U.S. & Japan Electronics Updates

12.28.2011 // Walt D. Custer // Industry Conditions

U.S. November Electronics Shipments, Orders & Inventories

Based upon last week’s U.S. Department of Commerce’s “Durable Goods” report:

  • Electronic equipment book/bill was 1.01 (3-month avg.) and 1.0 for the month of November alone
    (Chart 1).
  • The 3/12 growth of electronic equipment orders improved while the shipment 3/12 growth rate declined (Chart 2).
  • On a US$ basis both electronic equipment orders and shipments declined sequentially from October to November (Chart 3).
  • Communication (Chart 4) and computer (Chart 5) equipment orders and shipments declined in November. Results for the other electronics categories won’t be released until next week in the “Factory Orders” report.
  • The ratio of inventories/orders increased for electronic equipment (Chart 6).
  • Defense capital goods orders improved very slightly (Chart 7) while their book/bill approached 1.0
    (Chart 8).
  • Non-defense aircraft & parts shipments dropped from October to November while defense aircraft/parts shipments improved (Chart 9).


U.S. Industrial Production Up 3.7% Year-on-Year

(Chart 10)

U.S. industrial production increased 3.7% from November 2010 to November 2011 but declined 0.2% sequentially from October to November.


U.S. Leading Economic Indicator Rises in November; Consumer Confidence up Sharply

The Conference Board's gauge of the outlook for the next three to six months rose 0.5% after a 0.9% October increase.

The gain in the index is “pointing to continued growth and possibly gaining momentum in 2012” said Conference Board economist Ken Goldstein. "However, this somewhat positive outlook for the domestic economy is at odds with a global economy that appears to be losing steam."

November confidence jumped from 40.9 in October to 56.0 in November (Chart 11).


Japan Update

Japanese-made electronic equipment shipments continued to slump (Chart 12) (Chart 13). So did printed circuit boards and other components (Chart 14) (Chart 15). However the 3/12 growth rates of PCBs and components may have reached bottom (Chart 16) (Chart 17). Real growth does resume until the 3/12 exceeds 1.0. The current upward turn in the 3/12 just means that component sales are still deteriorating, but at a slower pace.


Intellectual Property Court Dismisses Administrative Suit Challenging Isola Group Patent

The Taiwanese Intellectual Property Court confirmed the validity of Isola's Taiwan patent no. 413659 (Fillers for Improved Epoxy Laminates) by dismissing an administrative suit filed by Taiwan Union Technology Corporation challenging Isola's patent.

Commenting on the decision, Ray Sharpe, Isola's CEO, stated, "We are pleased to be able to bring positive closure to the challenge to our patented filler technology in Taiwan. This decision validates our patent and gives Isola the right to preclude other laminators from using talc based fillers covered by our patents in their products in Taiwan."


Global high-tech industries to see rebound in 2H’12, says Applied Materials Executive

Global high-tech industries will start heating up in the second half of 2012, with the semiconductor sector to trigger the business rebound driven by demand for mobile applications, said president Erix Yu for Applied Materials Taiwan, while commenting on the existing oversupply problems in most end markets the company serves.

Both panel and solar sectors, however, will be struggling to recover due to more severe oversupply situations in the markets, Yu indicated. Taking Applied's orders in its fiscal fourth quarter as an example, orders for display equipment fell as much as 90% while those for the solar segment declined over 70%, Yu revealed.

Industry observers generally have a pessimistic view towards the business outlook for the solar PV and TFT-LCD industries in 2012, given the challenging market conditions.


Taiwan Flexible PCB Firms Benefiting from Orders Transferred Due to Thailand Floods

Taiwan-based flexible PCB manufacturers including Career Technology and Flexium Interconnect are benefiting from orders shifted from clients of Japan-based fellow firms Nippon Mektron and Fujikura, which continue to suspend operations at their factories in Thailand due to damage caused by the country's flooding, according to industry sources.

Nippon Mektron's and Fujikura's halted facilities in Thailand are unlikely to resume operations until the second quarter of 2012, the sources indicated. Alternative suppliers including Career and Flexium reportedly have been approached by their clients, the sources said, adding that the shifting of orders would carry on through the first half of 2012.

Thanks to the shifting of orders, these major Taiwan-based FPCB makers are expected to see on-quarter revenue growth in the fourth quarter, the sources said. Previously, fourth-quarter revenues of the players were anticipated to register sequential drops.


Japan-based SEMI Equipment Manufacturers Book/Bill was 0.97 for November 2011, up from 0.83 in October

(Chart 18)

Japan-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 0.97 for November 2011, up from 0.83 in October, according to the Semiconductor Equipment Association of Japan (SEAJ).

November worldwide bookings (3-month average) totaled JPY80.85 billion (US$1.04 billion), down 0.4% from JPY81.19 billion in October and 30.6% lower than JPY116.53 billion in November 2010.

Worldwide billings averaged JPY83.35 billion over three months, 14.6% lower than the revised October figure of JPY97.59 billion and down 22.3% from JPY107.34 billion in November 2010.


Worldwide Semiconductor Revenue Grew 1% to Reach $302 Billion in 2011

(Chart 19)

Semiconductor Industry's Strong Start Runs Out of Steam as Year Progresses

Worldwide semiconductor revenue grew 0.9% from 2010, reaching $302 billion in 2011, according to preliminary results by Gartner, Inc. After a strong start to the year, worries about the strength of the macro economy slowed equipment and semiconductor orders in 2011.

"The industry did well in the early part of the year, in many cases entering the year with backlog from an exuberant 2010," said Stephan Ohr, semiconductor research director at Gartner. "But uncertainty about the state of the macro economy set in at the midpoint of the year. Consumers held off purchases, and infrastructure expansion plans languished as governments resisted assuming more debt. Equipment inventories began to build as the year progressed, with resulting ripples throughout the semiconductor industry."


Global Media Tablet Shipments up 264.5% YoY to 18.1 Million Units in Q3

Worldwide media tablet shipments into sales channels rose by 23.9% quarter-on-quarter (QoQ) and 264.5% year-on-year (YoY) in the third calendar quarter of 2011 to 18.1 million units, according to International Data Corporation (IDC).

Despite these slightly lower-than-expected shipments (19.2 million units) in the third quarter, IDC said it sees strong demand in the fourth quarter and has increased its worldwide shipment forecast for 2011 to 63.3 million units, up from a previous projection of 62.5 million units.

Apple continued to drive worldwide media tablet shipments in the third quarter. The company shipped 11.1 million units in the third quarter, up from 9.3 million units in the second quarter. That represents a 61.5% worldwide market share (down from 63.3% in the second quarter), IDC said. HP entered and left the market in the third quarter with its TouchPad product. The company shipped 903,354 units to grab a 5% share of the worldwide market, No.3 behind Samsung`s 5.6% market share.

After IDC updated its taxonomy to move LCD-based devices such as Barnes & Noble`s Nook Color into the media tablet category, Barnes & Noble shipped 805,458 units to achieve the No. 4 spot with a 4.5% market share. ASUS rounded out the No. 5 with a 4% share.

After ceding share in the third quarter (down to 32.4% from 33.2% the previous quarter), IDC said it expects Android to make dramatic share gains in the fourth quarter growing to 40.3%. That increase is due mostly to the entrance of Amazon`s Kindle Fire, and to a lesser extent the Barnes & Noble Nook Tablet, into the market. The share increase comes at the expense of Blackberry (slipping from 1.1% to 0.7%), iOS (slipping from 61.5% to 59.0%), and webOS (slipping from 5% to 0%). Despite HP`s announcement last week that it would contribute webOS to the Open Source community, IDC does not believe the operating system will reappear in the media tablet market in any meaningful way going forward.

Despite the loss of LCD-based products (relocated into the media tablet category), ePaper-based eReaders continued to see strong shipment growth. In the third quarter, the worldwide total improved to 6.5 million units, up from 5.1 million units in the second quarter, representing QoQ growth of 27% and YoY growth of 165.9%, IDC said. IDC expects growth to continue in the fourth quarter thanks to new products introductions and price cuts from the major vendors.


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Featured Contributor:
Walt D. Custer

Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.

Custer Consulting Group

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