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May 25, 1987


By CBR Staff Writer

A rather discouraging picture is painted of the state and outlook for the US electronics industry in analysis of first quarter figures from the Commerce Department by the American Electronics Association in Santa Clara, California, which suggests that while sales for the period were up on those for a year ago, orders were down, indicating a flight offshore by US manufacturers, not yet offset by the Japanese moving in. The Association reports that first quarter domestic sales of electronics products and services were $56,100m, 4.5% ahead of 1986 first-period figures, but almost 10% lower than the record 1986 fourth-quarter sales of $61,700m. Fourth-quarter sales are of course traditionally higher than those for the first three months of the year. The Association estimates that orders for electronic goods and services placed during the period reached $54,900m, compared with $57,200m in the first quarter of 1986 and $61,400m in the final period of 1986. Commenting on the figures, Association president Richard Iverson notes that The positive sales and orders results we saw for the last quarter of 1986 don’t appear to have established a trend. Although 1987 first-quarter sales were better than those for the 1986 first quarter, the improvement is not supported by comparable increases in new orders. It is probable that we are seeing a continuing shift toward offshore production, which results in improved sales and profits without a corresponding increase in production and new orders for domestic plants. If this type of scenario is protracted, the outlook for domestic employment would be bleak. I feel strongly that the seeming trend to offshore production for our firms is a direct reflection of the recent problems with implementation of the USJapan semiconductor trade agreement. While I don’t suggest that the trade pact and the sanctions that insure its adherence be scrapped, I do feel that our industry and the country will be better off when free market conditions again prevail throughout the world, he concludes. The trend of the quarter is continued in the figures for March alone, which show domestic factory sales at $21,300m, 4% up, but new orders at $20,900m, a 2.3% decline on the figure for the 1986 first quarter.

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