Connector Industry Records Strong Performance in 3Q09 2009 & 2010 Forecast

12.07.2009 // Posted by: Ron Bishop // Posted in: Articles, Connectors

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The connector industry achieved sequential growth in orders of +17 percent, and +12.5 percent in 3Q09 sales over 2Q09. This is the second consecutive quarter of sequential growth. In 2Q09, orders were up +17 percent and sales were up +9.2 percent, sequentially.

In September 2009, orders were down -8.6 percent vs. last September. That is the best monthly order performance of the past 12 months. Sequentially, orders were up +3.0 percent, making September the third consecutive month in which orders increased.

September sales were down -18.1 percent year-over-year, and up +4.5 percent, sequentially.

The September book-to-bill ratio was 1.05, making this the third consecutive month in which the book-to-bill ratio was 1.05 or higher.

September Booking Highlights

• Bookings were down -8.6 percent in September 2009 vs. September 2008.
• Year-to-date September 2009 orders are down -29.3 percent.
• September 2009 orders are up +3 percent over August 2009.

The following chart plots the monthly change (year-to-year comparisons) in bookings since January 2007.

The September bookings decline, of only -8.6 percent, is the fifth consecutive monthly improvement in year-over-year comparisons.

September Billing Highlights

• Billings were down -18.1 percent in September 2009 vs. September 2008.
• Year-to-date billings are down -29.8 percent.
• September 2009 billings were up +4.5 percent compared to August 2009.

The following chart plots the monthly change (year-to-year comparisons) in billings since January 2007.

This is the second consecutive monthly improvement in sales on a year-over-year basis.

Comparison to 2001/2002

The following charts compare year-over-year percentage change in orders and sales for the 2001/2002 and 2008/2009 downturns.

You will note that the 2008/2009 downturn was deeper than the 2001/2002 downturn, but it is also recovering more quickly.

The following table compares the 2001/2002 and the 2008/2009 downturns, beginning with the first negative month in each of the down business cycles.

We are now in our 12th consecutive down month in year-over-year bookings. In 2001/2002, bookings continued to decline for 14 months.

Orders have shown improvement for five consecutive months.

Industry sales have declined for the 12th consecutive month. In 2001/2002, sales declined for 15 consecutive months.

Industry Performance by Region

The following table provides bookings performance by geographic region.

All geographic regions improved in September. North American orders improved to a decline of -10 percent, and Europe reported a decline of only -9.6 percent on a year-over-year basis. Both are significant improvements from the double-digit declines reported in August.

It is interesting to note that Asia Pacific is the first region to report a year-over-year increase in orders. Asia Pacific was up +22.6 percent in September 2009. Japan improved to a decline of -3.3 percent in September.

All regions improved in September, with Asia Pacific reporting sales growth of +3.1 percent on a year-over-year basis.

2009 Outlook

We are in the middle of a strong recovery in bookings and billings. The second quarter of 2009 was up +17 percent vs. the first quarter. The third quarter was also up +17 percent over the second quarter 2009.

Sales were up sequentially, +9.6 percent in 2Q09 and +12.1 percent in 3Q09.

The book-to-bill ratio remained above 1.0 in all three months of 3Q09 (July 1.07, August 1.05, and September 1.05).

The following table clearly shows how industry sales have improved.

We were expecting 3Q09 industry sales of $8,472 million, which was a year-over-year decline of -26.6 percent, and a sequential increase of +5 percent. U.S. GDP came in at a surprisingly strong increase of 3.5 percent, and helped drive the global electronics industry. China and the Asia Pacific region were also strong economies in 3Q09. We shipped $9,078 million in 3Q09, a +12.5 percent sequential increase.

An informal Bishop & Associates’ survey of industry executives revealed that October was also a good bookings month, giving the industry a good start to 4Q09. Strong demand, coupled with easy comparisons, means we will most likely achieve year-over-year growth in 4Q09. If that occurs, the 2008/2009 downturn will result in only four quarters of year-over-year declines in sales. The 2001/2002 downturn lasted for six quarters.

It is now our opinion that 4Q09 will be better than 3Q09. This is due to world GDPs improving, the holiday season build, all market sectors—including automotive—are rising, top line forecasts from numerous public companies in the electronics industry are increasing, and there is a strong backlog.

Assuming a modest +5.7 percent sequential improvement in 4Q09, the industry will achieve $9,595 million in sales.

The following table shows actual industry sales by quarter, including our estimate of sales in 4Q09.

In effect, the industry will achieve year-over-year growth of +5.7 percent in 4Q09. In 2009, industry sales will be $34,105 million, a decline of -22.4 percent from 2008 sales of $43,977 million. This is better than the ‑25 percent decline we were expecting for 2009.

2009-2010 Forecast

The following provides our adjusted 2009 forecast by region. The strong industry performance in 3Q09 makes us believe we will do better than the -25 percent previously forecast. Our new forecast for all of 2009 is a decline in industry sales of -22.4 percent.

We believe 2010 will result in a double-digit increase of +11.3 percent. Improving GDPs worldwide, combined with easy comparisons to 2009, makes a double-digit increase quite possible.

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