Issue link: https://iconnect007.uberflip.com/i/1531014
18 SMT007 MAGAZINE I JANUARY 2025 We work to give the industry a voice. at's really the value and, ultimately, why people work with us. We add value in the bottom-up analysis. I maintain a network of people across the supply chains whom I've cultivated over the years. We have frank discussions about what's going on with the market drivers: book- ings, billings, lead times, and pricing invento- ries. With those, you can figure out what's hap- pening in the industry. So, when we look at the top down and the bottom up, we can identify when the business inflects in either direction— positive or negative. ere could be tiny inflec- tions here and there, of course. Dennis, what are some key issues our readers should pay attention to in 2025? Reed: e first thing is the change in the administration. What will that mean from a tariff standpoint? With respect to assembly, I don't have a great answer. ere is a cyclical- ity: Inventory is ongoing, and that matters. But there are some unknowns within that cyclical- ity. We know the numbers for inventory, but we don't have a handle on how much actual demand was pulled forward during the short- age years. e next issue is about spending. I recently read that, collectively, governments world- wide—among interest rates, fiscal policy, stim- ulus, you name it—spent more, when adjusted for inflation, on COVID than they did on World Wars I and II combined. Assuming that's right, the challenges during COVID were the same in all markets. Your fac- tory was shut down, and then told to reopen, but there was a labor shortage. At the same time, you might have decided to pull forward the spend on, say, HVAC upgrades to get better filtration, and an automation project because we all need to social distance our workers. It's hard to draw a line from point A to point B linking these expenditures, but it's something to really think about: What is the real demand through the cycle? I don't think people have a good answer. ird, you should be thinking about near- shoring and the relationships between China and the West. If you plot foreign direct invest- ment into China over a 20-year window on one axis, and on the other axis you plot the Fed funds rate in the U.S., one line goes up and to the right; the other goes down and to the le. When I look at some of that data, it feels like we're in a once-in-a-generation deflation- ary environment that has kept global inter- est rates extremely low. Now, what will hap- pen with China's interest rates? Best case is an inflationary environment inside China. Worst case, China closes off to the West. Either is a distinctly different kind of cost curve than in the past 20 years. The last trend is about industr y competi- tion in general. This shortage laid bare some of the challenges of the supply chain. We'll see how short our memories are, but there is a push to qualify multiple suppliers wher- ever possible. There will be more competi- tion from other suppliers. Mark Wolfe: ere's also the "true demand" conversation. EMS companies tell me that for many of their OEM customers the solution to allocation was to double the order quantities: If you're getting half of what you order, order double. ere was a lot of that. e component providers tried to limit that, but desperate Dennis Reed