The room was packed for an early breakfast at the 2013 TTI Supplier Excellence banquet on Tuesday, May 7, 2013, at the Cosmopolitan Hotel in Las Vegas, NV.
As the plates became empty, the stomachs full, and the murmured hum quieted enough to hear a pin fall, Michael Knight, Senior Vice President of TTI Americas took to the stage to deliver company trends and his industry outlook.
Knight didn’t beat around the bush. “What the heck happened in 2012?” he asked. “It was a very ‘interesting’ year, that’s the most polite word that I can use as our industry went sideways despite GDP growth around the world – and sideways was a dream for some people.”
According to Knight, the industry witnessed zero growth in electronic equipment production (EEP), the second year in a row of negative EEP in the United States. Equally disappointing was the predicted strong second half in 2012 that didn’t materialize. Not too grim until you consider the prediction for 2013 … a “strong second half”.
Component factory lead times may have remained low and stable, but according to a Gallup Poll, consumer confidence in the economy is low: a mere 18% of respondants rate the economy as excellent or good, while 35% see it as poor. However, Knight said, those numbers are trending up.
Things are getting better for 42% of the population, but 52% see things as “getting worse,” and 30% of people are simply satisfied with the way things are going in the U.S. The glass isn’t half full, but at least there is still some beverage remaining in the container.
“Book to bills is strong all over,” Knight said. “The uncertainty of the elections and tax policy is behind us and we’re all hopping companies will start investing in their growth.”
Knight added that some GDP growth is predicted for 2013 and 2014, and the semiconductor industry can expect an “okay” year after its 2.6% decline in 2012.
Now, more of the troubling:
- The Eurozone is not out of the recession and will continue to be so through 2013.
- U.S electronic equipment orders are at their lowest point since 2000, and falling.
- Job growth is slowing and indicators are foreshadowing a weaker second half.
- According to Alan Beaulieu of ITR Economics, who has a historical 95% accuracy, a mild U.S. recession is predicted in 2014.
- TTI’s average selling price has dropped 8% since 2011, but average pieces shipped, per day, is up 9%. “We got caught up in this race to the bottom that our competitors seemed bent on. Now we are concentrating on higher margin customers,” said Knight.
Challenges to the Business
The Internet, or “The Great Leveler” as Knight sees it, allows customers to shop TTI’s business, all the time. “One of the things that you will notice on the internet is that web resales are all over the internet,” Knight said. “Web resale guidelines would help, and I’m encouraging our partners to consider web resales, because they are not our friend at the moment.”
Another stressor piling on to distributors comes from Wall Street, which is placing pressure on public companies that are not experiencing growth. According to Knight, public companies are under much more pressure to grow, as well as pressure to grab market share, which has caused companies to capitalize on price. Essentially, public companies have two levers they can pull: inventory and people. This trend has forced a lot of good people within the industry to fall along the wayside.
Filed Under: Rapid prototyping