Walt Custer's 2016 Business Outlook


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What’s going to be the next boom in the electronics industry? Is it self-driving cars, the Internet of Things, drones, or something else that’s still completely off the radar? At productronica, I sat down with Walt Custer of Custer Consulting Group, who offered his forecast for 2016. Included in our discussion were his view of China’s current impact on the market, as well as some keen insights on a few key players and important sectors in the electronics industry.

Barry Matties: Walt, let’s begin by you giving our readers a little context about what Custer Consulting Group does.

Walt Custer: Well, we consider ourselves market analysts. We try and figure out the global supply chain. It's highly cyclical, we all know that, so we try to understand the relationship between electronic equipment, the economy, electronic components, materials, and their growth cycles—how big they are, when they're going to peak, and when they’re going to hit their valleys. So that's sort of our thing. We track the entire electronic supply chain.

Matties: And this is under the Custer Consulting Group. You've been doing this now for 12 years or so?

Custer: Oh, longer than that. Before this life, I was vice president of marketing and sales for Morton Electronic Materials, which sold materials to the printed wiring board and semiconductor industries. That business was cyclical and we couldn't figure out why. So I started studying it, trying to understand why our business demand was fluctuating. When Morton International was bought out by Rohm and Haas, I got a golden handshake and "retired." That lasted about two weeks—until I founded Custer Consulting Group. I had been doing this as kind of a hobby for our customers and I said, "Hey, I can still do it but I'm going to try to sell it." And that was in 1999. Our corporation is 16 years old. I guess if you make 16 years at least it's something.

Matties: That's great. In all those years studying the markets, what's been the greatest surprise that you've come across?

Custer: I guess the boom and bust cycle, and maybe the dot com bust of 2001 that no one saw coming. We saw it I think three months before other people did because I remember going to an IPC meeting and telling people that inventories were building and orders were slowing. And everybody said, “Don't tell me that, we're fine.” And then two or three months later it imploded because everybody had built huge inventories for a perceived ongoing boom in datacom, telecom and computers, which just didn't materialize as fast as people thought. The dot com bubble was followed by major outsourcing to China. With it went much of North America’s and Europe’s volume electronics production. The financial crisis of 2007–08 was the next major crash. We recovered from that. But lately, I would say the surprise is that growth is so modest.

Matties: What do you think has had the greatest impact on the modest growth you are seeing? Do you attribute it to China’s slowing growth?

Custer: I think the biggest impact is less robust demand for consumer-driven electronic equipment. In particular, through the 2000 decade, we were in the personal computer and communication equipment ages. When iPads/media tablets came along in 2010 they dug into the personal computer sales. As PC growth slowed media tablets took up the slack. That kept ‘computer’ growth going but then newer smartphones cannibalized many of the functions of PCs, media tablets and point & shoot cameras.

WaltChart4.gif 

I use this graphic in my presentation that shows all the electronic equipment a guy of 15 years ago owned—all kinds of audio/video equipment and phones and everything. Now it's all in one iPhone. Smartphones went like gangbusters but now their growth is slowing.

walt_custer_article.jpgI think the concern now is what will the next high volume consumer product be? Without high-volume consumer electronics, our business cycle will be stuck in single digit growth. So we're in a little bit of trough right now waiting for the next big thing. People are talking about self-driving cars, the Internet of Things, drones, robots and whatever, but none of them have materialized in volume yet. So is China at fault? No, I wouldn't say China is at fault. It's one of the symptoms of the lack of a huge driving market at the moment.

Matties: You mentioned a lot of things: automotive, IoT, etc. If you were a betting man, where would you put your money on the next big thing?

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