Connector prices, leadtimes remain stable for now
Suppliers struggle with capacity concerns as connecter demand picks up
By Gina Roos -- Purchasing, 9/17/2009 2:00:00 AM
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The worst may be over for the connector industry as connector suppliers report orders are picking up after months of weak demand, plant closings and layoffs.
For buyers, price declines remain at the industry's average of 3–5%. Although leadtimes are stable in the six-to-eight-week range, buyers can expect leadtimes to stretch for some connectors as demand starts to slowly increase and suppliers re-adjust their inventory levels.
"It's been a difficult period of time starting in October 2008. We've had nine months of this disaster and that's plenty of time for companies to get manufacturing and inventories in line with the reality of lower demand," says Ron Bishop, president of Bishop & Associates in St. Charles, Ill.
Bishop says most connector suppliers are at least 25% smaller than they were last year, and at the midpoint for 2009, connector sales are off by 33.9%.
The market researcher projects the global connector market will shrink by 25% in 2009, tallying sales of about $33 billion, down from about $44 billion last year. The worst hit markets include automotive, industrial and transportation non-automotive, says Bishop. The best markets include military/aerospace, medical, computer and telecommunications with mobile and wireless doing much better than networking and infrastructure, he says.
Many connector suppliers also cite the alternative energy industry, particularly solar and wind, as potential growth markets.
As connector suppliers start to see a slight uptick in business, they are struggling with the issue of when to increase capacity, which could lead to longer lead times as demand starts to pick up. Dennis Renaud, vice president of global product management, communications and industrial solutions at Tyco Electronics in Harrisburg, Pa., says the company is struggling to balance supply and demand and is trying to determine how much expansion it needs to do.
Before suppliers make investments in expanding, they need to determine if the current uptick in business is driven by stimulus funds from governments or from replenishment due to low inventory levels in the supply chain or from long, says Renaud.
Keith Eichmann, product marketing manager for backplane connectors at Amphenol TCS in Nashua, N.H., says the wireless segment was strong during the first half because of infrastructure building in developing countries including China. But the segment may be down slightly in the second half as China waits for a second round of stimulus funds.
Renaud says he's starting to see some stresses in the raw materials supply chain such as metals and plastics which could lead to longer leadtimes.
The biggest challenge and opportunity for connector suppliers moving forward will be managing the upturn in the upcoming months, says Kelly Vogt, director of sales for Europe and Americas at FCI USA in Etters, Pa. Vogt says the key will be a flexible manufacturing footprint in order to align with demand.
Terry Turner, FCI's global marketing director for distribution, adds that the whole supply chain has to ramp up in order to support an upside as customers begin to place more orders.
Material leadtimes from FCI's suppliers are longer than what the company typically quotes for connector leadtimes, so there is a risk that some materials will be difficult to obtain quickly, says Dave Sideck, FCI's global market manager for high-speed and power products.
Connector makers also note that rationalizing their global operations footprint was accelerated because of the downturn. For instance, Eichmann says during the downturn, his company localized its supply chain and added services.
Many connector suppliers also say they have maintained their budgets for new product development. Despite the downturn, many customers have not cancelled their new programs, as they did during the 2001 downturn, say suppliers. Key product development areas include 85-ohm connectors and higher density and higher speed backplane systems.
Turner also thinks there will be additional efforts in cross-licensing of new technologies and products in the future to spread out the cost of research and development. Sideck adds that another driver is large customers who want to have a second-source option particularly if they are looking to use some of the new products in more critical programs.
Top 10 Connector Manufacturers
($ Millions)
| 2008 Rank | Manufacturer | Total | Percent Total |
| Source: Bishop & Associates, Inc. |
|||
| 1 | Tyco Electronics | $8,103.0 | 18.43% |
| 2 | Amphenol | $3,236.2 | 7.36% |
| 3 | Molex Incorporated | $3,200.1 | 7.28% |
| 4 | FCI | $1,841.0 | 4.19% |
| 5 | JST | $1,549.0 | 3.52% |
| 6 | Yazaki | $1,492.0 | 3.39% |
| 7 | Foxconn (Hon Hai) | $1,468.0 | 3.34% |
| 8 | Hirose | $1,044.8 | 2.38% |
| 9 | JAE | $1,042.0 | 2.37% |
| 10 | Delphi Connection Systems | $998.9 | 2.27% |
| Total Top 10 | $23,975.0 | 54.52% | |
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