PCB production in January 2007: revenues post double digit growth.

JANUARY'S PCB PRODUCTION data was released by The Japanese Ministry of Trade and Industry (METI) recently. Below is a synopsis of the report:

January PCB revenue posted a 5.1% or 79.61 billion yen decline compared to the previous month. January production typically experiences a seasonal decline after the Christmas season; however, comparing the same month to last year, the industry showed a strong growth of 12.5%. On the other hand, January PCB production volume was down 3.4% at 1.94 million square meters compared to December, and showed a decline of 0.8% compared to January 2006. Revenues posted double digit growth while volume production showed almost no growth. Japanese PCB manufacturers have shifted output toward higher margin segments to help survive in the current competitive environment.

The rigid PCB segment is on par and trending as usual for this time of year. Volume for the single side rigid board segment declined 8%, and revenue also dipped by 2.9% compared to the same month in 2006. Production volumes for other circuit categories show no significant changes, and revenue is quite minor compared to other Japanese PCB segments. The double-sided boards (+2.8%) and four-layer boards (1.9%) posted small gains compared to the previous year, while six- and eight-layer boards (+26.1%), and the other rigid boards made by the build-up process (+18.2%), enjoyed double digits growth compared to the same month in 2006.

Flexible circuit manufacturers show similar trends. January's total revenue grew 0.1%, and total volume declined 1.5% compared to January 2006. This shows no significant changes from last year; however, once you crunch the data by product category there are remarkable differences: Revenues for the single-sided flexible circuits declined by 5.5% and volume declined by 13.7%. The single-sided flexible circuits segment is in a downturn because Japanese manufacturers are moving to high margin products such as fine lines and ultra-thin circuits. Double-sided flexible circuits and multi-layer flexible circuits have nominal growths compared to last year (4.1% growth by revenue and 9.5% growth by volume). Since 2004, the flexible circuit industry in Japan has struggled through long slow seasons and has declined each year over the past two years. Posting a flat growth could be a welcomed site for the flexible circuit industry and could be a positive sign of things to come after the two-year slide.

The module circuits segment is trending differently compared to other circuit categories. Total revenue in January declined by 7.9% and volume declined 5.3% from December, which could be blamed on seasonal fluctuation. Total revenue grew by 23.1% and volume grew 6.3% compared to the same month last year; however, there are significant differences between the rigid module segment and other modules. Revenue for the rigid module circuits grew by a whopping 50.7%, and 32.4% volume. The steady growth signifies a consistent growth trend. Revenue for other module circuits, mainly the flexible tape circuits, declined by 7%, and volume increased by 1.4% compared to the same month last year. Unfortunately, volume is flat but market prices have substantially decreased. Slowing demand and lower prices for flat panel displays could be one reason for this problem.

Overall, performance in January for the Japanese PCB industry was lack-luster. Concerns within management teams for Japanese PCB manufacturers are unclear at this time, and some industry analysts expect the effects of Microsoft's new operating system, Vista, to grab hold on February's numbers. However, many people in Japan are not optimistic about the contributions of Vista. They are also concerned that there is no major sporting sport event scheduled for this year such as the Olympics, or World Cup Soccer. FPD and PCB manufacturers are considering conservative projections this year.

Headlines

Japanese market research firm Fuji Keizai released a report regarding the fuel cell market. Fuji expects a 10 billion+ market by 2020. Another firm, IDC Japan, reported in March that 2006 PC shipments in Japan declined 2.3% to 14.28 million units. The downturn was attributed to customers' hesitation to buy new PCs before Microsoft's Vista was released.

Fujitsu rolled out a new 2.5" disc drive for automobile and industrial applications. The drive is said to be reliable in applications with mechanical shocks and vibrations under broad temperature ranges (-30[degrees]C to +85[degrees]C).

Yamaha will sell its subsidiaries, Yamaha Metanics and Yamaha Olin Metals, by the end of September due to shrinking demands of the lead frame business.

Dai-Nippon Printing developed a new barrier film for flexible organic EL display panels.

Hitachi introduced removable hard disc drives called XR01Series for new flat panel TVs (50" PDP TVs and 3T" LCD TVs). In other news, the company decided to close its manufacturing plant in Mexico by 2008. Production will be transferred to Chinese facilities.

DOMINIQUE NUMAKURA is president of DKN Research; [e-mail].