Issue link: https://iconnect007.uberflip.com/i/1473479
JULY 2022 I PCB007 MAGAZINE 13 DuBravac: Yes, at least initially, that's what it looks like. Now, the Catch-22 would be part shortages. If I can't get certain things, if I know that I've got a six-month wait on cer- tain key components, then I may wait on PCB orders. So, I think if you look at our book- to-bill numbers over the last few months, when order flow seems to ebb a little bit, I think some of that is EMS companies saying, "I'm not going to order right now because I can't get these other three things that I need to get. I need all my components to come in." e economics are such that they need it all to come in the back door at the same time. ey don't want to be holding inventory. ey can't carry it. Right now, everything is fine with bank lend- ing and lines of credit, but it's an important area to watch. Managing the cash flows is what a lot of businesses are doing. It's almost like the manufacturing is second to making sure you've got cash flow to cover it. My sense is that order flow has been a result of part shortages and lon- ger lead times. Some of that will probably con- tinue. A big risk factor is China's zero COVID policy. Even though Shanghai and other areas were shut down for nearly two months, the ports did okay. ere were definite delays, but not as severe as it could have been. It could have been really bad if things were shut down for many months. Let me address the auto industry, which is significantly under-inventoried. at won't change this year, and the auto sector will be working to get back into what they would con- sider a healthy inventory position for much of 2023. Obviously, the different segments of the electronics supply chain have unique dynamics at play. For example, when it comes to the auto sector, anything in the electric vehicle supply chain is in high demand. EVs are essentially oversubscribed and sold out everywhere. Even a recession is unlikely to dent that category. ere is pent-up demand because auto man- ufacturers aren't dedicating as much capacity to EVs as there is demand for that segment. Johnson: Shawn, do you see this as an opportu- nity to be investing in capacity? DuBravac: e great challenge with investing in additional capacity is the amount of uncer- tainty around future demand. at's what holds companies off from really building out greater capacity. Some companies, like TTM which recently announced a new facility in Malaysia, are making the commitment to build out capacity. Other companies are strategically adding capacity as well, especially where it looks like a very long season of demand—EVs, for example, if you were doing anything in that space, then you have some assurance. ere's a lot of momentum suggesting that adding capacity now will just be the start of capacity coming on in this space. For others, though, it's challenging to add capacity when there's uncertainty about future demand. Johnson: Such as looking at your supply chain. You can add the capacity, but will you be able to get the incoming components you need to make it work, for example? DuBravac: Definitely. ere are a lot of chal- lenges when we think about adding capacity. Adding more physical assets is just a piece of it; labor is another. Labor costs are definitely a constraint on adding capacity. If I need more workers, can I find and retain them? Can I deploy that capital in a very productive way? Johnson: With everything going on, is now The great challenge with investing in additional capacity is the amount of uncertainty around future demand.