by Kelly Scanlon, director, EHS policy and research This week marks the annual observance of World Day for Safety and Health at Work, coordinated by the International Labor Organization (ILO). According to a recent report from the ILO, approximately 2.8 million workers worldwide die each year from occupational accidents and work-related diseases, or about 7,500 per day. In most countries, government regulations now exist to prevent such hazards, although many of those rules are not as cost-effective as they should be. Indeed, recognizing the benefits of leading the way and going beyond mere compliance, many companies have created cost-effective systems for continuous improvement in environmental, health and safety (EHS) performance. We’re proud that IPC members such as Raytheon and Lockheed Martin Missiles & Fire Control have been recognized as being among “America’s Safest Companies” by EHS Today. As a longtime leader in environmental, health and safety (EHS) issues, IPC supports the need for practical policies and regulations that prevent work-related hazards and exposures, and we offer several helpful resources for our members. For example, the IPC Environmental, Health & Safety (EHS) Committee – under the leadership of Bret Bruhn of TTM Technologies – promotes cleaner, safer manufacturing worldwide through information exchange, assistance with regulatory compliance, and advocacy for practical, internationally consistent legislation and regulations. If you or anyone on your team has questions or suggestions concerning IPC’s work on EHS issues, please contact me at KellyScanlon@ipc.org. You’re also invited to attend one of the IPC/ITI environmental compliance workshops in June, which will cover California Prop 65, the EU Circular Economy Strategy, EU RoHS, EU REACH Directive, EU plastics initiatives, and environmental restrictions in southeast Asia. After all: Are we not all workers who deserve a safe and healthy workplace?

IPC Releases PCB Industry Results for March 2019 BANNOCKBURN, Ill., USA, April 29, 2019 — IPC — Association Connecting Electronics Industries® announced today the March 2019 findings from its North American Printed Circuit Board (PCB) Statistical Program. Year-over-year growth in March was strong for sales but slipped into negative territory for orders, while the book-to-bill ratio retreated to parity at 1.00. Total North American PCB shipments in March 2019 were up 19.1 percent compared to the same month last year. Year-to-date sales growth as of March was 16.4 percent. Compared to the preceding month, March shipments jumped 32.9 percent. PCB bookings in March decreased 0.9 percent year-over-year, bringing year-to-date order growth down to a positive 2.4 percent. Bookings in March were up 10.1 percent from the previous month. “Strong sales for the North American PCB industry in March, combined with lackluster order growth, brought the book-to-bill ratio down to 1.00, its lowest level in more than two years,” said Sharon Starr, IPC’s director of market research. “Year-over-year sales growth has outpaced order growth for the past 10 months, indicating the likelihood of slowing sales growth in the coming months.” Detailed Data Available The first-quarter 2019 edition of IPC’s North American PCB Market Report, containing detailed data from IPC’s PCB Statistical Program, will be published by mid-May. The quarterly report presents detailed findings on rigid PCB and flexible circuit sales and orders, including separate rigid and flex book-to-bill ratios, growth trends by product types and company size tiers, demand for prototypes, sales growth to military and medical markets, and other timely data. This report is available free to current participants in IPC’s PCB Statistical Program and by subscription to others. PCB companies that are IPC members doing business in North America are invited to contact marketresearch@ipc.org for information about participating. More information about this report can be found at www.ipc.org/market-research-reports. Interpreting the Data The book-to-bill ratios are calculated by dividing the value of orders booked over the past three months by the value of sales billed during the same period from companies in IPC’s survey sample. A ratio of more than 1.00 suggests that current demand is ahead of supply, which is a positive indicator for sales growth over the next three to twelve months. A ratio of less than 1.00 indicates the reverse. Year-on-year and year-to-date growth rates provide the most meaningful view of industry growth. Month-to-month comparisons should be made with caution as they reflect seasonal effects and short-term volatility. Because bookings tend to be more volatile than shipments, changes in the book-to-bill ratios from month to month might not be significant unless a trend of more than three consecutive months is apparent. It is also important to consider changes in both bookings and shipments to understand what is driving changes in the book-to-bill ratio.

IPC’s monthly PCB industry statistics are based on data provided by a representative sample of both rigid PCB and flexible circuit manufacturers selling in the USA and Canada. IPC publishes the PCB book-to-bill ratio at the end of each month. Statistics for the current month are normally available in the last week of the following month.

03_19 IPC BOOK-TO-BILL GRAPHS

https://youtu.be/IzMti0R0_xQ IPC APEX EXPO 2019, where technology's future came to together with 9,796 attendees from 56 countries and 440 exhibitors from around the world. Join us in San Diego for IPC APEX EXPO 2020!

By Chris Mitchell, vice president, global government relations Monday, April 15 was the deadline for millions of Americans to file their income tax returns, so this is a good time to review the Tax Cuts and Jobs Act of 2017 (TCJA) as well as the current tax policy landscape and how these rules are affecting the electronics industry. TCJA Fostering Economic Growth In passing the TCJA, Congress restructured the U.S. tax code for the first time since 1986. IPC applauded the bill’s passage because of the need to replace an outdated tax code with one that promoted competitiveness and innovation in our industry and economy-wide. Several provisions were especially important to the electronics industry, including: • Lowering the corporate tax rate from 35 percent to 21 percent; • Allowing full and immediate expensing of capital investments placed in service between September 27, 2017 and January 1, 2023; and • Safeguarding the R&D tax credit. • The bill also allows many small businesses that are organized as “pass through” companies to claim a 20 percent deduction for the non-wage portion of pass-through income. These provisions have helped generate stronger-than-expected GDP growth and near record-low unemployment. In fact, the number of U.S. job vacancies has exceeded the number of unemployed Americans for months. Most economists are forecasting continued growth through 2019. Changes Coming in a Few Years Even as we celebrate the success of the TCJA, we should be mindful of work yet to do and new issues that have come up. Here are a few that affect our industry: • Bonus Depreciation Starts Ramping Down in 2023. The TCJA provided for 100 percent bonus depreciation for capital expenditures, spurring investments in plant and equipment. However, the law phases out bonus depreciation from 2023 to 2026. Bonus depreciation enjoys wide support on Capitol Hill, so there will be attempts to prevent its expiration. Some skeptics believe bonus depreciation is more appropriate as a tool for reversing economic downturns, while others say it is accelerating automation and jeopardizing jobs. We expect a tough fight to extend this provision past 2023. • R&D Tax Credit Falls Short. Beginning in 2022, companies will be required to amortize R&D expenses over five years instead of claiming an immediate, full deduction as they do today. There are concerns that this will reduce R&D investment, and some in Congress are working to rewrite this provision. Moreover, a cadre of Congress members will continue to fight to increase the alternative simplified R&D credit from 14 percent to 20 percent to bring it in line with international competitors. But such an increase is considered unlikely. • TCJA Regulations Still Pending. Significant portions of the tax law require the Treasury Department to issue implementing regulations, but many such rules are still in the proposal stage. Regulations can undergo significant changes as they go through the process, so IPC and its members will need to keep an eye on them and be prepared for further advocacy. • Pass-throughs (S-Corps) Still Face Unfair Treatment and Significant Uncertainty. Pass-throughs have long argued for tax parity with C-Corps, and the authors of the TCJA sought to provide some relief by granting a 20 percent deduction on some pass-through income. However, legislative rules prevented Congress from making the relief permanent, and the deduction will vanish at the end of 2025. Because pass-through tax rates are tied to individual rates, any debate over changing them will get caught up in the political battle over marginal tax rates for individuals. • Expiring Tax Provisions in Limbo. No sooner had the TCJA passed in 2017 than congressional efforts began to pass an “extenders packages” to reinstitute several old tax provisions that were left out of the bill. Currently, there are 29 so-called extenders that expired in 2017 and 2018, and we are beginning to see bipartisan interest in passing an extensions bill later this year. The two provisions with the most support are the biodiesel tax credit and the short-line rail maintenance credit. We will continue to monitor developments. • TCJA Exacerbates Budget Woes. The TCJA may be boosting economic growth, but it is not paying for itself. Tax revenues are falling below forecast, and the Trump administration’s FY2020 budget proposes $1 trillion+ annual deficits through FY2022. And that is a best-case scenario! Planning Ahead The TCJA made some very helpful changes to an outdated tax system. However, the tax writers also created a great deal of uncertainty by putting a time limit on some of the most significant and popular provisions, which are likely to expire in a few years absent a resurgence of bipartisanship. We know that many IPC members make long-term business decisions based on the tax code. Thus, your company may want to consider taking advantage of TCJA tax provisions while they last and working with IPC to advocate for smarter, more predictable tax policies in the future.

by Chris Mitchell, IPC vice president, global government relations Ask yourself the following question: Why is it that the aerospace, defense and high performance (ADHP) electronics sectors remain reliant on lead solders and components even as the commercial sector has largely phased out their use? The short answer is that lead-free electronics do not offer the performance and reliability assurances that the ADHP sectors require, but the longer answer is that key stakeholders, including government entities, have not invested in the science to understand how to achieve symmetry and interchangeability between lead and lead-free electronics. IPC is working to change that and we need your help. Essential R&D Delayed by Budget Cuts Over the last 15 years, the commercial electronics industry has largely phased out its use of lead (Pb) in the manufacture of electronic components and circuit assemblies. The transition to Pb-free electronics was driven by the European Union’s Restriction of Hazardous Substances Directive (RoHS), which placed new restrictions on the use of lead in commercial products. Though initiated in Europe, RoHS has had a global impact on the electronics industry. Other countries have followed Europe’s lead and manufacturers are now obligated to eliminate the use of lead in their goods for markets around the world. The migration to Pb-free electronics has been successful in the commercial markets, but the ADHP electronics sectors have been slower to abandon the traditional tin-lead solder used in the production of components and circuit assemblies. ADHP products have more demanding performance requirements than consumer electronics; they need to perform flawlessly in harsh environments and in safety-related applications; and there is not enough data on the performance of Pb-free products to support the move. Enter the Pb-Free Electronics Risk Management (PERM) Council, comprised of subject matter experts from government, industry, academia, and other stakeholders. Founded in 2008 and housed by IPC since 2012, the PERM Council provides leadership and coordination of Pb-free electronics risk management activities in both government and industry. A major focus of the PERM Council has been gathering enough detailed engineering knowledge to underpin the conversion from tin-lead solder to Pb-free in the ADHP sectors. In 2009, PERM supported an effort funded by the U.S. Department of Defense (DoD) to identify the knowledge gaps and estimate the cost to fill them. The cost estimate this “Pb-Free Manhattan Project” was about $110 million over three years, broken down into more than 100 “bite-size chunks” from $100,000 to $5 million. Unfortunately, due to DoD budget cuts in the last decade, the “Manhattan Project” was never fully funded, although some companies and universities continued to work on the smaller chunks. In 2014, IPC completed a “re-baseline” and estimated that about $40-50 million was still needed to complete the knowledge base. To date, the R&D project is still incomplete. Now, in 2019, IPC and a consortium of manufacturers and academic institutions are working with more than a dozen congressional offices to secure $15 million in federal funding to put the R&D back on track. The formal funding requests have been filed; congressional deliberations on defense spending are underway; and Congress is expected to send a defense appropriations bill to the president for his signature by late summer, at which time we will know whether we have been successful. A great deal of policymaker education and advocacy will be necessary to achieve this goal in 2019 and to keep the momentum going in 2020 and beyond. The IPC Government Relations team will be working on the issue 24/7, but members of Congress are most interested in hearing from IPC members, i.e. the front-line business leaders in their states and congressional districts. To learn more and contribute your expertise to IPC’s Pb-free electronics efforts, please visit the PERM Council page on IPC's website and contact me at ChrisMitchell@ipc.org to join our Advocacy Team.

The United Kingdom’s effort to leave the European Union, known as Brexit, is making waves in the global economy. Many companies are facing tough decisions about their operations in the UK and EU. IPC members, how concerned are you about the impacts of Brexit on your company? Take a one-minute survey.   Last Week’s Question: “Over the last year, how difficult has it been for your company to find qualified workers for roles that require technical knowledge and skills?” The response was nearly unanimous: About 90 percent of those who answered said it was “very difficult,” and around 10 percent said “somewhat difficult” to find qualified workers. That’s a powerful statistic! Thanks for your responses.

By Chris Mitchell, vice president, global government relations The United Kingdom’s effort to leave the European Union, known by the nickname “Brexit,” is bogged down in political uncertainty, which in turn is creating disruptions in the global economy. With a “no-deal” Brexit possible within two weeks, here’s a recap of recent developments and the possible impacts on the electronics industry. (And let us know what you think about Brexit.) First, a Quick Recap Following a 2016 referendum in which the “leave” side won narrowly, the British government invoked Article 50 of the Treaty of European Union, which lays out a two-year process for member countries to withdraw from the EU’s political and economic structures. That process was set to conclude by last Friday, March 29. British Prime Minister Theresa May finalized a Withdrawal Agreement with the EU in November 2018. However, Parliament rejected the agreement on January 15, as well as two subsequent versions of it on March 12 and March 29. In a rare move, rank-and-file members of Parliament took control of the chamber twice in the last week to hold “indicative votes” on 12 Brexit alternatives, but none won a majority. Just yesterday, following a lengthy cabinet meeting, Prime Minister May signalled that she would seek a further extension from the EU until May 22 and that she would work more closely with Labour leader Jeremy Corbyn to forge a compromise. Top Takeaways 1. The urgency remains even as the deadline is postponed. PM May asked for and received an EU extension of the Brexit deadline to April 12. She now has indicated she will seek an extension until May 22. But May 22 is right around the corner, and the country’s political leaders remain at loggerheads. It is not clear whether working with Corbyn can deliver a deal with majority support. 2. A no-deal Brexit remains a real possibility and would wreak havoc. Goldman Sachs has estimated a 15 percent likelihood that the UK will exit the EU without a deal in place. Some fear the likelihood is even greater, and most agree the outcome would be dire. World Trade Organization (WTO) tariffs would go into effect, requiring goods to be re-priced accordingly. Customs officials would need to re-establish rules and procedures at the border, but it’s uncertain whether adequate infrastructure could be put in place that quickly. 3. A new PM is likely soon. Throughout her tenure, May has come under withering criticism from both the Left and Right for trying to chart a middle course. In a last-ditch effort to win more Conservative Party votes for her Withdrawal Agreement, she pledged to step down if Parliament adopted her deal. The ploy did not work. Now the British political class is gearing up for a leadership contest on top of everything else. 4. A general election is also possible. Britain’s next national election is not scheduled until 2022. Parliament can trigger an election sooner, but the current Conservative majority is largely opposed, having lost seats in 2017 in an election that May did not need to call. On the other hand, the current impasse, if it continues, may make general elections a necessity. The Labour Party may pick up seats in a general election, but few experts think it would be enough for a strong mandate, and any election would be at least several months away. 5. Manufacturers must plan for various scenarios. Saddled with these uncertainties, companies with operations in the UK and EU are hedging against the various outcomes. IHS Markit’s Rob Dobson expects that “the impact of Brexit preparations, and any missed opportunities and investments during this sustained period of uncertainty, will reverberate through the manufacturing sector for some time to come.” In the near term, the uncertainty has led to advance purchasing and stockpiling of inventory, leading to surges in manufacturing production. But many companies are shifting their supply chains away from the UK, sourcing goods and materials from other EU countries or from outside the region altogether. Airbus, Nissan, Ford, Siemens and Sony are just a few of the companies that are considering or actively shifting operations out of the UK as a response to Brexit. 6. The electronics industry may be disproportionately impacted. According to an Oxford Economics study commissioned by IPC, the EU28 electronics industry employs more than 2.4 million workers, with about 8 percent or 196,000 of them in the UK. Without an orderly Brexit, the UK could slide into recession in 2019, and the country’s share of the EU’s electronics workforce could drop even further. It’s impossible to predict with precision, but the electronics industry has a highly globalized and complex supply chain. New trade barriers and uncertainties will constrain the ability of British electronics companies to leverage the European electronics marketplace and labour force. 7. Brexit has already harmed economic growth in the UK. A column in the Financial Times says the UK economy has already shrunk by 1.5 percent since the Bank of England’s 2016 forecast, even as the world economy has grown. Goldman Sachs predicts that a no-deal Brexit could whack UK GDP by another 5.5% and depreciate the pound sterling by 17 percent. The New York Times reports the UK has forfeited its role as an economically and politically stable country from which companies can base their European operations. With so much at stake for the electronics industry, IPC will continue to stay abreast of developments and keep you informed. Let us know what you think by taking our survey or dropping me a line at ChrisMitchell@ipc.org.  

The electronics industry has a positive impact around the globe— this week of volunteerism is a great way to show the world the good things we do beyond the products we manufacture! From June 9-15, 2019 we are asking companies that are part of the global electronics supply chain to select a charity or cause of your organization’s choice to support through staff volunteer efforts. Take part in a local litter collection. Organize a food drive. Anything to make a difference!! IPC will celebrate your good work through social media and other promotions! Follow our social media pages and stay involved with what our supporters are up to! https://youtu.be/-ID8VdUBugU

As a longtime leader in education and training in our industry, IPC is stepping up its efforts, and we could use your input. How would you answer the following question? Over the last year, how difficult has it been for your company to find qualified workers for roles that require technical knowledge and skills? Click here to respond by COB Friday, March 29. Thank you!

by Ken Schramko, senior director, North American Government Relations Within the last week, U.S. President Trump released his $4.7 trillion fiscal 2020 budget plan, kicking off the annual federal budget process. IPC is watching several budget debates that could impact the electronics industry and its supply chain. It’s important to remember that Congress has the power of the purse, and the President’s budget is merely a request. Ultimately, members of Congress must make the tradeoffs that result in spending bills that can pass. When passed in identical form by both houses of Congress, the budget establishes the overall allocations that the appropriations committees then use to write annual spending bills. However, Congress is not even required to pass a budget; and due to partisan wrangling, in many years it does not. Under the rules, action may begin on the annual spending bills even if the House and Senate have not agreed on a budget resolution by May 15. Thus, while the president’s budget is a significant statement of executive branch priorities, it is merely the starting point. Within that context, let’s look at the key takeaways: • The administration’s budget proposal runs a $1 trillion+ annual deficit through FY2022. Rather than balancing the budget within 10 years as Republicans in Congress have proposed in recent years, President Trump proposes to balance the budget in 15 years based on relatively rosy economic assumptions. • The Trump budget assumes the continuation of the spending caps in the 2011 Budget Control Act (BCA), which would force overall federal spending down by $126 billion. Congressional leaders have signaled their intent to raise these caps. • Maintaining the BCA caps would require a 9 percent cut to domestic discretionary spending. Spending for Medicaid, Medicare and other mandatory programs is also proposed to be cut. Programs marked for growth include “funding for border security, national defense, opioids, law enforcement, childcare, veterans’ healthcare, emerging technologies that support the industries of the future, and workforce development.” • The Trump budget would cut overall research and development spending by roughly $6.5 billion—or 5 percent. These cuts would primarily affect civilian agencies including the Dept. of Energy, NASA, National Science Foundation, National Institutes of Health, and others. • President Trump is proposing to draw on “off-budget” funds from the Overseas Contingency Operations (OCO) to push through a 5 percent, $33.8 billion overall increase in defense spending. The move is controversial because the OCO was intended for combat operations and crises abroad. • The Trump Administration is expecting GDP growth to hover around 3 percent for the next decade, while the Congressional Budget Office forecasts a decline in GDP growth from 3.1 percent in 2018 down to 1.7 percent by 2020 and then relatively flat through 2029. Federal Reserve Chairman Powell this week said growth appeared to be slowing from last year, “under the weight of the Trump administration’s trade war, economic slowdowns in Europe and China and fading stimulus from the Republican tax cuts of 2017” (New York Times, 3/21). IPC is digging into the details of the President’s budget request, particularly with regard to DoD, Commerce, and EPA. We will work with Congress throughout the appropriations cycle to protect and improve programs of interest. Please let us know if you have any input on this. Here’s a rundown of how some budget shifts could affect the electronics industry: EDUCATION/LABOR • Would invest $1.3 billion in grants to states for Career and Technical Education (CTE). The recently reauthorized Perkins CTE program helps students gain access to technical education, “including work-based learning during high school and a wide array of post-secondary options including certificate programs, community colleges, and apprenticeships.” COMMERCE • Would eliminate the Manufacturing Extension Partnership (MEP) and Economic Development Agency, both of which support U.S. manufacturing initiatives. • Would provide $688 million for the National Institute of Standards and Technology and prioritize research in quantum computing, artificial intelligence, and microelectronics. DEFENSE • Significant increases for DoD R&D programs, including hyper-sonics, AI, and quantum computing. More defense R&D could be good news for defense supply-chain research and IPC’s efforts to secure funding for a five-year, $40 million program to help the defense industry move toward Pb-free electronics. EPA • Would cut the agency by $2.8 billion (31.2 percent), which if enacted could affect IPC’s effort to persuade the agency reduce reporting burdens on electronics manufacturers that send byproducts sent for recycling. HOMELAND SECURITY • Would give DHS a $3.6 billion (7.4 percent) increase to help support funding for 750 additional border patrol agents, 1,000 ICE officers, and 54,000 detention beds. The budget proposal would require all employers to use E-Verify program for worker authorization. ENERGY • Would eliminate the Advanced Research Project Agency–Energy (ARPA-E). Looking Ahead The U.S. budget process as it works today also revolves around those cliffhanger moments when Congress and the President must agree on a way forward or trigger government shutdowns or debt defaults. The “meta” decisions are whether to raise the BCA spending caps and based on what understanding; how to handle the next debt-limit increase; and within those parameters, partisan wrangling over programs like the border wall, defense, and health and welfare programs. In short, this promises to be another raucous budget and appropriations year. As always, please let us know if you have any questions or concerns about how the federal budget process affects your business.