The global economic downturn continued into 2023 and its effects were felt by Taiwanese PCB makers. The combined domestic and overseas output in Q1 was 181.8 billion NTD, a decline of 15.4% year-on-year (YoY). The main reason for this was the relatively strong base period last year due to the pandemic and semiconductor bonuses (up to 20.8% YoY). This year, a multitude of factors, including a correction in the global economy, high inventory levels, and weak end-user demand, all contributed to the downward trend in business revenues.
        In terms of PCB applications for Q1, consumer electronics saw a shrunk in demand from non-essential spending on appliances, wearable devices, and audio-visual entertainment products. A drop in iPhone sales, in particular, weighed on the revenues of associated vendors. However, network communication products bucked the trend due to strong demand from telecommunications infrastructure and satellite communications. The lifting of global pandemic lockdowns led to a steep decline in PC and notebook sales. Aggressive cost-cutting by businesses also impacted server spending. Automotive sales were a highlight of this quarter. Electric vehicles (EV) and autotronics are expected to drive the steady growth of related PCB sectors.
        Analysis of Taiwanese PCB product structure found that even IC carriers were not immune to the downturn in demand despite 12 consecutive quarters of growth. 2023 Q1 saw a 13.2% YoY decline and Q2 is looking less than promising based on the overall outlook of the semiconductor industry. In Flex PCB, even though the automotive sector put on a strong performance in Q1, weak demand in key applications such as smartphones and notebooks meant that the decline in Flex PCB increased from 8.5% in Q4 last year to 13.4% in Q1 this year. Even though Q2 has traditionally been the off-season for Flex PCB, a mild recovery in computer-related applications may compensate for the slump in smartphones.
        Growth in Multilayer PCB began showing signs of slowing in Q3 last year, making it one of the earliest PCB products to be affected by the economic downturn. The decline had exceeded two digits (13.5% and 14.0%) for two consecutive quarters, so overall demand is still bottomed out. On the other hand, a recovery in demand from automotive and network communications and restocking inventories by notebook channels may all boost the business performance of Multilayer PCB vendors. A reduction in the magnitude of decline may therefore be seen in Q2. HDI is widely used in all types of applications. Despite a relatively strong performance in automotive applications in this sector, this was insufficient to overcome the two-digit decline in consumer electronics such as smartphones, notebooks and wearable devices. HDI, therefore, saw its decline in output increase to 16.4%.
        The overall economy has a high level of uncertainty due to factors such as high inflation and high interest rate. Supply chains are therefore continuing to be conservative in their stocking strategy, with most turning to rush and short orders. Order visibility remains uncertain and the impact can already be seen in this quarter. In terms of future development, a recovery in end-user demand and speed of destocking is critical to industry output. Growth is expected in automotive and network communication products, but consumer products may remain weak if no innovative applications should emerge. In terms of destocking, restocking end-user inventories on computer products is having an impact. However, destocking smartphones will still take time, and this should help re-ignite demand for PCB-related products such as smartphones. IC carriers are closely linked to semiconductors, so weak consumer demand will impact their destocking time. Taiwanese PCB makers are therefore expected to see a decline of 13.4% in global output in Q2. The total output in NTD for 2023 is expected to decline by 6.2% (or 8.2% if using USD). Hopefully, a recovery in consumer demand in the second half of the year will help the PCB industry return to the offensive again.