ZTEST Electronics Monthly Corporate Update for February 2003
ZTEST Electronics Inc.'s (TSXVE: YZT) wholly-owned subsidiary, Permatech Electronics Corp., is an ISO 9002 certified Electronic Manufacturing Services (EMS) provider founded in 1982. Permatech's offerings include Materials Management, Printed Circuit Board (PCB) Assembly, Testing and Design services. Permatech operates from a 20,000 square foot facility in North York, Ontario, Canada.
Manufacturing Industry Activity and the EMS Sector
On March 3rd, 2003 the Institute for Supply Management, www.ism.ws/ISMReport/ROB032003.htm, reported that Economic activity in the manufacturing sector grew for the fourth consecutive month. The overall economy grew for the 16th consecutive month. The Purchasing Managers' Index (PMI) was calculated at 50.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. "The manufacturing sector continued to grow in February, but the rate of growth slowed when compared to January. While Production remained strong, there was a significant slowing in the rate of growth of New Orders. Manufacturing jobs continue to decline as the Employment Index's rate of decline accelerated," commented Norbert J. Ore, C.P.M. chair of the Institute for Supply Management™
As reported by press release March 3rd, 2003 Global semiconductor sales totalled $12.2 billion in January 2003, a 2.4% decrease from the $12.5 billion in revenue reported in December 2002 and a 22% increase from the $10.0 billion total recorded in January 2002, the Semiconductor Industry Association (SIA), www.sia-online.org/pre_release.cfm?ID=261.
"For more than a decade now, with the exception of the boom year 2000, sales have been slightly lower in January than December because of the seasonality of the semiconductor industry," stated SIA President George Scalise. "We continue to forecast double digit revenue growth for 2003 and broad-based strength in our industry, driven by a recovery in information technology (IT) spending, a fast-paced global wireless market, and the emergence of new growth sectors, including Wi-Fi (802.11) and broadband networks using advanced semiconductor technologies."
Market forecasts predict a 4-7% rise in IT spending in 2003 and a 10-14% rise in PC sales, as corporate buyers return to the market. There is an installed base of 160-180 million older units worldwide that need to be replaced in the anticipated upgrade cycle.
Semiconductor sales have a material effect on the Electronics Manufacturing (EMS) sector as the Printed Circuit Boards (PCBs) used in electronics assembly are populated with semiconductors. Therefore it is typically understood that increased semiconductor chip sales will lead to higher PCB assembly activity.
Permatech Established Business
With Permatech's long operating history, it has built a core base of customers who provide a stream of consignment and turnkey assembly orders. This core customer base is well diversified in the Medical, Power, Computer, Telecommunication, Wireless, Industrial and Consumer Electronics markets, limiting therefore the company's exposure to any one industry. The charts on the following page show on a rolling six-month basis:
The proportion of revenue generated by each market served
The trend of revenue generated by each market segment
The proportion of revenue attributed to turnkey vs. consignment business,