2019 Connector Industry Outlook

After another year of +11.0% growth in 2018, we believe 2019 will have to take a breather. The connector industry grew to $66.7 billion, for another record year from a revenue standpoint. We expect revenues to be $69.6 billion in 2019 up +4.3% over prior year. We expect the growth to be relatively flat on a sequential quarterly basis.

The lower growth rate is not an indication of poor connector demand, but more a reflection of tougher comparisons to the 2017 and 2018 results.

Connector Industry Sales and Forecast by Quarter
(2017, 2018, 2019)

From a regional standpoint, we expect China to have the highest growth rate in 2019 at +6.3%, followed by Asia Pacific and North America.

Connector Sales by Region

Sales by market sector are expected to be strongest in telecom/datacom at +6.6% YOY followed by automotive and industrial.

Connector Sales by Market Sector

Our outlook for 2019 is based on the following industry factors:

• Connector prices will be relatively stable
• Raw material costs will be increasing modestly
• Lead times will be reasonable
• Factories will be fully loaded

Our outlook is also based on the following economic and sociopolitical factors:

• World GDPs are declining. Growth rates in many of the top 20 economies will be below 2%
• Growth rates assume relatively stable currency exchange rates
• Unemployment will be stable at historically low levels in the US. Europe‘s unemployment will continue at current levels
• Inflation is generally low worldwide.
• Interest rates are generally low worldwide, but are slowly increasing in the U.S.
• For the U.S. economy, some companies are bringing their production back on-shore
• Brexit has been a great uncertainty for trade in Europe which is continuing into 2019
• Consumer confidence is generally high in the U.S., Europe, China and Japan
• Stock markets worldwide are expected to stabilize from the volitility seen in late-2018
• The tariff negotiation between the United States, China, Euro volatility, Japan, and Mexico will continue in 2019. Although this situation has stabilized a bit, the resolution of the negotiations still needs to occur
• U.S. military spending has been increased and will probably stay at these higher levels going forward
• Military spending in Europe and other regions has also been trending up over the last year, primarily based on continued conflict in the South China Sea, wars in the Middle East, North Korea, and increased tension between Russia and Ukraine.

There are some risks. Inflationary trends are looming with rising employment, higher wages, and increasing discretionary spending. Coupled with increasing military and infrastructure spending, inflation is a real possibility. However, we believe the Federal Reserve and the European Central Bank will be vigilant and raise interest rates in a systematic and structured manner to keep inflation under control. Some moderate increases in rates from historically low rates is probably a good thing. Regardless of the possible inflationary pressures, we believe 2019 will be a good year for the industry.