cost of gold as we move into
2019 and this will have a knock
on effect of the cost of
electronics components and
PCB’s
9. THE IMPACT| TRACK|OIL PRICES - USED IN THE PRODUCTION OF CHEMICALS AND THE PRODUCTION OF FUEL FOR LOGISTICS SERVICES
US$0.00
US$26.67
US$53.33
US$80.00August
Septem
ber
October
Novem
ber
Decem
ber
January
US$73.21
US$76.21
US$78.46
US$72.00
US$55.21
US$60.50
What is happening to the price of Oil?
Since hitting a peak of $85 per barrel during September
of 2018, the price of crude oil has been in sharp decline
ever since, hitting a low of $55.00 in December, a level
not seen since 2017.
So what has disturbed the liquid global barometer, and
where does the cost of oil go during 2019?
There is strong evidence to suggest that the surplus of
global oil stocks, and particularly those held in the U.S
are starting to reverse at the start of 2019, according to
a Merrill Lynch report. This in itself would normally be
enough to prop up the producer prices, however hedge
funds managers have been selling their positions in
favour of other more stable commodities, and the fear
of uncertainty across global markets has also had an
impact.
There is a view that the sell off and uncertainty has
pushed oil down to unsustainable price levels and it is
anticipated that the price of oil will rebound to around
the mid $65 per barrel during the first quarter of 2019.
The short term further of oil very much depends on
how the deceleration of the Chinese market place
continues, and how the recently announced stimulus
package by the China central banks performs.
Prices
falling
Prices are currently falling although it is
anticipated that there will be a correction
during Q1 2019
10. THE IMPACT| TRACK|COPPER PRICES - USED IN THE PRODUCTION OF COPPER CLAD LAMINATES AND COPPER PLATING ($ PER 1LB)
US$2.50
US$2.63
US$2.77
US$2.90
August
Septem
ber
October
Novem
ber
Decem
ber
January
US$2.65
US$2.70
US$2.83
US$2.75
US$2.85
US$2.65
China Policy Change toward scrap metal use
helping to consolidate copper prices.
Whilst copper prices continue to be lower than at the
start of 2018, a decline of just under 20% from the $3.30
highs seen, the move of China towards minimising the
use of scrap metals has seen China copper imports rise to
a high of 5.3 million tonnes during 2018.
This conscious legislation by the Chinese government has
propped up the price of Copper along with the weakness
of the $ which material the procurement of commodities
by people holding other currencies more cost effective.
Current global copper inventory levels are currently sitting
at low levels not previously seen since 2008 This
reduction in availability is also helping to maintain the
current price of copper and mitigating a down ward
trend.
It is anticipated that during 2019, the increase in bank
lending by Chinese banks, which peaked at record levels
in December 2019, part of an overall general stimulus
package, will generate new construction and
infrastructure projects, that coupled with the crack down
on the use of scrap metals will maintain copper prices
through the year.Prices
rising
Albeit copper prices have taken a
downturn in early January, it is anticipated
that the crack down of use on scrap
metals in China, and the current low
inventory prices will keep the price of
copper on a steady incline during 2019
11. INFOCUS|CHINA & THE PCB INDUSTRY
China will implement a new set of strict regulations on the operations of the PCB
industry on February 1, which may threaten the survival of small- to medium-size
makers, according to sources from the related upstream supply chain.
In addition to having higher requirements concerning environmental matters, the
new regulations will require makers to have technological patents for their
products, to set aside at least 3% of their annual revenues for R&D, and to achieve
annual utilisation rates of over 50%.
The regulations impose specific requirements on different types of applications, but
makers of PCBs for aerospace and military applications will not be affected by the
new regulations.
The sources believe the China government is looking to strengthen the leading
players’ dominance in the industry as the new regulations will accelerate the
elimination of small- to medium-size players that give priority to shipment
volumes over technology development.
At the end of 2015, the China government implemented regulations to reduce
metal pollutions caused by the plating process, and since 2016, it has been
tightening its control to protect the environment. Most of the top players have
already installed facilities in compliance with the environmental regulations, but
many smaller ones, unable to afford the high costs of such facilities, have quit.
Although over 50% of worldwide PCB manufacturing is conducted in China, only
three of the global top-30 PCB makers were from China, according to research firm
Prismark’s figures for 2017.
Without government support, most China-based small- to medium-size PCB makers
are likely to have difficulties continuing their operations, which is expected to
accelerate the consolidation of China’s PCB industry - source digitimes
12. THE CULTURE| SPENDING 24 HOURS IN THE JEWEL OF ASIA - HONG KONG
Tsim Sha Tsui
Promenade offers
an uninterrupted
view of one of the
most famous
skylines in the
world.
Visit one of Hong
Kong’s abundant
markets; Gold Fish
market off Tung
Choi Street is one
of our favourites
Visit the Man Mo
temple, a taoist
temple built in the
late 19th century,
where people go
to pay respects to
the god of
literature
My favourite thing
to do in Hong
Kong is to take a
trip on the
ubiquitous star
ferry into central
hong kong
Take some Dim
Sung in one of the
street food cafes
#Whilst Hong Kong is know for
its sky scrapers, 40% of the
territory is country park and
reserve land.
#Did you know Hong Kong
means “fragrant harbour” and
Kowloon means “nine dragons” #Hong Kong international
airport is the same size as 20
international football pitches
WHY NOT SPEND TIME
IN HONG KONG DOING..
13. THE IMPACT| ELECTRONIC COMPONENTS
Fab capacity
constraints are still
seen across a range
of manufacturers
leading to allocation
in some cases
Global shortages of
tantalite ore are
continuing to
constrain
manufacture of
tantalum capacitors
General shortages in
the passive market
continue, chip
resistors, TKD, Vishay,
MLCC’s in general,
Flash devices are
seeing lead times in
excess of 20 weeks
amid price increases,
and increases in
demand
Automotive industry
expected to drive
increased shortages
into 2019 building
toward a $160 billion
automotive market
moving toward 2022
Global Semiconductor
Sales up 9.8% Year
on Year, reaching
$41.8 Billion, with
China year on year
sales increasing
17.4%
Double ordering
within the supply
chain continues to be
a prevalent and
exacerbating issue,
artificially inflating
lead times.