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Molders Economic Index: The global PC market is hot this summer and beyond

While personal computer (PC) sales in the United States are only up by 3%, a combination of aggressive pricing and a hunger for new technology has helped make it one of the hottest segments of the global economy. The United States made up roughly a third of the total PC market in 2000, and as more countries grow their information science infrastructure, the U.S. has dropped to just 21% of the worldwide market. WHERE DO U.S. MOLDERS FIT IN?

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Molders Economic Index: The global PC market is hot this summer and beyond

While personal computer (PC) sales in the United States are only up by 3%, a combination of aggressive pricing and a hunger for new technology has helped make it one of the hottest segments of the global economy. The United States made up roughly a third of the total PC market in 2000, and as more countries grow their information science infrastructure, the U.S. has dropped to just 21% of the worldwide market.


Apart from the macro data, keep in mind that the average production run for new computer housings or keyboards has been reduced to less than 200,000 units. This is a market segment with frequent design changes, since a product that's been out for six months is considered “old.” This benefits molders-such as those in Canada, the United States, and Mexico-who have the skill set to rapidly bring small-run new products to market, and we see a continued and healthy growth in 2008 and beyond for PCs and PC-related equipment.

An additional force that has pushed computer-related molding jobs back into North America is the low value of the dollar. It has become so much more affordable to mold computer parts in North America as compared to old mainstays such as Taiwan, China, Singapore, or South Korea.

Global PC sales shot up 12.3% year-to-year in Q1 2008. South America led the demand with shipments up more than 19%. Western Europe has had solid shipments and has racked up double-digit increases over the same time last year.

South America is the fastest-growing PC market, with 2007 overall sales up 8.9% over the previous year. First-quarter 2008 shipments were up 19.1%, with Peru leading the way in terms of percentage of growth and Brazil heading the top of the list in terms of number of units shipped.

Brazil is the largest market in Latin America and total Brazilian PC shipments rose 38% to 10.7 million units last year, according to research firm IDC in Framingham, MA. Brazil's PC market, which ranked seventh in 2006, is poised to take third place by 2010, behind the U.S. and China.

Argentina has the second-largest information market and it is projected to grow at a compound annual rate of 9% over the 2007-2012 periods.

Colombia has been slow to enter the information age and is rapidly trying to close the gap behind its neighbors. Colombians are expected to invest as much as $2 billion on information products next year and the market is projected to grow at a compound annual growth rate of 11% over the 2007-2012 periods.

Peru and Venezuela currently are smaller PC markets, but according to Business Monitor International, we can expect PC shipments to these nations to expand at a compound annual growth rate of 8% over the 2007-2012 period.

Western Europe experienced a 14.1% growth rate in the PC market in the first quarter of 2008. Germany led the region with the highest growth rate, an increase of 17.4% compared with Q1 2007. Shipments of more than 1.6 [million? Must be.] mobile PCs led the surge, with a 40% increase in volume compared to the previous year. Mobile PCs made up about 57% of total PC shipments. The desktop market dropped 3.3% to approximately 1.25 million units shipped.

PC shipments in the United Kingdom were up 11.2% over the previous year. This represented the sale of 3.1 million units. The mobile PC market soared and more than made up for a 15% decrease in the desktop market. Mobile PCs made up more than 60% of total PC shipments.

France had 2.4 million units shipped in Q1 2008, an increase of 7.9% over the same time the previous year. Here too, demand for mobile PCs increased 26.8%, more than covering the falling desktop market, which dropped 9%. Mobile PCs accounted for 56% of total PC shipments.

If you have any doubts about the export opportunities in today's market, just check out the first quarter numbers from the U.S. Dept. of Commerce: Total exports were up 17% and exported manufactured goods were up 11.10%. While the NAFTA region accounted for the highest dollar amount, it had the slowest growth rate. Look for larger, sustainable growth in South and Central America, Africa, and Europe (see chart for details[?]).


North American consumer spending, already hit hard by the housing slump and the reduced availability of credit, will be hurt further by gas prices.

Morgan Stanley analyst Ole Slorer is predicting that oil will spike to $150/bbl in July before leveling off at a slightly lower price. We expect oil prices to remain high for the foreseeable future for several reasons.

The Central European Bank and Federal Reserve Bank are working at odds with one another. Each is trying to keep fuel costs down in their own realms and have subsequently driven up prices in the other region. Tensions are escalating between Israel and Iran and could erupt into violence, which has speculators driving up prices. As demand has increased in areas such as Malaysia and India, price supports have been eliminated, driving up prices.

We have heard anecdotal reports out of China of gas stations along major highways experiencing shortages that have led to runs on the stations and long gas lines similar to what we saw in the United States in 1973 and 1974. This is not the type of news Beijing wants to hear right before hosting the Olympics.

The word is that the government would like to put a cap on gas prices, but privately-run, for-profit oil companies are not under direct government control. Beijing can try to suppress oil prices by allowing the yuan to rise, but we hope they do not fall to this temptation-and here's why.

An artificially higher yuan could trigger the larger specter of inflation and threaten China's ability to send cheap exports to the United States. That in turn could pump up unemployment, which is a dangerous risk at a time of rising food prices since hunger leads to political instability.


As far as the domestic economy goes, the unemployment rate hit 5.5% in May, a jump of 0.5% over the previous month. This was the biggest jump in more than 22 years. It puts unemployment at a full point over the same time last year. The only bright spot is that teenage workers rather than primary wage earners largely accounted for the bump.

While teenagers account for the largest market in soft goods and entertainment, they account for a small percentage of the durable goods market and historically have been transient workers able to re-enter the workforce faster than primary wage earners.

On the flip side, personal income rose 0.2% in April following a 0.4% rise in March and GDP growth for the first quarter of the year has been revised up to 0.9% quarter-to-quarter, which puts it up 2.5% year-to-year. The growth is small, but it is significant because the longer it lasts, the less likely we are to be headed toward a full-blown, nail-biter recession.

In the housing market, foreclosures are at a record high. Data from the Mortgage Bankers Assn. indicate 2.47% of mortgages were in the process of foreclosure on March 31, up from 2.04% at the end of last year and 1.28% at the end of March 2007. More than a third of these numbers are in California and Florida, which respectively account for 21% and 15% of the entire country's foreclosures. An additional 6.35% of all mortgages were in distress-at least 30 days past due but not yet in the foreclosure process.

Existing home sales fell by 1% in April nationally with the median price dropping by 8% from $212,900 in April 2007 to $202,300 in April 2008. Privately owned housing starts in April were 8.2% above the March numbers, but 30.6% below the April 2007. The National Assn. of Realtors (NAR) is urging Congress to implement a temporary tax credit to move hesitant homebuyers into the market. NAR based its support on the success of a 1975 temporary tax credit designed to “clear an oversupply of newly constructed homes during an economic downturn.”

Productivity was up in Q1 2008 by 2.6%, according to the U.S. Dept. of Labor. Compared to Q1 2007, productivity jumped 3.3%. Part of this rise is due to reduced employment (or hours worked) but it also reflects the benefits of a decade of investment in advanced molding and manufacturing equipment. In plain English, the U.S. is well poised for a substantial manufacturing recovery: Molders can do more with less labor.

The Institute for Supply Management's (ISM) May manufacturing report indicated the fourth consecutive month of decline within the manufacturing community, although its index climbed a full percentage point to 49.6. Using ISM's scale, an index number below 50 indicates contraction while 50 or above indicates growth. New orders were at 49.7 and production at 51.2.


Honda and Kia recorded record U.S. sales in May, but General Motors, Ford, and Chrysler saw domestic sales continue in their downward spiral. GM sales dropped 27.5% in the month led by a 37% slide in the light truck category, which includes SUVs. The numbers led GM to announce the closing of four North American truck plants. The manufacturer is trying to focus on more fuel-efficient models and blames a series of strikes for the 14% drop in auto sales. The automaker believes it could have sold an additional 15,000-18,000 units in this more fuel-efficient category if there had not been production delays.

Despite the drop in sales, GM held on to a 20% market share in U.S. sales of the month. Toyota came in second in market share, with Ford in third place, Honda climbing to fourth, and Chrysler dropping down to fifth.
Toyota saw total sales drop 3% in May, led by a drop in light truck sales. Ironically, Prius sales plummeted 37% because dealers sold out of inventory and could not fill orders. The Prius remains the fastest-growing model in the United States and they are being purchased faster than Toyota can turn them out.

Ford's U.S. sales were down 16% in May. The 3% gain in small cars could not offset the 25% slide in SUV and light truck sales. In one month Ford F Series sales fell more than 30%, knocking it from the number one selling spot down to number three. Ford says Explorer sales slid 41%.

Honda's record-breaking U.S. sales were led by the Civic beating out the Ford F Series pickup to become the nation's best-selling vehicle for the first time.

Chrysler stopped being a “big three” automaker in 2005, but May's domestic sales figures falling by 25% knocked it from the number four spot down to number five. The company attributes the slide to a 40% drop in fleet sale orders, a statistic that left its car sales plummeting even faster than truck sales.

MEI graphs and data:
MEI and Federal Reserve Industrial Production Index
North American Molding Markets
Canada, United States, and Mexico; Major Injection Molding Endmarkets
IM Services and Exports
U.S. Molding Markets
United States; Major Injection Molding Endmarkets
The Import/Export Picture

Author Agostino von Hassell ([email protected]) of The Repton Group LLC (New York, NY) is a regular contributor to IMM.

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