Connector industry revenue increased about 35 percent through August compared to the same period in 2009 because of strong demand and firming prices across many customer segments. However, the growth rate is slowing in the fourth quarter and revenue growth in 2011 will be in the single digits, according to connector industry research firm Bishop and Associates.

Through the first half of this year, connector sales increased 37.5 percent compared to the first half of 2009 to $21.2 billion. For the year, connector revenue will grow 29.4 percent globally to nearly $43 billion, according to Bishop and Associates.

"There has been across-the-board growth, but the segments that have been performing the best year-over-year are the ones that were hit hardest last year," said Ron Bishop, president of Bishop and Associates, based in Wheaton, IL. "Transportation (non-automotive), automotive and industrial were decimated last year." However, in 2010 there has been a 180-degree turn in connector demand and sales.

Automotive is up in the 50 percent range; transportation, 35-40 percent; industrial is in the 30's and computers are up over 20 percent. Military is growing more modestly in the mid-single digits, said Bishop.

The bad news for connector manufacturers is that demand is starting to soften. "But it is a modest slowdown and no one is overly concerned about it, although they are watching it," Bishop reported. The fourth quarter of 2011 could be flat compared to the third quarter.

Bishop said the first half of 2011 will be challenging, but business will improve in the second half and there should be 6 percent growth for 2011.

Lead times stretched and connector suppliers tried to implement price increases. "Actually in the connector industry, firming is a better word than increase because OEMs and contract manufacturers have so much clout in the component business, so it's really hard to implement across the board price increases," said Bishop. However, it is a different story with distributors.

"Typically what happens is connector companies will go for a 4-5 percent rate hike with distribution.

"Some of that sticks because distributors can pass it along to many smaller customers," said Bishop. "This year, with demand being strong, connector suppliers have been fighting for price increases rather than fighting to prevent price decreases."

Global connector industry revenue will increase 29.4% in 2010.

The overall forecast for this year is 29.4 percent for this year and 6.3 percent in 2011. That's welcome news to connector suppliers and a far cry from 2009 when connector sales dropped 21.8 percent to $34.3 billion.

Wild swings

Because of higher raw materials prices, "we have been forced to pass some price increases on to customers," says Bavo Teunissen, global marketing communications director for FCI.Bavo Teunissen, global marketing communications director for FCI, said the connector business over the past year swung wildly. "We had seen a tremendous drop in connector demand, but then a tremendous backswing," said Teunissen.

Teunissen said the worst part of the downturn was in January of 2009. "The swing upwards came at the end of last year and early this year. Growth was strong in the first half, but is now leveling off," he stated.

Karen Claybaugh, national distributor sales manager for Hirose Electric USA, agreed but said while purchase orders by distributors have leveled off, point of sales (POS) demand from customers continues to grow.

Claybaugh said that connector demand picked in January and February when "huge stocking orders started coming in from distributors. Distributors had stocked up tremendously and now they don't need to do that. In fact, they overstocked a little and are adjusting, but POS continues to see good growth."

Rob Poort, business line director for FCI, said the recovery kicked in at a faster pace than the crisis did and now connector demand is at pre-downturn levels. "It is continuing at these levels, even if it has leveled off."

While connector demand has been strong across most customer segments, some suppliers say business has been better in some segments than others. Claybaugh said while growth has occurred across the board, "we have been focusing on medical and industrial and high-speed connectors. We are seeing good growth there."

Teunissen said smartphones, alternative energy, smart metering and consumer electronics were strong for FCI in terms of connector demand in 2010.

Teunissen said smartphones are helping drive connector sales. He noted that even during the recession, sales of smartphones grew. "People continued to buy iPhones, BlackBerrys and other smartphones. Smartphones drive backplane and I/O products." said Teunissen.

Teunissen added that during this year, demand for photo-voltaic connectors "was going through the roof" and there was "strong demand for connectors used in measuring and control equipment."

Poort said smart meters are also driving connector sales. Many utilities are installing smart meters to manage and monitor electricity use and such equipment uses connectors.

Longer lead times

"It is fair to say lead times doubled. Some connectors went from two to four weeks, while others went from 16 to 25 weeks," says Rob Poort, business line director for FCI.Teunissen said the downturn and the quick upturn had a big impact on the connector industry. Suppliers cut back production or moved production into lower cost regions. When demand came back, lead times for many products stretched, which usually happens in a recovery.

"It is fair to say lead times doubled," said Poort. "Some connectors went from two to four weeks, which is acceptable, while others went from 16 to 25 weeks," he added.

There also have been increases in pricing for some products. Suppliers reported that there have been increases in raw materials prices such as gold, copper and palladium. "For some products that have a higher material content, we have been forced to pass some price increases on to customers," said Teunissen.

Claybaugh said prices have been mostly stable overall. "We have not passed on any across the board price increases. There is a competitive nature out there, but we have not seen price erosion either."

While connector demand may be leveling off in the fourth quarter, suppliers see growth for 2011. Demand in 2011 will be weaker than in 2010, but there should be mid-single digit growth, said Teunissen.

Claybaugh also expects growth to continue in 2011. "At this point I don't see any real softening in the market. We are seeing purchases slow because of an inventory adjustment, but we predict a strengthening in the first quarter of 2011."