PCB | November 23, 2006

IPC Releases IMS/PCB Book-to-Bill Ratio

IPC—Association Connecting Electronics Industries® announced today the findings from its monthly Printed Circuit Board (PCB) Statistical Program.
PCB Book-to-Bill Ratio
The North American rigid PCB industry book-to-bill ratio for October 2006 decreased to 0.99. The North American flexible circuit book-to-bill ratio held steady at 0.91. These ratios are based on monthly data collected from PCB producers that participate in IPC's monthly PCB Statistical Program. The combined (rigid and flex) industry book-to-bill ratio in October 2006 was 0.99. Some analysts find the separate ratios for rigid and flex more meaningful than the combined ratio, because of the divergence in recent years between the rigid PCB and flexible circuit segments of the industry in growth rates and book-to-bill patterns.

The 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. A ratio of more than 1.00 suggests that current demand is ahead of supply, which indicates probable near-term growth.

Rigid PCB Growth
Rigid PCB shipments are up 7.8 percent and bookings are down 6.0 percent in October 2006 from October 2005. Year to date, rigid PCB shipments are up 9.9 percent and bookings are up 8.3 percent. Rigid PCB shipments from the survey sample decreased 14.3 percent from the previous month and rigid bookings decreased 7.5 percent from the previous month.

Flexible Circuit Growth
Flexible circuit shipments in October 2006 were up 26.4 percent and bookings were down 8.7 percent compared to October 2005. Year to date, flexible circuit shipments are up 8.3 percent and bookings are down 6.5 percent. Compared to the previous month, flexible circuit shipments from the survey sample decreased 6.2 percent and flex bookings decreased 13.0 percent.

Total Industry Growth
For rigid PCBs and flexible circuits combined, industry shipments in October 2006 increased 9.0 percent from October 2005, and orders booked decreased 6.2 percent from October 2005. Year to date, combined industry shipments are up 9.8 percent and bookings are up 7.2 percent. Combined industry shipments for October 2006 are down 13.7 percent over the previous month, and bookings are down 7.9 percent over the previous month.

"The October book-to-bill ratio of 0.99 is only slightly below parity, but this is the first time we have seen a book-to-bill ratio below 1.00 in almost two years," according to IPC President Denny McGuirk. "This is no cause for alarm, though, because it is mainly due to a big increase in flexible circuit shipments this month and increases in rigid PCB shipments in August and September. The fundamentals still look good," he added.

The book-to-bill ratios and growth rates for rigid PCBs and flexible circuits combined are heavily affected by the rigid PCB segment. Rigid PCBs represent an estimated 85 percent of the current PCB market in North America, according to IPC's World PCB Production and Laminate Market Report for the Year 2005.

The Role of Domestic Production
IPC's monthly survey of the North American PCB industry tracks bookings and shipments from U.S. and Canadian facilities, which provide indicators of regional demand. These numbers do not measure U.S. and Canadian PCB production. IPC asks survey participants for the percent of their reported shipments that were produced domestically (i.e., in the USA or Canada). In October 2006, 89 percent of total PCB shipments reported were domestically produced. Domestic production accounted for 88 percent of rigid PCB and 95 percent of flexible circuit shipments in October by IPC's survey participants. These numbers are significantly affected by the mix of companies in IPC's survey sample, which remains constant throughout each calendar year, but may change at the beginning of each year.

Bare Circuits Versus Assembly
Flexible circuit sales typically include value-added services such as assembly, in addition to the bare flex circuits. In October, the flexible circuit manufacturers in IPC's survey sample indicated that bare circuits accounted for about 71 percent of their shipment value reported for the month. Assembly and other services make up a large and growing segment of flexible circuit producers' business. This figure is also sensitive to changes in the survey sample, which may occur at the beginning of each calendar year.

Interpreting the Data
Year-on-year and year-to-date growth rates provide the most meaningful view of industry growth. Month-to-month comparisons should be made with caution as they may reflect cyclical effects. Because bookings tend to be more volatile than shipments, changes in the book-to-bill ratios from month-to-month may not be significant unless a trend of three consecutive months or more is apparent. It is also important to consider changes in bookings and shipments to understand what is driving changes in the book-to-bill ratio.

The information in IPC's monthly PCB industry statistics is based on data provided by a representative sample of both rigid and flexible PCB manufacturers in the USA and Canada. IPC publishes the PCB Book-to-Bill Ratio and the Interconnect Manufacturing Services (IMS) Business Report each month. Statistics for the previous month are not available until the last week of the following month.
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