Business Outlook Global Electronics Industry (with emphasis on - PowerPoint PPT Presentation

Business Outlook Global Electronics Industry (with emphasis on Europe) Custer Consulting Group www.custerconsulting.com February 2019

On the Internet no one knows Custer I am a dog Presentation Walt given by Alun

Brace yourself for some sobering news

2019 Situation Global manufacturing growth is slowing based on PMI data. Most sectors of the world electronic supply chain are now expanding slower or contracting. Inflation, tariffs, trade disputes and Brexit are key issues Geopolitical concerns remain very significant. European electronics sectors except instruments, medical electronics & aerospace declined in 4Q’18

20190213 Industrial Production – Europe Manufacturing Index (2015 Avg. Month = 100, Seasonally Adjusted) Index 140 Eur28 Germany France Italy UK 130 120 110 100 90 Slowing 80 Industrial Production 70 Jan/05 Jul/05 Jan/06 Jul/06 Jan/07 Jul/07 Jan/08 Jul/08 Jan/09 Jul/09 Jan/10 Jul/10 Jan/11 Jul/11 Jan/12 Jul/12 Jan/13 Jul/13 Jan/14 Jul/14 Jan/15 Jul/15 Jan/16 Jul/16 Jan/17 Jul/17 Jan/18 Jul/18 Jan/19 Eurostat

Purchasing Managers Indices Useful but Sobering Leading Indicators

20190203 Global "Purchasing Managers" Index Diffusion Index, >50 = Growth 60 Expansion 55 50 Contraction PMI 45 40 35 30 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Markit Economics

20190203 Eurozone Manufacturing "Purchasing Managers" Index Diffusion Index, >50 = Growth 65 60 55 50 PMI 45 40 35 30 Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Feb 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Markit Economics

European Purchasing Managers' Indices January 2019 vs December 2018 20190203 51,4 Europe 50,5 51,5 Germany 49,7 54,2 UK 52,8 49,7 France 51,2 Above 50 = Growth 49,2 Italy 47,8 Below 50 = Contraction 51,1 Spain 52,4 51,5 Sweden December 51,8 49,7 Czech 49,0 January 51,7 Russia 50,9 46,0 48,0 50,0 52,0 54,0 56,0 PMI Markit Economics

Electronic Equipment World

World Electronic Equipment Production By Type 20190208 4Q’18 Prelim estimate Weighted avg Annual Rate $B (converted @ fluctuating exchange rates) For total El Eq +2.8% 2500 industr+instru gov/mil Computer & Peripherals 2000 automotive consumer Telecom/Datacom 1500 Business 1000 500 0 Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Two Measures of Electronic Equipment Growth Composite company sales by sector from quarterly financial reports Monthly regional data

20190208 Electronic Equipment Sales Weighted Average vs. Regional Model @ Fluctuating Exchange Quarterly Revenue Growth 25 20 15 10 % Growth 5 0 -5 -10 Company Composites -15 -20 Regional Data -25 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 213 OEM company sales composite (converted to weighted average by product sector) vs. Regional electronic equipment shipment model

201900214 European Computer, Electronic & Optical Products Production Index (2015=100), Seasonally Adjusted 130 120 110 100 90 80 1 2 3 4 5 6 7 8 9 1011 12 1 2 3 4 5 6 7 8 9 1011 12 1 2 3 4 5 6 7 8 9 10 1112 1 2 3 4 5 6 7 8 9 10 1112 1 2015 2016 2017 2018 2019 Eurostat, C26 category, EU 28 countries

World Electronic Equipment Monthly Shipments 20190213 Converted @ Fluctuating Exchange Rates USA US$ B 120 Europe Japan China 100 Taiwan Korea 80 ROA ROW 60 40 20 0 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Custer Consulting Group

20190213 World Electronic Equipment Monthly Shipments Converted @ Fluctuating Exchange Rates US$ M 220 200 180 160 140 120 December 2018 down 4.3% vs December 2017 and down 2.2% sequentially vs. November 2018 100 80 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Custer Consulting Group

Electronic Supply Chain Growth Europe & World

European Electronic Supply Chain Growth 4Q’17 vs 4Q’18 20190213 -10 -5 0 5 10 Electronic Equipment -1 Instruments & Controls 9 Medical electronics 8 Communication Equipment -7 Domestic Electric Appliances -6 Motor Vehicles -6 Airplane/Aerospace 3 Semiconductors (SIA in euros) 6 Electronic components -6 Electronic components & boards -4 Loaded electronic boards 5 Wiring devices -5 % Change Euro denominated growth rates; Eurostat, SIA & Custer Consulting Group

Global Electronic Supply Chain Growth 4Q'18 vs. 4Q'17 (preliminary) 20190203 -20 -10 0 10 20 30 3 Equip Tot=Weighted avg Electronic Equipment by product sector 4 Military 1 Business & Office 1 Instruments & Controls 6 Medical -4 Communication 7 Internet (Datacom) 10 Computer -9 Data Storage 10 Automotive 1 Consumer 10 SEMI Equip (SEMI) 7 Semiconductors (SIA) 21 Passive Components 0 PCBs 6 Large EMS (excl Foxconn) 7 ODM -2 Process Equipment 0 Materials -5 Rigid & Flex Laminate % US$ Change US$ equivalent at fluctuating exchange; based upon industry composites including acquisitions

Markets of European Focus

Automotive Equipment Suppliers 20190208 Composite of 15 Public Companies Revenue, Net Income & Inventory $ Billions 140,0 Revenue +9.9% Income 120,0 Inventory 100,0 80,0 60,0 40,0 20,0 0,0 -20,0 Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Autoliv, Borg Warner, Continental AG, Delphi, Denso, Federal Mogul, Gentex, Hella, Johnson Controls, Lear, Magna, TRW Automotive, Valeo, Visteon, ZF Friedrichshafen

20190213 European Motor Vehicle Production Index (2015=100), Seasonally Adjusted 120 110 100 90 80 70 60 50 40 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Eurostat, C291 category, EU 27 countries

20190202 Military & Aerospace Composite of 22 Public Companies Revenue, Net Income & Inventory $ Billions 180 -0.7% Millions 160 Revenue 140 Income 120 Inventory 100 80 60 40 20 0 -20 Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Boeing, Bombadier, EADS (Airbus), Finmeccinica,General Dynamics, Halliburton, Harris, Honeywell (military portion), L-3 Communications, Lockheed, Moog, Northrop Grumman, Raytheon, Rockwell Collins, Textron, Thales, United Technology

European Production - Aircraft, Spacecraft & Related Equipment 20190213 Index (2015=100), Seasonally Adjusted 120 110 100 90 80 70 60 50 40 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Eurostat, C303 category, EU 27 countries

Instruments & Control Equipment 20190208 Composite of 16 Public Companies Revenue, Net Income & Inventory $ Billions 60 Millions -1.1% Revenue 50 Income 40 Inventory 30 20 10 0 -10 Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ABB, Agilent, Ametek, Emerson, Itron, Keysight, National Instruments, PerkinElmer, Rockwell Automation, Rotork, Teledyne, ThermoFisher, Woodward Govenor

20190213 European Production - Instruments & Appliances for Measuring, Testing & Navigation Index (2015=100), Seasonally Adjusted 130 120 110 100 90 80 70 60 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 4 9 2 7 12 5 10 3 8 1 6 11 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Eurostat, C2651 category, EU 27 countries