What is the PCB Book-to-Bill Ratio?
The PCB book-to-bill ratio compares the value of orders booked (incoming orders) to the value of orders billed and shipped over a certain timeframe, typically one month. It provides insight into both demand from electronics manufacturing companies and capacity utilization at PCB fabricators.
The ratio is calculated by dividing the value of orders booked by the value of orders billed:
PCB Book-to-Bill = Value of Orders Booked / Value of Orders Billed
A book-to-bill above 1.0 means more orders are being received than filled, indicating rising demand and potential supply constraints. Conversely, a ratio below 1.0 signals slowing demand as more orders are being fulfilled than received.
Latest PCB Book-to-Bill Reaches 34 Month High
According to the latest IPC report, the PCB book-to-bill ratio rose to 1.18 in February 2023, its highest level since April 2020. The ratio has been above parity for 26 consecutive months now, highlighting consistently strong demand for PCBs.
| Month | Book-to-Bill Ratio |
|---|---|
| Feb 2023 | 1.18 |
| Jan 2023 | 1.14 |
| Dec 2022 | 1.11 |
| Nov 2022 | 1.09 |
| Oct 2022 | 1.10 |
| Sept 2022 | 1.08 |
As the table shows, the book-to-bill has climbed steadily over the past 6 months from 1.08 in September 2022 to 1.18 in February 2023. This upward trajectory points to accelerating demand in the PCB market.
IPC, the global association for electronics manufacturing, releases the PCB book-to-bill each month based on data from its member companies. The ratio covers rigid PCBs and flexible circuits, providing a snapshot of overall PCB industry demand in North America.
What’s Driving the High Book-to-Bill?
Several factors are contributing to the elevated PCB book-to-bill ratio:
1. Strong Electronics Demand
Demand for electronic devices, appliances, and vehicles remains robust despite economic headwinds. 5G smartphones, laptops, gaming systems, wearables, smart home devices, and automotive electronics are some of the key end markets driving PCB consumption. The global chip shortage has also led some OEMs to place advance orders and build inventory to avoid supply disruptions.
2. Supply Chain Constraints
While order intake is high, PCB production continues to face supply chain challenges. These include raw material cost increases and limited availability of certain components like Copper Foil and fiberglass. Logistics issues and port congestion also remain headwinds. The constraints are elongating lead times and limiting production capacity.
3. Reshoring and Diversification
The pandemic exposed risks in concentrating too much electronics production in any one region. Many western OEMs are now looking to reshore PCB sourcing and assembly or at least diversify their supplier base to reduce geopolitical and supply chain risk. This is driving more RFQs and orders to North American manufacturers, boosting the book-to-bill.
4. Capacity Investments
To meet rising demand, the PCB industry is investing in new capacity and capabilities. Manufacturers are adding production lines, expanding facilities, and upgrading equipment to improve efficiency and technology offerings like HDI and IC substrates. However, lead times for new equipment are often long, constraining the ability to rapidly scale production in the near-term.
PCB Market Forecast
With the book-to-bill ratio at a multi-year high, the outlook for the PCB industry appears bright. Industry analysts expect demand to remain strong in 2023 driven by new product launches, 5G infrastructure rollout, vehicle electrification, and industrial automation.
However, there are potential headwinds to monitor:
- Inflation and rising interest rates could dampen consumer electronics demand
- A slowdown or recession in major economies would impact electronics consumption
- Geopolitical conflicts and trade wars disrupt supply chains and business confidence
- Easing of the semiconductor shortage could slow the pace of orders as OEMs work off inventory
- New COVID outbreaks and lockdowns in Asia could disrupt production and logistics
Considering these factors, PCB market growth forecasts for 2023 range from 5-12% depending on the product category and region. Higher-value segments like IC substrates, HDI, and rigid-flex are projected to outpace conventional rigid PCBs.
| PCB Product Category | 2023 Projected Growth |
|---|---|
| IC Substrates | 10-12% |
| HDI / mSAP | 8-10% |
| Rigid-Flex | 7-9% |
| Rigid ≥ 6 layers | 5-7% |
| Rigid ≤ 4 layers | 4-5% |
| Other (flex, metal core, etc.) | 3-4% |
Source: Prismark, Yole Intelligence, company reports
Longer-term, the market for PCBs is expected to grow steadily, driven by megatrends like IoT, artificial intelligence, robotics, and sustainability. However, the industry will need to navigate supply chain challenges, material science advances, and geopolitical risks to capitalize on these opportunities.
FAQ
1. What does a PCB book-to-bill ratio above 1.0 indicate?
A book-to-bill ratio above 1.0 means a company or industry is receiving more orders than it is shipping/billing over a certain period of time. It suggests increasing demand relative to current production as order backlog grows. Generally seen as a positive indicator for sales growth.
2. What is a good book-to-bill ratio?
There is no universally “good” book-to-bill ratio as it depends on the context of the specific industry and business cycle. In general, a ratio significantly above 1.0 (e.g. over 1.10) is seen as a strongly positive demand signal. Consistently very high ratios can also highlight capacity constraints. A ratio around 1.0 indicates supply and demand in relative balance.
3. What factors can impact the PCB book-to-bill?
The book-to-bill ratio can be impacted by various factors including:
- Strength of end market demand (e.g. consumer electronics, automotive, industrial)
- Product launches and lifecycle (e.g. new iPhone driving orders)
- Supply chain disruptions and component shortages
- Geopolitical and macroeconomic conditions
- Capacity investments and constraints in the PCB industry
- Customer order patterns and inventory management
4. Are there any limitations to the book-to-bill ratio?
While a useful gauge of directional demand, the book-to-bill does have limitations:
- It is a ratio, so does not reflect the absolute level of orders or shipments
- It can be volatile month-to-month based on order timing from large customers
- It is a backward-looking metric, so turning points can lag inflections in the cycle
- Order bookings don’t always translate to revenue if there are cancellations
- The PCB book-to-bill only covers the Americas, so may not reflect global trends
As such, it’s important to analyze the book-to-bill in conjunction with other data points like absolute order levels, lead times, capacity utilization, and end market indicators to get a full picture of industry conditions.
5. How can I track the PCB book-to-bill ratio?
The monthly PCB book-to-bill ratio for North America is published by IPC, the global electronics manufacturing association. IPC surveys its member companies in the PCB industry to collect order booking and billings data each month. The ratio is typically released in the last week of the following month (e.g. February data released in late March).
Many industry analysts, trade publications, and financial news outlets also report and analyze the data when it is released. Some PCB companies also report their own book-to-bill ratios in quarterly financial disclosures.
Conclusion
The PCB book-to-bill ratio hitting a 34 month high underscores the robust demand environment facing the industry today. Strong orders from key end markets like 5G, data center, automotive, and IoT are converging with supply chain constraints to stretch lead times and backlogs.
While a high book-to-bill bodes well for near-term sales, the industry must continue to invest in capacity, technology, and supply chain resiliency to meet future demand. With the right strategic initiatives, PCB companies can ride the wave of electronification and position themselves for long-term growth.
No responses yet