U.S. Electronics Manufacturing Metrics:
Building Blocks for a Roadmap
By John MacWilliams, Bishop & Associates inc.

Many organizations, including this one, do market forecasts. These forecasts are based on many different inputs and check points: data from manufacturers, analyses of equipment content, company financial statements, and data from other independent forecasters in the marketplace. Reliable market statistics provide one of the foundations upon which long-range forecasts are made.

Globalization of the electronics industry and supply chain have made the forecasting task more difficult. A component part may be manufactured in one country and assembled into equipment in another. Equipment subsystems may come from around the world, but the equipment is assembled, shipped, and billed from one location—or multiple locations. Some equipment, described as a domestic shipment, in actuality only had its final assembly or software installed in the U.S. Thus, reports on equipment sales are typically “consumption” numbers, i.e. where equipment is sold. A PC sold in the U.S. may be composed of a motherboard assembled in China from a bare board made in Taiwan, with component parts coming from Japan, Singapore, the U.S., China, Malaysia, and elsewhere.

To be certain of a market, one would need to have accurate data from all manufacturers—and from governments around the world. Neither is possible, as most manufacturers do not publicize where equipment is made. So, we are left with a patchwork of data, hopefully cross-checked with other inputs, to zero in on the actual size of the marketplace. In the U.S., the Department of Commerce and its Census Bureau maintain statistics on just about everything, including U.S. manufacturing. It does so with a large number of product codes, called NAICS (North American Industry Classification System). The NAICS database is huge, but with a bit of work you can find information on almost any product or thing. However, government data has several problems:

• It is bureaucratic—to a great extent, due to necessity.

• The database is huge, in some cases, unfamiliar terminology is used.

• The government keeps data on things that are essentially obsolete, such as vacuum tubes, sliderules, etc.

• Massive amounts of data are collected from thousands of manufacturing establishments; therefore, the process is painful.

• The data is only as good as what is reported by manufacturers.

• Typically, annual reports are one to two years behind the current year, even with the best procedures and equipment.

• The data is not necessarily an accurate indicator of a dynamic, global marketplace.

• In some instances, where a company has a large market share, some data might need to be hidden.

• There are difficulties tracking parts assembled offshore, but included in domestic shipments of equipment.

Domestic organizations want to maximize their penetration of shrinking domestic markets as more manufacturing goes offshore and foreign markets grow more rapidly. This can mean turning over every “rock” to find morsels of domestic business that were previously ignored. Thus, domestic government data can be of value. For international organizations, the data is one input to gauge the global marketplace, an indicator of foreign trade statistics, and one piece of the forecasting puzzle.

I have spent a fair amount of time looking at this data off and on, and here’s my input: Unless you do it regularly, it’s like having to drop breadcrumbs to find your way back to where you were a year ago. (You may also know that story about coffee breaks…). The hardest part is getting to the right place on the Census website to find the data you are looking for—or, stumbling onto data you weren’t looking for, and didn’t know existed. It is sort of like surfing the web for peanut butter and ending up buying an aquarium.

For electronic products, the top NAICS number is 334: Computer and Electronic Product Manufacturing. There is a hierarchy from that point down, slicing through the strata of the industry, from equipment to components to parts. Examples:

And of course, there’s more. In fact, the Census Bureau maintains factory shipments, and import and export data on all product categories. Some data is compiled on a monthly basis, others are complied quarterly or annually. The Census Guide to Data Sources gives an in-depth look at what is available monthly, quarterly, and annually.

Detailed annual shipments data by product category is shown at 2009 Annual Survey of Manufacturers (release date: 12.3.2010), Sector 31: Annual Survey of Manufacturers; Value of Products Shipments; Value of Shipments for Product Classes: 2009 and 2008. Scroll down to NAICS 334 (An Excel spreadsheet is available for download.).

Here is some selected data for 2008 and 2009 (last annual data available):

Census also has significant international trade statistics by NAICS product codes. For example, shown below are year-ending 2010 trade data for Computers and Electronic Products (334) and Electronic Connectors (33441), including major country trading partners:

International Trade 2010: Computers and Electronic Products and Electronic Connectors

Details on this data can be located online, enter 334 and 334417 from the dropdown windows; enter “World” from the dropdown window. There are numerous other reports available online from the Census Bureau.

Over the past decade, China and other emerging markets have become centers for outsourcing of electronics manufacturing. We will explore government data sources in these regions to see what can be gleaned from their commerce and trade data.

We have also discussed the likelihood that the future vis-à-vis China may be different than this past decade, as costs rise in China and other factors come into play. A recent Wall Street Journal has an interesting article, “Will Costs Drive Firms Home?” (May 5, Marketplace) It discusses findings by the Boston Consulting Groups and the American Chamber of Commerce in China. There is a growing belief that companies will begin to “insource” more business back to the U.S., while these emerging markets will target manufacturing more toward their home market demand. The timeframe for this to happen is over the next five to seven years. So, doting on U.S. trade statistics may become more important in the years ahead.

John MacWilliams Senior Consultant and Analyst, Bishop & Associates Inc. John MacWiIliams has been in the electronics industry for over 40 years. His main areas of experience have included: U.S. competitiveness programs, market research studies, authored articles, field sales and management, product marketing management, strategic marketing, new product planning, venture development, advertising and media relations, direct sales, manufacturers representative, distribution sales management, and international marketing. MacWilliams has worked with AMP, Diceon Electronics, TRW, and IRC in marketing management positions. Prior to joining Bishop & Associates, MacWilliams served as the group director of marketing and new product planning for AMP. MacWilliams graduated from Lehigh University with degrees in business management and engineering.