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U.S. Circuit Board & Electronic Component Manufacturing Report
Date:2014-2-25 19:27:51

The Circuit Board and Electronic Component Manufacturing industry produces inputs such as capacitors and transistors, which are essential in the downstream production of consumer electronics. As such, demand for industry products is often tied to production levels and demand in downstream industries. 

Although economic recovery has improved demand for consumer electronics in the five years to 2014, industry revenue has declined due to rising import competition and greater offshoring activity. Industry manufacturers have followed their downstream customers to countries that offer more competitive labor costs, resulting in lower domestic production. Additionally, lower-cost imports have increasingly penetrated the market, forcing down the prices of industry products and further diminishing the industry's domestic market presence. Despite revenue declines in almost every year of the five years to 2014, robust growth in 2010, due to a rebound in demand, led to an expected average annual growth of 1.6%; however, revenue is still expected to decline 2.7% in 2014, hitting $43.9 billion.

According to IBISWorld Industry Analyst Darryle Ulama, “Following a trend in technology manufacturing, the industry has shifted production to overseas plants that offer more competitive labor costs and house client industries in electronics manufacturing.” In the five years to 2014, manufacturers that remain active in the US increasingly compete with imports from producers with lower production costs, allowing them to sell lower-priced products. In addition, an appreciating dollar since 2012 has further encouraged the entrance of imports and threatened the industry's export segment. By 2014, imports are expected to satisfy 58.1% of domestic demand, indicating its strong market position against the industry.

Similar trends are expected in the five years to 2019, as manufacturers continue to relocate abroad and a strong dollar encourages greater import volumes. “Although demand for industry products will remain strong, mirroring demand for consumer electronics, manufacturers are expected to lower their prices to remain competitive against foreign producers,” says Ulama. Thus, industry operators will face a moderate decline in profit during this period. Meanwhile, a strong dollar will further encourage imports and burden the industry's export segment. These trends will encourage industry firms to exit or relocate over this period. Lower domestic production will translate into tepid revenue growth.

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