As I write this, the latest news on the financial front is the reaction to the $220 million in bonuses paid to executives at the bailed-out insurer AIG. Although the bonuses are a very small fraction (0.13%) of the $173 billion in public funds supplied to the insurer, it has been more than enough to ignite widespread public outrage. When Republican senators (Charles Grassley, R-Iowa) start calling for normally respectable businessmen to take a lesson from the samurai and either "resign or go commit suicide", the situation on Wall Street has become pretty grim.
Back in the 'real' economy, including the parts of which that make sensors, the implications of the financial crisis are becoming more and more tangible. In the last quarter of 2008, the crisis began to cause a major decline in U.S. (and world!) manufacturing activity. Virtually all major U.S. manufacturing sectors experienced severe declines in shipments and/or orders. The U.S. automotive sector was hit especially hard, with monthly shipments in January 2009 that were 42% lower than those of a year earlier. The extreme carnage in the automotive sector resulted from a combination of tightening consumer credit, an increasing reluctance on the part of consumers to part with their cash, and some serious doubts about the continued survival of certain automakers.
While the penetration of sensors has been steadily increasing in all kinds of applications, the recent across-the-board declines make it difficult to point to any really good news—it is more the case of finding the least-bad news, which is that most manufacturing sectors have not been hit as severely as automotive. With that in mind, some of the 'brighter' sensor-consuming manufacturing sectors are:
Farm machinery—While this sector saw an 11% drop in monthly shipments (January 2009) from its recent peak in September 2008, it still saw a 24% increase from January 2008 to January 2009. Regardless of how bad things get, people will still have to eat, and it's too late to go back to oxen.
Extraction Machinery—This is equipment for mining ore and pumping oil and natural gas. Demand for this equipment has been experiencing consistent growth for the past five or six years, with approximately $19 billion dollars of shipments in 2008; large enough to be a significant sensor market unto itself. It will be interesting, however, to see if this trend continues, as the price of oil (and the amount of money available for capital investment) has dropped dramatically over the past year or so.
Instrumentation & Control (Including Medical Instruments)—This is a key group of markets for many sensor manufacturers, particularly those producing low-to-mid volume, high-value sensors. The bad news is that shipments have been declining since last summer (2008). The good news is that the decline has been relatively small (<10%), and that the overall trend for the past decade has been upward. This is in sharp contrast to other high-tech segments such as computers and semiconductors, for which the trend for U.S. manufacturing activity has been downwards for some time.
While there are many segments which have experienced significant declines, one to keep an especially close watch on is commercial aircraft manufacturing. While this can be a volatile business simply because of its dependency on large orders, shipments over the past year have been especially volatile. Even more worrisome than declines in recent shipments, however, are the declines in monthly orders. From January 2008 to January 2009, orders declined 58%. As aircraft are highly complex assemblies with long lead times, the recent decline in orders may not be fully reflected in shipments (and sensor purchases) for quite a few months.
Conclusion
The fallout from the financial crisis has had profound effects on U.S. manufacturing and the consequent market for sensors. If you would like to see some of this data on these effects for yourself, it is available on the Web. A free report covering orders, shipments and long-term trends for 18 major U.S. manufacturing sectors can be downloaded from www.sensorlytics.com/bulletin.htm.
Note: Figures in this report were derived from data released by the U.S. Department of Commerce.