Electronics Industry Update

End-market demand in the U.S. electronics manufacturing sector remains strong. The Commerce Department reports that the dollar value of shipments from the computer industry rose 7.8% between December 1996 and December 1997, while shipments from the communications equipment sector grew by 10.9%. Electronic components shipments rose by 12.7% over the same period of time, but there were signs that this growth was slowing during the final months of last year. Some of this slowing can undoubtedly be attributed to continued price pressures on semiconductors. Overall semiconductor sales totaled $11.95 billion during December, up almost 5% from the November level. However, this was only 2.3% above the December 1996 sales total and represented the smallest year-over-year sales improvement since April. It is apparent that although unit sales are holding up well, downward price pressures continue to affect both memory chips and -- to an increasing degree -- microprocessors. As 1997 came to a close, it was clear that growth momentum was beginning to slow in all corners of the world. Our current forecasts anticipate waning growth during 1998, particularly in the Japan and other Asia/Pacific markets, but we look for a solid rebound during 1999.

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