Along the California seashore, the annual Fleck Connection Congress declared the health of the industry to be “extremely good,” with 2006 being a record-setter.
BY MATT VINCENT
At the eighteenth annual Fleck Connection Congress (FCC), held at the Laguna Cliffs Resort in Dana Point, CA, Fleck research chairman and founder Ken Fleck declared that 2006 was the connector industry’s “best year, the first double-digit year” since the year 2000.
In the event’s opening presentation, “2006, 2007 Outlook, Industry Hot Spots & Challenges,” Fleck cited year-to-year real growth of 11.3% versus 2005 for worldwide shipments of connectors, cable assemblies and backplanes. Driving forces for the industry’s rapid growth over the past year included an “explosion” in Internet connectivity, said Fleck, comprised of immense increases in 10-Gigabit Ethernet applications, along with “explosive demand” for bandwidth access across the entire range of wireless networks, including WiFi, WLAN, WiMax, ZigBee, Bluetooth and WBA applications. A record-setting 848 million units of wireless handsets were shipped globally in 2006, according to Fleck.
“A huge portion of the industry is being pushed by semiconductors,” Fleck added, with yearly revenues for this segment setting a record high of $255.6 billion globally-up 12.3% from 2005. Semiconductors were seen directly driving global demand for $28 billion worth of connectors, cable assemblies and backplanes in 2006, with 213 new semiconductor fabs forecasted in the next three years.
Additionally, Fleck cited “huge automotive advances,” with electronics requirements increasing at a rate of 20.5% per year, including those for smart air bags, telematics, GPS, radar, smart tires and hybrids. In fact, at present, Fleck stated that, “automotive is the highest demand sector for the connector industry, replacing computers, and followed by medical.”
Soaring to new heights
Further, Fleck noted that demand for interconnect technology used in commercial aircraft designs has soared toward “the highest we’ve ever had in the industry,” with orders in 2005 and 2006 setting “all-time records.”
Citing a 15% increase in backlogged orders, representing more than 1,200 aircraft (in large part, A380 and 787 designs), Fleck sees the commercial aircraft industry for connectors and cable assemblies reaching over $1 billion by 2012. Geosynchronous transfer orbit (GTO) satellite technologies and the U.S. Department of Homeland Security’s expanding need for advanced sensor technologies were also seen as significant, emerging growth drivers for the connector industry in 2006.
Fleck determined that, at a rate of 3.7% or $1.602 billion, price erosion for the connector industry overall in 2006 was “much smaller than in prior years.” The lower rate was due to numerous price increases passing through an increased cost of raw materials, such as copper, resins and gold.
“There were raw material price increases across the board for all manufacturers,” he said. While China, unsurprisingly, continues to rank as “the premier location for all forms of electronics manufacturing,” with over $5 billion of global connector industry business having moved to China in 2006 alone, Fleck also noted that price erosion caused by the industry-wide move to China has accounted for an 11.6% loss since 2000.
Sounding a note of general caution, Fleck forecasted a slight slowdown in the global connector industry for 2007. Among the negative factors: Overall, North American electronics production is expected to increase only 2%, with overall semiconductor unit growth projected at 9%. Desktop PC, handset, and mil/aero segments are all also seen slowing in growth. ASPs [average selling prices] are seen declining, and overall forecasted revenue growth is only 3 to 4%.
The road to recovery
The buoyancy and general optimism of 2005-2006 notwithstanding, Fleck also pointed out that the connector industry as a whole is still struggling to recover from the economic downturn of 2001. According to Fleck, in terms of worldwide shipments, the industry is still 7.9% below where it was in 2000, down from $45.072 billion to $41.510 billion.
In the end, however, Fleck conceded that “’07 should not be too bad,” citing several positive factors. While 2007 will be “the first year in memory that handset growth will be under 10%,” Fleck noted that most other portable electronics manufacturing will be “way up.” Increases are seen occurring in digital camera phones, MP3 phones, music-enhanced phones, and push-to-talk applications, along with increased demand for WLAN and WiMAX technologies.
Other industry “hot spots” include: high-bandwidth/high-speed PC connectors, which are expected to expand at a four-year CGR of 20%; serial I/O connectors, expected to expand at a four-year CGR of 14.4%; and fine pitch connectors (> .05-mm), expected to expand at a four-year CGR of 10.4%.
Finally, amidst steady rates of vertical integration across all industry segments, 2006 saw EMS, ODM and OBM companies reaching $19.4 billion versus a year ago, with this segment expected to increase 5.5% by 2010, to about $30 billion, according to Fleck.
China, or not?
The Congress featured a diverse roster of executives and industry professionals speaking on a variety of topics germane to the industry. Topics ranged from present innovations and notions of “best practices” to discerning how trends in materials, manufacturing, and cultural tendencies might affect the industry’s future.
The industry’s heavyweights were well-represented at the event. Amphenol TCS (www.amphenol-tcs.com) president Rick Schneider talked about trends in high-speed, high-density system interconnect technology, touching on backplane systems as well as overall system configuration issues. Schneider highlighted the significance, “especially in Asia,” of continually rising bandwidth demands toward Gigabit-speed video and HDTV applications, and how the escalating desire for global “telepresence” will inevitably shape demand for interconnect technology.
In a presentation entitled “Future of the Connector Industry: A Leading Supplier’s Perspective,” FCI’s (www.fciconnect.com) chairman and CEO Jean-Lucien Lamy assessed what he called an industry currently dominated by automotive and datacom markets. “I brought my crystal ball to talk about the future-and we are talking about a bright future,” he said.
Nonetheless, hearkening back to the beginning of the Internet/telecom bubble in 1999, with its “sky’s the limit” outlook for connector companies, Lamy noted that the subsequent plunge in markets after the September 11 terrorist attacks nearly bankrupted his company. “I got burned, so I speak from experience,” he said. So, in spite of the industry’s present optimism, Lamy sounded a note of caution, warning that connector firms must adopt a “pragmatic approach” in creating balance and diversity within their manufacturing operations.
Commenting on FCI’s 28 global manufacturing sites, Lamy was resolute: “I refuse to move everything to China. One mustn’t put all their eggs in one basket among low-cost manufacturing countries.” Further, citing the increasing role of OEMs and ODMs in components and suppliers selection, Lamy stressed the importance of firms protecting their IP [intellectual property] as means to defend market leadership. To allay fears of Chinese interests appropriating vital intellectual property (IP), he noted that his company has based most of its IP concerns in Singapore.
Lamy summed up with a kind of motto for global connector firms, saying that all should strive to adhere to a general principle of “design here, manufacture there, and sell anywhere.” Contrastively, in a talk entitled “India-A Land of Opportunity? The Growth of Manufacturing Using Connectors in India,” Paricon Technologies’ (www.paricon-tech.com) representative Joel Urban wryly observed that manufacturers in India and Asia often appear to hew to a different maxim, with an objective to “design in Asia, build in Asia, and sell in Asia.”
Urban’s was not the only presentation to underscore challenges, concerns, and opportunities presented by the growing Indian and Asian marketplaces. Newport Technologies’ (www.newporttechnologies.biz) president Karl Weaver addressed these topics in a pair of presentations, one illuminating “the subtle art of doing business within the Chinese and Indian business protocol,” and another investigating how companies in both China and India are driving a “global smart phone revolution.” (John Powers, VP of cellular service provider metroPCS (www.metropcs.com) expanded upon this particular theme in his presentation, “Exploring Opportunities in Wireless,” which looked into the burgeoning mobile and wireless communications arenas and their significance for connector firms seeking to furnish service provider equipment.)
Elsewhere from a global perspective, regarding imminent concerns of raw materials supplies facing the connector industry, the Congress welcomed Robert Farrington, principal research manager for the National Renewable Energy Laboratory’s (www.nrel.gov) advanced vehicle systems group, who delivered a presentation entitled “Addicted to Oil-Where Does the Road Lead?” (Wherever it leads, you may expect to ride there in a hybrid automobile.) In a similar vein, John Barnes, principal consultant for the UK-based consulting firm CRU Group (www.crugroup.com), in his “Copper Market & Price Outlook,” remarked, “You’ve heard we’re running out of oil? Well, guess what, we’re running out of copper as well.”
Interconnect innovations
Several of the speakers held forth on innovations in interconnect technology. Gordon Vinther, president of Ardent Concepts (www.ardentconcepts.com), discussed his company’s RC SpringProbe technology as a means of replacing traditional spring pin, “pogo”-style PCB contacts in high-frequency, high-pitch (< 1.0-mm) RF applications.
Paricon Technologies president and CEO Roger Weiss covered “novel interconnect methods to increase performance and reduce cost,” including his own company’s PariPoser interconnects, which are designed for high-density I/O applications where soldering is difficult, such as LAND-grid-array, BALL-grid array, and device test interconnections.
In terms of materials innovations, Vikram Gopal, global program manager for GE Plastics (www.geplastics.com), gave a presentation entitled “Valox IQ for the Interconnect Industry,” which described his company’s Valox iQ and Xenoy iQ resins. Aimed at automotive manufacturers, the resins are created with polybutylene terephthalate (PBT)-based polymers derived from 85% post-consumer plastic waste (i.e., common soda bottles) and are designed to consume less energy and yield less carbon dioxide (CO2) in their manufacturing than traditional, petroleum-based resins. “This approach reduces CO2 emissions by at least 1.7 kilograms (kg) per kilogram of resin and saves up to 8.5 barrels of crude oil per 1,000 kg of resin,” claimed Gopal.
Other notable speakers included Corning Cable Systems’ (www.corningcablesystems.com) David Meis with a presentation entitled “FTTH: Re-defining the Broadband Experience in America,” Belden CDT’s (www.belden.com) Paul Vanderlaan, whose presentation unraveled the oftentimes “Disconnect Between Cable & Connector Manufacturers,” and Elma Bustronics’ (www.bustronic.com) Justin Moll, who delivered his “VITA Market Update” on behalf of the open systems VME technology community for modular embedded computing designs.
Wrapping up the two-day Congress, Ken Fleck delivered a pair of in-depth workshops analyzing product lines and discerning technology trends within the global markets for connectors, cable assemblies and backplanes.
Leavening some number-crunching with a few good-humored, personal asides, Fleck used these sessions to expand upon the information imparted in his opening presentation, illuminating the finer points of his company’s perennial and comprehensive view into the connector industry. For more information, visit www.fleckresearch.com.
MATT VINCENT is senior editor for Connector Specifier.
