What is the impact of the Federal Reserve's interest rate cut on the connector industry?

Will the Fed's rate cut create a butterfly effect on this side of the Pacific?
A 50 basis point cut has put the Federal Reserve in the spotlight, making it a leading figure in the industry. This rate cut will significantly affect various sectors such as real estate, consumption, and finance, and many media outlets and institutions have provided their analyses.

From the perspective of the connector and cable harness industry, the main effects of the rate cut are on production, manufacturing, and commodity trading related to connectors. In simple terms, the U.S. dollar's rate cut will lead to a flow of funds back to the renminbi, providing more abundant capital for emerging industries, which is a major boon for manufacturing, including the connector sector. The rate cut will also have some impact on gold and copper prices, which are crucial for connector manufacturing.

Although gold and copper prices greatly affect the connector industry, the implications of the rate cut extend beyond raw material prices, influencing product export competitiveness and the overall operations of the connector sector.

For U.S.-based connector companies, this rate cut directly reduces financing costs, aiding in production expansion for connectors. At the same time, the increased investment and consumption spurred by the rate cut will further promote prosperity in the upstream and downstream sectors of the connector industry. Major connector giants like Amphenol, Molex, Aptiv, TE Connectivity, and Commscope are likely to be direct beneficiaries.

For domestic connector companies, the impact of the rate cut is relatively complex. Yu Xiang, a special expert at Tsinghua University's Strategic and Security Research Center and a senior expert at the China Construction Bank Research Institute, noted in the Global Times that "the renminbi will face upward pressure in the short term, which may weaken the competitiveness and profit margins of Chinese goods, including connectors, increasing operational pressures on enterprises." From the perspective of product exports, the competitive advantage of domestic connectors in the international market may weaken after the rate cut.

On the other hand, the core of the rate cut is to stimulate economic growth in the U.S., which can also help the global economy to some extent shake off its downward trend and boost consumption. For categories like consumer electronics and new energy vehicles, which have relatively complete domestic supply chains, the increased demand brought about by the rate cut will also benefit connector manufacturers.