May Book-to-Bill Shows Promise

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BANNOCKBURN, Ill. Association Connecting Electronics Industries (IPC) announced the book-to-bill ratio for May. The book-to-bill is based on monthly data collected from PCB producers that voluntarily participate in IPC's program. IPC surveyed rigid and flexible PCB manufacturers, and presents the results in separate and combined analyses. Researchers suggest relying most heavily on year-to-year statistics, such as comparisons of May 2005 numbers to those from May 2006, for the most accurate industry assessments.

The combined (rigid and flex) industry book-to-bill ratio in May 2006 was 1.01. The industry began a rebound in May after a characteristically slow April, said Denny McGuirk, IPC president. The North American rigid PCB industry book-to-bill ratio for May 2006 declined slightly, but remained positive at 1.02. Shipment growth lowered the book-to-bill in the rigid PCB segment, though that industry continues to project a trend, now entering 10 consecutive months, of positive book-to-bill ratios. The North American flexible circuit book-to-bill ratio remained negative for the third straight month at 0.91. IPC notes that changes in the book-to-bill ratios from month-to-month often lack significance unless a trend of at least three consecutive months is apparent; however, market researchers at IPC caution against considering this data indicative of a major market shift. "The flexible circuits industry is very volatile. This decline in book-to-bill is a correction, not a trend," explained Sharon Starr, director of market research, IPC. "Month-to-month statistics don't consider a long-enough time to indicate a trend. You'd need at least six months to call this a trend," Starr added.

Total industry growth recorded shows a year-to-date increase in shipments of 10.3%, with a comparable 10.8% rise in bookings. Shipments are up 9.2% from April 2006. Bookings rose 3.8% from the previous month. The greatest divergence occurs in the statistics comparing May 2006 to May 2005, with billings totaling an 18.1% escalation and bookings only growing by 4.9%.

Rigid PCBs represent more than 75% of the current North American PCB market. Billings and bookings in this segment were up in all statistical analysis time frames. Shipments rose 11.1% in the year-to-date, and bookings climbed 12.8%. From April to May 2006, shipments increased 8.5%, with a complementary increase of 2.9% in bookings. In comparison to May 2005, the industry improved shipment volume by 20.2% and bookings by just 7.1%.

Flexible circuit sales that typically include value-added services, such as assembly, in addition to the bare flex circuits did not achieve such uniform improvement. Bare circuits accounted for about 70% of shipment value reported for the month. Year-to-date statistics indicated a 0.8% rise in shipments and a 14.5% decrease in bookings. Billings and bookings saw parallel increases from April, with 19.5% and 19.2%, respectively. Finally, the month-to-month ratio recognized a shipment decrease of 4.2% and a larger drop in bookings 20.0%. "As the flexible circuit industry was so high last year, this negative book-to-bill can be attributed to cyclical patterns and self-correction, not decline," said Starr.

Ratios are calculated by dividing the value of orders booked over the past three months by the value of sales billed (during the same period) from the companies in IPC's survey sample. IPC monitors the sample group to ensure inclusion for a variety of products and company sizes. A ratio of more than 1.00 indicates that current demand is ahead of supply, implying probability of near-term growth. The May ratio of 1.01 indicates an overall balance of bookings to billings neither general growth nor decline.

IPC's numbers track bookings and shipments from U.S. and Canadian facilities specifically, not U.S. and Canadian PCB production. Production statistics suggest, however, that 87% of total PCB shipments were domestically produced in May 2006 86% of rigid PCB and 97% of flexible circuit shipments.



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