2008 Connector Industry Outlook

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, and rising unemployment. 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 percent in the first half of 2008, more than double the growth of +6.0 percent 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. 

Industry Sales Performance and Top Three Manufacturers’ Performance
Six-Month Sales Results

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

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

Market Sector Performance
Percent Change In Sales – 2Q08

Amphenol does not provide growth figures 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 one to three percent in 2008. China continues to be the growth engine for the connector industry. Sales in China are up approximately +16 percent in the first half of 2008, Japan is up six to seven percent, Europe is up +10 to +12 percent, and the Asia-Pacific region increased in the seven to eight percent range.

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

Industry Sales Forecast
First Half vs. Second Half 2008

While we hold to the +7.3 percent increase in 2008 for now, we have an upward bias, i.e. the industry will probably do better than +2.5 percent growth in the second half of 2008. July results are now being collected and will be reported by the end of August. The second half of 2008 will be interesting.

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

Connector Industry Forecast

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 percent in the first half of 2008 in U.S. dollars was growth of approximately seven to eight percent in local currencies.