The cable assembly industry has rebounded after a challenging pandemic year. Every market depends on these critical connectivity components, but some headwinds remain in the complex global electronics industry.
2020 was a surreal year in many ways. In the cable assembly industry, it started with modest expectations for growth. The overall U.S. economy was headed for solid growth. Job numbers and income growth were hitting record numbers. The U.S. stock markets were going gangbusters. And then COVID-19 hit and, within days in March, the economies of the world shut down. At Bishop & Associates, we grappled with the new challenges in predicting the financial impact this black swan event portended for the electronics industry. In our initial reaction, we estimated that the cable assembly industry would lose at least 30% of its sales value in 2020. Fortunately, the industry proved to be much more resilient than those initial prognostications. At the end of 2020, the industry was only down 2.7% from the prior year.
The cable assembly industry ended 2020 with sales of $161 billion. All world regions experienced a downturn — except China, which grew 3.7% year over year (YOY). Europe was down 5.8%, North America was down 3.3%, Asia Pacific decreased 4.4%, rest of world (ROW) was down 7.0%, and Japan was down 9.8%.
In 2021, the cable assembly industry has already seen significant growth. In the first quarter of 2021, sales are up over 20% over the previous year. A good part of this growth is due to the easy comparison from 2020.
In 2021, North America is projected to grow 6.2%, Europe and Japan will increase 5.3% each, China will grow 9.9%, Asia Pacific will increase 5.4%, and ROW will go up 4.6%.
The cable assembly market is expected to grow at a compound annual rate of 5.9% over the next five years. Some tailwinds in 2021 include:
- The financial markets in the U.S. have come back strongly in 2021 despite some volatility.
- The gross domestic products of most major economies demonstrated growth again in the first quarter of 2021, after losing ground in 2020.
- The vaccine rollouts, for the most part, are on track and slowing the spread of COVID-19 in countries that have sufficient access to them.
- The U.S. housing market, particularly in resale, has been extraordinarily strong.
- Unemployment rates are coming down as global economies reopen.
Some headwinds the electronics industry faces:
- Semiconductor products are in short supply as the industry diverted their production during the pandemic to other uses. Most notably, this has left the automotive industry unable to ship cars. The automotive market sector is the largest sector in the cable assembly industry.
- Due to the downturn in air travel, we expect that the production of commercial aircraft will be down in 2021 and 2022.
- COVID-19 variants are emerging in several countries, disrupting economies and prolonging the pandemic. India, Brazil, South Africa, and the U.K. are facing particular difficulties.
- Geopolitical instabilities are simmering between China and Taiwan, Iran and Israel, Russia and Ukraine, and the U.K. and Europe (Brexit), to name a few.
Given the vast amounts of money being pumped into the economy by the United States, Europe, and China, however, we anticipate a relatively quick recovery. A few thoughts about the industry going forward:
The current economic trends impacting each region — both the good and the bad — are likely to fluctuate significantly over the next few years as the world adjusts to the new normal of COVID-19. Many of the pre-pandemic economic conditions, however, will still exist. China, well into its industrial expansion, will still be adjusting to having a middle class with a higher standard of living and a collective desire for more modern goods and services. The U.K. and Europe will still be adjusting to Brexit, and Europe will still be dealing with their sovereign debt crisis.
The shift of industrial output from the advanced economies to the emerging/developing economies is slowing. For the most part, this trend seems to have run its course. Certain industries will always remain local and their subcontract business (i.e., cable assemblies for automotive) will remain with them. Other industries have finished transferring business between regions. China’s increasing share of the cable assembly market will increasingly be a result of demand in its domestic market.
China has become more aggressive in overseeing and controlling international as well as domestic companies. Companies with operations in China have come under increasing control by the centralized government. This will probably change how other countries (and global companies) deal with China.
To see detailed facts and figures related to the cable assembly industry’s performance in 2020 and anticipated forecast for 2021, see the new Bishop & Associates 2021 World Cable Assembly Market, a 17-chapter, 200-page report which provides a detailed analysis in U.S. dollars for the years 2020 through 2026, by region, end-use equipment sector, and cable assembly type. This comprehensive analysis is provided numerically and graphically, allowing the reader to easily view and understand upcoming trends.
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