Electronic Connectors

SIC 3678

Companies in this industry

Industry report:

This industry is comprised of manufacturers of electronic connectors, such as coaxial, cylindrical, rack and panel, and printed circuit connectors. Establishments primarily engaged in manufacturing electrical connectors are classified in SIC 3643: Current-Carrying Wiring Devices, those manufacturing electronic capacitors are classified in SIC 3675: Electronic Capacitors, and those manufacturing electronic coils, transformers, and other inductors are classified in SIC 3677: Electronic Coils, Transformers, and Other Inductors.

Industry Snapshot

The health of the electronic connectors industry is tied to that of electronic equipment and other finished-product (e.g., automobile) manufacturers. During the early years of the first decade of the 2000s, the overall economy, which reported a decline in consumer spending, had a negative impact on the industry. As a result, shipment values fell to $3.62 billion by 2002 after significant growth during the 1990s, with shipment values reaching $6.12 billion in 2000. During 2003 the economy began to recover, as did the connector industry. The industry continued to grow through the mid-2000s, posting a slight increase in shipments in 2003. Consumer electronics and computers, as well as a rebounding telecommunications industry, drove growth. In 2006, the industry shipped $4.45 billion in connectors. Shipments continued to increase, albeit modestly, to $4.5 billion in 2007 but fell to $4.2 billion in 2008, the year during which the global economic recession peaked. Electronic connector shipments declined to $3.96 billion in 2009 before rebounding to $4.58 billion in 2010, as economic conditions began to improve worldwide.

Organization and Structure

Within the connector industry, printed circuit connectors accounted for approximately 21 percent of output during the mid-2000s. Cylindrical connectors and coaxial (RF) connectors accounted for 14 percent and 11 percent, respectively. Rack and panel (rectangular) connectors held 8 percent of the market share. Other connector types and parts accounted for the remainder the industry.

Makers of electronic connectors and other passive electronic components must rely on manufacturers of finished products to maintain favorable prices and provide a market for their goods. Military markets generally require the most advanced and usually the most expensive products, as is the case in most components industries. When an industry like the PC industry slows or is forced to reduce its prices, which was the case worldwide in the late 1980s and early 1990s, or when PC prices permanently drop from the pressure of intense competition, as they did in the mid-1990s, connector manufacturers have difficulty maintaining profits.

Throughout the 1980s and 1990s, the connector industry was overcrowded, with approximately 800 manufacturers worldwide. However, consolidation, mergers, and movement of operations to overseas facilities reduced the number of establishments in the United States to fewer than 300 by the mid-2000s. According to the U.S. Census Bureau, in 2006 the industry had 22,492 employees, of which 16,473 were production workers.

Background and Development

The beginning of the electronic connectors industry can be traced to products such as the solderless electrical connectors that AMP Inc. manufactured for use in aircraft and boats in the 1940s, and the introduction of the printed wiring board in 1936 by Dr. Paul Eisner. The increased use of electronic components, particularly in military applications in the 1980s, was ironically foreshadowed by growth in demand for electrical components in military ships and aircraft during World War II. At the end of the war, contract terminations eliminated many shops. However, the post-war explosion of the semiconductor-related industries eventually made the connectors field more attractive, so by the early 1990s, the number of connector manufacturers had risen to approximately 800.

Challenging operational environments of industry and the military continued to provide a demand for specialized connectors. In 1991, Ocean Design Inc. introduced an oil-filled, pressurized connector for military and petroleum industry use in undersea and damp conditions. This connector could be mated underwater without shutting off power. The design relied on a thin layer of a specially engineered thermoplastic to strengthen its protective epoxy layer. Another specialized connector with military applications was the Beta Flex circuit board connector. This connector was developed to meet a need for very fast data transmission in the high-vibration avionics environment. At the core of this design was a nickel-titanium memory alloy. Pave Technology Co. introduced a radiation-resistant "push-through" connector that allowed workers to replace the connection without entering a sealed chamber.

Not content with the connector's status as the weak link in the signal chain, coaxial connector-and-cable assemblies were developed in which the connectors and the cable were shielded, preventing signal loss of as much as 30 percent. These connector assemblies also featured a four-beam contact, providing more surface area than the standard two-beam contact. In 1992, AMP Inc. introduced another important innovation within the industry, a hybrid called the Active Eurocard Connector. It was a high-speed connector that featured a small printed circuit board on which microchips could be placed, freeing motherboard space. The design was said to allow more efficient use of space and dramatically increase bus speed. Highly controlled impedance was a feature of all such high-density connectors.

An ongoing problem in the mid-1990s was the provision of standards for the vast number of new technologies, although some manufacturers preferred proprietary standards, forcing customers to purchase many different components from one source. Concurrent with the push for proprietary standards, a trend began with suppliers working closely with customers to develop customized connectors. The result was somewhat higher profit margins in specialized applications, such as military use. Increased consumer demand for inexpensive products that used electronic connectors and increased competition among producers of electronic connectors continued to diminish the number of manufacturers within the industry.

The industry grew steadily during first half of the 1990s, especially for coaxial connectors and printed circuit connectors. A promising long-term trend in the late 1990s was the proliferation of electronics in such varied industries as industrial connector applications in data communications, commercial aircraft, medical technology, automobiles, and telecommunications. Mobile phones also offered a greatly expanding market potential. However, industry shipments declined consistently throughout the late 1990s, dropping from $5.55 billion in 1997 to $5.33 billion in 1998 and to $5.13 billion in 1999. It was not until 2000 that the value of shipments began to climb, reaching $6.15 billion.

After peaking at $6.15 billion in 2000, the industry was adversely affected by the economy, which stifled demand and caused oversupply issues, thus eroding prices. Shipment values fell 18 percent to $4.99 billion in 2001 and another 23 percent to $3.6 billion in 2002. By 2003, the economy began to recover and demand increased in computers and consumer electronics. Globally, connector sales grew 9.7 percent during 2003 to $25.4 billion, although the United States only experienced a marginal 0.4 percent increase in revenues. China's connector industry, on the other hand, grew 23 percent year-on-year. Computer and peripheral related connector sales increased by nearly 10 percent from $6 billion to $6.7 billion, and the medical equipment industry grew more than 17 percent, from $557 million to $653.5 million.

Growth continued during 2004 and prices stabilized. Orders were up, lead times were extended, and backlogs began to build once again. Growth was driven by ongoing recovery of demand in the automotive, consumer electronics, computer, and mobile technology sectors. Although the global industry grew during the mid-2000s, U.S.-based operations continued to move overseas where production costs were sometimes cut over 50 percent. In 2006, the industry's 289 establishments shipped about $4.45 billion in connectors. The following year saw the number of establishments drop to 229 and shipments increase modestly to $4.5 billion with 21,791 employees earning $941 million. As of 2008, shipments fell further to $4.2 billion.

Current Conditions

According to the U.S. Census Bureau, 299 establishments operated in this category for part or all of 2010. Industry-wide employment totaled approximately 19,693 workers receiving a payroll of nearly $1 billion. The Annual Survey of Manufactures reported that industry shipments were valued at $3.96 billion in 2009 and $4.58 billion in 2010. Of the 19,693 employees, a total of 13,126 employees worked in production in 2010, putting in nearly 27.6 million hours to earn wages of $534 million.

As of 2010, global demand for electronic connectors within the computer and peripherals market held (20.4 percent); automotive captured (20.4 percent); telecom/datacom market with (16.3 percent); industrial commanded (11.5 percent); and other with (31.4 percent), according to Bishop & Associates.

In the late 2000s, the electronics connectors industry had to contend with rising commodity prices for materials, which, in turn affected growth margins. For example, gold had increased by about 56 percent since 2009. From 2010 through 2011, both copper and gold prices climbed more than 30 percent, squeezing margins further. In addition to price volatility, another factor manufacturers were up against was the scarcity of materials, as there were a limited number of suppliers. More importantly, since the industry was highly competitive, it was difficult to pass the added cost on to their customers. The top 10 connector manufacturers, based on revenues, accounted for an estimated 54 percent of the global market in 2011.

Industry Leaders

The worldwide connector industry was dominated by Tyco Electronics Ltd. of Berwyn, Pennsylvania. Its parent company, Tyco International Ltd., headquartered in Princeton, New Jersey, posted 2008 sales of just under $20.2 billion with approximately 113,000 employees. The company's sales fell to $17.3 billion in 2011 with a reported 102,000 employees. A distant second was Molex Inc. of Lisle, Illinois, which shipped nearly $3.33 billion in products and employed 32,160 in 2008, followed by Thomas & Betts Corp. of Memphis, Tennessee with sales of $2.47 billion and approximately 10,000 employees that year. Molex grew its revenues from $3.00 billion in 2010 to $3.60 billion in revenues for 2011, up 19.3 percent with 33,000 employees. Thomas & Betts reported revenues totaling $2.29 billion in 2011 with 9,400 employees. The company was acquired by ABB Ltd. located in Zurich, Switzerland in 2012 for approximately $3.9 billion. The combined companies' complimentary product mix made for a nice fit along with Thomas & Betts' North American presence and ABB's Europe and Asia presence, setting the stage for robust growth potential.

Tyco Electronics began as AMP, originally known as Aircraft Marine Products, which was founded by Uncas A. Whitaker in 1941. Initially the domestic leader in the U.S. electrical connector industry, AMP was purchased in 1999 for $12 billion by international manufacturing concern Tyco International Ltd., which renamed the company Tyco Electronics. AMP was expected to greatly increase market share of parent Tyco's electrical and electronic components group, representing trends in the ever-increasing globalization of the market for electronic connectors.

Tyco's justification for the merger reflected a growing overlap of technologies within electronic components, particularly in communications technologies. AMP's fiber optics and backplane assembly technologies were expected to aptly mesh with connector technology and increase Tyco's competitiveness in marketing fiber optic communications cable, precision printed circuit boards, and backplanes. After several difficult years of cutbacks and significant layoffs at its Pennsylvania-based operations, the company began to see significant growth, especially overseas. While jobs in central Pennsylvania fell to 4,800 by 2004, down from more than 7,000 during the 1990s, Tyco's Electronics employee base in China grew from 2,000 to 27,000.

America and the World

In 2008, imports of electronic connectors were valued at more than $3.5 billion, up from $3.2 billion in 2006. Over the same period, the value of overseas shipments rose slightly from $3.5 billion in 2006 to $4.1 billion in 2008, reflecting one of the few manufacturing industries with a trade surplus. That trend continued in 2010, with exports totaling $4.7 billion to 189 countries, compared to imports totaling $3.7 billion from 98 countries. The primary export markets for U.S.-made electronic connectors remained with the North American Free Trade Agreement (NAFTA) partners, Mexico and Canada.

In the mid-2000s, China was the fastest growing market for electronic connectors in the world because so much of the world's production of electronics equipment was located there. During 2004, the global market grew approximately 12 percent. However, China's market grew more than 20 percent, while the U.S. industry shrank 1 percent. China accounted for approximately 10 percent of the global demand for connectors, which was expected to double.

Research and Technology

About one-third of the electronic connectors sold in the United States are printed circuit boards. Cylindrical, rack and panel, planar hermetic sealed, and fiber optic connectors divide the rest of the electronic connector market, with fiber optic connectors showing a strong potential for growth. The demand for increased miniaturization is predicted to drive technological advances in the future. Specialized military and commercial applications also fuel research.

Citing the failure of solder joints under fatigue as a cause of avionics failures, Westinghouse introduced Solder Free Interconnects, which are secured by cantilever spring clips, and Lockheed Sanders introduced folding printed circuit boards with flexible printed wiring. Although some aspects of the emerging technology made manufacturing less labor-intensive, others, particularly the small size of the components, required heavy investment in specialized machines that were able to handle the process.

The data communications market remained one of the largest users of electronic connectors during the first and into the second decade of the 2000s. Private networks in commercial buildings accounted for a significant increase in use of multimode fiber optic connectors. In an effort to address difficulties during installation of extensive networks, which accounted for a significant amount of the expense when using fiber optics, traditional epoxy and hot-melt connectors were supplanted by crimp-style connectors. Moreover, manufacturers were investigating the possibility of using non-glass plastic and copper fibers to further reduce cost.

The drive for miniaturization also was fueled by the laptop computer industry, which required high density interconnections for next-generation components like miniature memory cards and 1.8-inch disk drives, as well as connectors to link laptops with networks and desktop PCs. Two-millimeter to 0/8-millimeter connectors were developed for use in the smallest of computers and electronic devices, such as pagers. However, new designs were required as applications for electronic components demanded smaller, conveniently sized, and weighted apparatus. Traditional manufacturing processes were based in traditional engineering schemes that utilized mated pairs (a receptacle and plug). New designs, which were initially intended to be used in the telecommunications handset market, featured connectors that did not require a receptacle.

As electronic devices grew increasingly smaller, another concern was the drain on available power attributable to electronic connectors. Resistance factors in connectors and attendant power consumption accounted for approximately 10 percent of power use in small devices such as pocket electronic personal organizers. However, as electronic devices became smaller and more powerful, using miniaturized batteries, such power drain became unacceptable.

By 1997, standard-contact connectors had resistance of about 3 ohms, and more costly gold contacts were about 1 ohm. Future applications, however, demanded connector resistance in the range of micro-ohms. In an effort to meet demand for low cost, miniature, low resistance connectors, engineers began to create designs that used new materials such as flowable polymers that potentially allowed for wall thicknesses of 0.005 inch. Designers could put mating contacts on the thin-cut edges instead of wide stamped sides of electronic components. This reduced the width of connector pins and resulted in an attendant drop in resistance.

The miniaturization of electronic devices also brought about the need to reduce the number of pins required to make connectors but increase the flow of data that would go through those connectors at the same time. As the twentieth century ended, engineers conceived interconnection designs, called Micro Electro Mechanical Systems (MEMS), which utilized a system similar to the one used in integrated circuit fabrication. MEMS enabled inclusion of micro-miniature motors, pumps, switches, actuators, sensors, and mirrors by exploiting the mechanical and electrical properties of silicon and integrated connectors and circuitry onto a single chip.

In addition to MEMS-based design, more radical research and development was underway in the late 1990s. Rather than basing technology on silicon, engineers and scientists began to explore the possibilities presented by carbon-based materials. This made electronic and mechanical components on a molecular scale a possibility. Such designs depended on the effective development of a form of carbon comprised of 60 atoms arranged in a spherical lattice-work and configured in hexagonal faces. Researchers thought that the molecular structure known as "fullerene" had mechanical properties similar to those that MEMS made possible but on an infinitesimally smaller magnitude.

The drive for technological advances for connectors continued into the mid-years of the first decade of the 2000s. In a 2005 Wireless Design & Development article, Ernest Worthman noted, "The technological revolution has produced a dizzying array of miniature and subminiature devices and end products that have created a demand for connectors far removed from the standard cable connectors. Connectors have evolved to connect flat cables, fiber cable, all types of computer and communications multiple element cables, and a myriad of others." For example, by 2005, high-density connectors, once commonly produced at 1.27 mm pitch, were offered in pitches from 1 mm to 0.3 mm, and in some cases as low as 0.05 mm.

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