It is a confusing year. The economic news is mostly bad: high energy costs, rising inflation, increasing costs of raw materials, slowing GDP growth worldwide, lower real estate values, liquidity issues in the financial sector, low consumer confidence, rising unemployment, etc. Logically, the electronics industry should be slowing appreciably, reflecting the state of the broader, global economic conditions.

In fact, the opposite is occurring with connector sales growth in double digits. As evidence, connector sales are up +12.5% in the first half of 2008, more than double the growth of +6.0% achieved at the halfway point in 2007.

The following table clearly shows how well the industry is performing, in spite of the difficult economic environment.

Additionally, the top three connector manufacturers have a fairly positive outlook for calendar 3Q08. Amphenol projects sales to be up approximately +13 to +14%, Molex +9 to +10%, and Tyco Electronics +6 to +8%.

All market sectors are growing, except automotive, in the United States. The following table displays sales results for Tyco Electronics and Molex in calendar 2Q08.

Amphenol does not provide growth by individual market sector, but reported, “growth was broad based with particular strength in global communications, military and commercial aerospace markets.”

Sales are also growing in all geographic regions with the exception of North America, which will be down -1 to -3% in 2008. China continues to be the growth engine for the connector industry. Sales in China are up approximately +16% in the first half of 2008, Japan is up +6 to +7%, Europe is up +10 to +12%, and the Asia Pacific region increased in the +7 to +8% range.

Second Half 2008 Forecast

We are going to hold our full-year 2008 forecast at +7.3%, based on the economic “head winds” that exist. In effect, we are forecasting second half 2008 growth of +2.5%, meaning there will be significant softening in connector demand.

We will hold to the +7.3% increase in 2008 for now, but with an upward bias (i.e., the industry will probably do better than +2.5% growth in the second half of 2008). July results are now being collected and will be reported in the next few days. The second half of 2008 will be interesting.

Our full-year 2008 forecast by region is shown in the following table.

We report connector sales in U.S. dollars, which have declined in 2008 compared to other major currencies. The decline was significant enough to have a major impact on the percentage change in sales. For example, the sales increase of +12.5% in the first half of 2008 in U.S. dollars was growth of approximately +7 to +8% in local currencies.