The world connector industry increased sales 7.2% in 2007, achieving five consecutive years of growth (2003: +11.2%, 2004: +17.9%, 2005: +6.2%, 2006: +12.6%, and 2007: +7.2%). Since the 2001-2002 downturn, world demand for electronic products has been excellent.

The following chart shows the % change in world connector sales by year beginning in 1981. There have been only four sales declines in the past 27 years, two most recent occurring in 2001 and 2002.

Europe

Europe is the largest connector region of the world, with connector sales of $11.406 billion in 2007. Europe recorded a year-to year increase of +11.9%. In the past 27 years, the European region has displayed six years of sales decline, 1985, 1989, 1992, 1993, 2001, and 2002. Over the same 27 year period, the European region has attained a compound average growth rate of +5.9%.

North America

North America is the second largest connector region of the world, with connector sales of $9.898 billion. North America recorded a sales decline of -2.5% during 2007. Over the past 27 years (1981-2007), the North American region has had just eight years of sales decline, 1985, 1990, 1991, 1998, 2001, 2002, 2003 and 2007. Over the same 27 year period, the North American region has achieved a compound average growth rate of +3.6%.

Regional Summary

The table below shows that the 2001 and 2002 recession is still having a downward impact on the connector industry’s past 10-year, and past 20-year compound annual growth rate (CAGR). Previously, the connector industry had a historical CAGR of +7.0%. However, over the past five-year period, the connector industry has achieved excellent growth, with a CAGR of +10.9%.

End Use Equipment Sectors

Automotive is the largest market for electronic connector products with 2007 shipments of $10.145 billion. Connectors utilized in the automotive sector account for 23.7% of all connectors manufactured. Ranking second is computers and peripherals, with 20.5% of the total market.

2007 Connector Industry Outlook

The connector industry has achieved five consecutive years of growth beginning in 2003. Additionally, we have recorded 31 straight months of growth in bookings and billings.

Our forecast for 2008 projects growth of +7.5%, which will make six consecutive years of industry growth. Long growth streaks are not unprecedented in the industry. For example, the industry recorded eight consecutive years of annual increases between 1993-2000. However, while a sixth year of growth in 2008 is historically possible, it is going to be a challenge.

• U.S. Housing and Sub-prime Mortgages: The daily news announcements about liquidity problems in the financial markets, declining real estate values and foreclosures are beginning to have a dampening effect on consumer spending.
• Rising Costs, Unemployment and the Fear of Inflation: Energy, raw materials and agricultural products all have reached record levels, and news of moderately increasing unemployment adds to consumer uncertainty.
• Lower Forecasts for World Growth: The consensus opinion of economists is for a reduced GDP in 2008 in most of the large producing countries. The U.S., Europe, Japan and China are all forecast to drop between 0.5% and 1.5% from 2007 GDP results.

The Positives

• The U.S. federal government and the Federal Reserve Bank: The U.S. government is implementing actions to prevent a prolonged recession, i.e. infusion of funds to insure liquidity in financial markets, reducing interest rates, and the economic stimulus package.
• Sales of homes increased in the U.S. in February for the first time in seven months, offering hope that we are working toward a bottom in the housing crisis.
• Asian Economies Remain Healthy: China is forecast to have 2008 GDP growth of +9.8%, India +7.8%, Hong Kong +4.0%, Indonesia +6.1%, Malaysia +5.5%, Singapore +4.5%, South Korea +4.4%, and Taiwan +4.5%. (Source: The Economist)
• Demand for Electronic Products Remains Strong: We have yet to see a major downturn in any electronic market sectors.
• January and February Connector Demand: The connector industry is up +14.8% in orders and up +12.6% in sales for the first two months of 2008. This is the industry’s best start to a new year since 2004.

It is clear there is a disconnect between economic news, which is mostly bad, and business on the ground, which is very good (connector orders and billings are good). While confusing, it is equally clear that the electronics industry has not yet experienced a downturn.

For now, we continue to believe 2008 will result in industry growth, and we are holding to our +7.5% growth forecast. Our forecast by geographical region is shown in the following table.

Note: Europe is now defined as Western, Central and Eastern Europe. Countries included in Europe can be found under definitions at www.connectorindustry.com.