Issue link: https://iconnect007.uberflip.com/i/1069358
28 PCB007 MAGAZINE I JANUARY 2019 industry for 20, 30, or 40 years and say this is the most disruptive they've seen it happen at a time when there's a great expansion going on in the industry. So, it's not only that there's a disruption in components, but there's also a greater demand for it, which is why it's hitting too hard right now. The bellwether for me on if it's long term or not is with the component manufacturers. And what is short term? Is it one to two years, six months, or something else? I don't know, but that's really the bellwether. Since we sell into many different industries, we get a very good cross-section of where demand comes from. Is it coming from the actual equipment manufacturers? Some of the equipment manufacturers that we deal with have to do with the circuit board population. When we see orders going up in that area, we tend to think that there's going to be an expansion in the industry. For example, if someone like Universal Instruments increases their purchases, you expect that there would be an upswing in the market because they're anticipating more machinery to be sold, more circuit boards to be built, and more production. Meanwhile, if you go back a step further and look at the component industry, from what I understand, they're not expanding their capacity at the moment. One side thinks that it's not going to last long, but from my side, there's turmoil in the market, which does not lend fuel to a growing market. I think we're starting to see some ups and downs on Wall Street, and the effects of tariffs on component lead times. It makes for a lot of uncertainty in the general marketplace. Overall, I think it's going to affect it in a negative manner. Does that slow the economy or the stock market down? That's yet to be seen, but it certainly leads me to believe that that's the direction it's going. Johnson: We're hearing in the industry is that the three major drivers to this supply shortage for parts are cellphones and telecommunications, automotive, and aerospace. Antal: Generally, we see a lot of larger companies moving their production out of the U.S. I've been hunting for customers— some of them are the largest customers in our industry—and I'm hearing across the board they're moving their production to Mexico. My guess is they've done the calculation and have figured out it's cheaper to bring in assemblies from outside depending on the industry. It's cheaper for them to bring the assemblies and then get tariffed as they come in based on what their demand is, whether they have them assembled here or shipped out of the U.S. to other regions of North America, Central America, or elsewhere. It's a disturbing trend because, from our government standpoint, that was not the intention of putting tariffs on or any of this other stuff; it's having an opposite effect. Johnson: To clarify, it sounds to me like you're saying that for electronic manufacturers, by placing tariffs on things inbound to the U.S. and now facing tariffs on exports—retaliatory tariffs, if you will—part of the math is to determine how steep the tariff is in the target country you'll ship to from the U.S. Now, OEMs have to calculate both tariffs, and figure out how to stage up their final assembly to minimize the impact? Antal: What I'm saying is that from the larger companies, they don't sell 100% of their product into the United States, so if they bring components into the U.S. and pay a So, it's not only that there's a disruption in components, but there's also a greater demand for it, which is why it's hitting too hard right now.