2008 - The ‘interesting’ year that was
12 January 2009
‘May you live in interesting times’, is euphemistically referred to as a Chinese curse. Severe blizzards; the massive earthquake in Sichuan claiming more than 70,000 lives; and the recent shocks from the ongoing global financial crisis, all ensured that 2008 for China was certainly a most ‘interesting’ year.
Remarkably, China’s economy has so far displayed amazing resilience in the face of these major setbacks. The extraordinary growth of the economy, now the world’s fourth largest and including the world's largest and fastest growing electronics market, has been well documented. But concerns about a slowdown have begun to surface in recent months, as the country received more jolts from the global financial crisis. According to Xinhua, the country's growth in the third quarter was 9% year on year, the slowest pace in about five years, due to slower growth in exports. Foreign direct investment, which has been a significant driver of the economy, is plummeting.
In December, the China Economic review reported that, in November, China's exports actually contracted by 2.2%, down from 19.2% growth in October and the first decline since June 2001. Import numbers were also down, by 15.6%. A likely reason for this is that China is buying fewer components for assembly and eventual export.
The China government responded swiftly with a US$586 billion infrastructure stimulus package, designed to combat the drop-off in demand for Chinese exports. A number of key areas have been earmarked, including technological innovations. Actions being considered to boost domestic sales include placing subsidies on electronics and other products to reduce prices to consumers.
During the boom times, millions of migrant workers left farms to seek employment in the coastal provinces and large cities, with many finding work in low-end electronics manufacturing. However, some have started to return to the rural areas as lay-offs occur and prospects dry up as economic conditions worsen.
Against this gloomy backdrop, it was encouraging to see the ‘2008 International Printed Circuit & Electronics Assembly Fair’ held in Shenzhen, China in early December attracting far more visitors than the exhibitors and organisers had anticipated. The show, which was presented by the Hong Kong Printed Circuit Association and (HKPCA ) and IPC – Association Connecting Electronics Industries (IPC), showcased material and equipment dedicated to the pcb fabrication industry. However, Kong Hoi Wing, chairman of HKPCA, and Dennis McGuirk of the IPC weren’t overly optimistic about the outlook for the industry next year.
Kong and McGuirk underscored the negative effects that the challenges of meeting environmental compliance mandates and higher labour costs, coupled with the global financial crisis will have on the pcb industry in China in 2009.
Kong stressed that the industry standards for the control of environmental pollution are not new in China and are amongst the strictest in the world. However, an issue that has made life difficult for the industry has been the fact that local governments can make adjustments to the discharge levels based on a specific company or regional requirement.
Without giving any firm numbers, Kong predicted that a number of pcb factories will be forced to close. This is on the back of China’s desire to move its economy from a manufacturing base to a consumer base. Higher salaries and a stable employment situation are seen as necessary for this strategy to succeed.
In addition, some companies have already seen demand drop by 40% to 50%. On the capacity side, most of the pcb factories in China operate close to a 70% break-even; a prolonged decline in demand will inevitably lead to closures.
As McGuirk pointed out, this is the first time that China’s consumer-driven electronics pcb factories have faced a significant market downturn, as many of them didn’t become operational until 2000.
McGuirk doesn’t anticipate a significant impact on the US pcb industry, adding that military, medical, industrial and the quick-turn markets will be less likely to face substantial declines.
2009 promises to be very interesting year for the development of the pcb industry both in China and around the world, but on reflection, perhaps we should hope that it’s not quite as ‘interesting’ as it was in 2008.
Contact Details and Archive...
Most Viewed Articles...