Tech Recovery Has Been Around for a While

September's book-to-bill ratio for North American board makers was 1.15 (meaning for every $100 billed, $115 worth of orders were taken), the seventh month this year that the closely watched ratio has been above 1.0, according to the IPC, a trade association. Because circuit boards are the building blocks for many electronic devices, orders for them are considered a leading indicator of demand for electronic goods of many types.

Walter Custer, a Sea Ranch, Calif.-based consultant and analyst, noted that demand for flexible boards, used in a variety of handheld devices and military electronics, increased nearly nine times faster than demand for the rigid boards used in larger products. The smaller boards, however, represent less than 15% of all boards shipped.

Nearly all of the printed circuit boards produced in North America are used in relatively high-end products, such as routers, pricier computers and servers, medical equipment and military applications, while boards for PCs and cell phones are generally made in Asia.

Orders for boards in Taiwan this year will reach about $3.9 billion, up from $3.6 billion last year, said Custer, who tracks the island's nine large publicly traded printed circuit board makers. Unit growth is probably much larger, but price cutting, a problem for the entire industry, held down the dollar growth.

David MacGregor, an analyst with Longbow Research, regularly surveys board makers. "September marks the third consecutive month of improving business conditions and conclusively sets aside any lingering speculation that this recovery is not for real," he wrote in a note to clients. However, he also noted that there are signs of double ordering by large manufacturers seeking to assure adequate supplies of boards, and that could be inflating demand.

The good news on the demand side won't necessarily translate into good news on the earnings side for component suppliers and contract manufacturers. Pricing is still very competitive and is holding down gross margins, said Deutsche Bank analyst Chris Whitmore.