Weekly Market Updates for March 14, 2012
03.14.2012 // Walt D. Custer // Industry Conditions
GDP and Electronic Equipment Regional Forecasts by Year
Thanks to my colleague Ed Henderson, the following are his most recent growth forecasts by region by year for GDP (Chart 1) and electronic equipment production (Chart 2). For details on Ed’s monthly “Henderson Electronic Market Forecast” visit www.hendersonventures.com
U.S. Electronics Demand in January
The U.S. Department of Commerce just released its “Factory Orders” report for January.
Chart 14 summarizes the annualized (12/12) and 3-month (3/12) growth rates of the North America electronics supply chain in January. The 3/12 is a leading indicator.
Global Semiconductor Sales Decline 2.7% in January with Sales Poised for Future Growth
As noted last week SICAS will no longer publish quarterly fab utilization rates (Chart 15) and two key contributors to the SIA global semiconductor statistical program (reportedly Intel & AMD) have withdrawn. Therefore, the SIA must rely on estimates for its future monthly semiconductor statistics.
Chart 16 summarizes January 3-month average semiconductor shipment growth by region and Chart 17 shows historical 3-month average regional shipments in US$. Note that regional 3/12 growth rates were continuing to deteriorate in January in all areas (Chart 18).
Looking forward, Custer’s Consulting Group semiconductor shipment leading indicator suggests that the 3/12 growth may be at its low and should be poised for recovery in a few months (Chart 19).
SIA January commentary:
The Semiconductor Industry Association (SIA), representing U.S. leadership in semiconductor manufacturing and design, announced that worldwide semiconductor sales were $23.1 billion in January 2012, a 2.7% decrease from the month prior when sales were $23.8 billion. All monthly sales numbers represent a 3-month moving average.
“The month−over−month revenue decline for January is in line with seasonal patterns,” said Brian Toohey, president, Semiconductor Industry Association. “A weakened global economy amidst inflation concerns and the European debt crisis continued to affect sales at the start of the year, but there are strong signs pointing to recovery and growth as 2012 progresses.”
Semiconductor sales are expected to improve due to positive demand drivers, an improved U.S. economic outlook and the resolution to the floods in Thailand.
Despite recent WSTS membership changes, SIA remains fully committed to the availability of robust and timely global semiconductor revenue data and will continue to publish WSTS data according to the established schedule.
Fab Equipment Spending Growth Flat in 2012; Record Spending Expected for 2013 (Chart 20)
Semiconductor fab equipment spending is expected to remain level (0% increase) in 2012 according to the latest SEMI World Fab Forecast report. Eight companies, including Samsung and Intel, will keep their fab equipment spending level above $2 billion in 2012. Fab equipment spending is estimated to be $38.85 billion for 2012 and a record $45.50 billion for 2013.
While the outlook for fab equipment spending in 2012 was negative two months ago, key spenders like Samsung increased spending to record levels; Hynix increased spending in 2012 by 23% to about US$ 3.75 billion, while UMC increased spending from $1.6 billion to $2.0 billion. In addition, Intel increased spending much more than expected, to a historic high of about $12.5 billion. If macroeconomic factors improve and other companies adjust their capex plans, then equipment spending for 2012 could even cross into positive territory.
2010 was a good year for fab construction but 2011 was even better with a 24% increase year-over-year to $6.4 billion. For 2012, spending on construction is expected to decline by about 28% to $4.5 billion. Data of the World Fab Forecast show an even further decline in 2013.
Coming out of the downturn from 2010 on, yearly capacity growth was 5% to 10% and is expected to stay modest for the foreseeable future. However, SEMI’s fab data shows rapid increases in fab equipment spending for some segments leading also to an increase in installed capacity.
While installed capacity for DRAM is expected to level out, flash capacity will grow rapidly between 2010 and 2013. The dedicated foundry sector will also undergo growth in installed capacity with the key contributors like TSMC, Globalfoundries and UMC. The recently released SEMI Fab database report enables data analysis by technology node, product type, region, company and fab by fab.
Lower construction spending compared to recent years, especially on new fabs, raises some concern about available capacity beyond 2013. Overall, the industry has tried to control installed capacity since coming out of the 2009 downturn. Now due to increasing demand, some segments, such as flash, foundry, and system LSI, are experiencing a boost in installed capacity.
Worldwide PC Shipments are on Pace to Total 368 Million Units in 2012, a 4.4% Increase from 2011 (Chart 21)
PC Market to Exhibit Higher Growth by End of 2013
Worldwide PC shipments are on pace to total 368 million units in 2012, a 4.4% increase from 2011, according to the latest forecast by Gartner, Inc. PC shipments are forecasted to see higher growth by the end of 2013, when shipments are expected to reach more than 400 million units.
"PC shipments will remain weak in 2012, as the PC market plays catch up in bringing a new level of innovation that consumers want to see in devices they purchase," said Ranjit Atwal, research director at Gartner. "The real question is whether Windows 8 and ultrabooks will create the compelling offering that gets the earlier adopter of devices excited about PCs again."
In addition, while the economic environment and supply issues played a key part in the weaker PC market, it was a lesser concern to PC vendors compared to the far greater issue of changing consumer dynamics.
Gartner analysts said that 2011 redefined the landscape of the device market. "The use of applications such as e-mail, social networking and Internet access, that were traditionally the domain of the PC, are being used across media tablets and smartphones, making these devices in some cases more valued and attractive propositions," said Mr. Atwal. "Consumers will look at a task that they have to perform, and they will determine which device will allow them to perform such a task in the most effective, fun and convenient way. The device has to meet the user needs not the other way round."
Gartner expects ultrabooks will garner greater attention in the latter half of 2012, as the industry looks for this platform to reinvigorate the mobile PC form factor. "However, PCs will face more competition as we see new media tablets based on operating systems from Android and Microsoft, as well the new iPad," Mr. Atwal said.
"Moreover, we expect the shift to the personal cloud will accelerate as consumers increasingly adopt cloud-based services as part of their digital ecosystem," Mr. Atwal said. "The evolution of the personal cloud will challenge vendors across all mobile devices markets and add to the hurdles for PC vendors to overcome to revive the PCs and differentiate them from tablets. The creation of content capabilities of PCs may not be enough to counteract the better content consumption capabilities of media tablets."
Mature PC markets will continue to be replacement market driven and their volumes will be much less than their emerging market counterparts.
"Emerging markets are key to driving worldwide PC growth in both the short and long-term, and our expectation is that 2012 and then 2013 onwards will be supported by growth in emerging markets as their share increases from just over 50% in 2011 to nearly 70% in 2016," said Mr. Atwal.
"Emerging markets have very low PC penetration and even with the availability of other devices we still expect a steady uptake of PCs."
Worldwide Disk Storage System Markets Post Solid Gains for the Fourth Quarter and 2011 – IDC (Chart 22)
Worldwide external disk storage systems factory revenues posted year-over-year growth of 7.7%, totaling just under $6.6 billion, in the fourth quarter of 2011 (4Q11), according to the International Data Corporation (IDC) Worldwide Quarterly Disk Storage Systems Tracker. For the quarter, the total disk storage systems market grew to just over $8.5 billion in revenues, representing 3.5% growth from the prior year's fourth quarter. Total disk storage systems capacity shipped reach 6,279 petabytes, growing 22.4% year-over-year.
"The external disk storage systems market ended 2011 with strong year-over-year revenue growth that helped to push the market to 10.6% growth for the entire year," said Liz Conner, senior research analyst, Storage Systems. "Helping to drive the overall market growth were the emerging regions, which posted high, sustained growth in 2011. In contrast, the mature regions saw growth soften as their economies entered the recession recovery phase. Another factor underlying the 2011 growth, and specifically the fourth quarter gain, was the delayed impact of the drive shortage caused by the Thailand floods. The enterprise storage market is expected to start feeling the brunt of this shortage in 2012, resulting in minimal impact on the fourth quarter and 2011 as a whole."
Worldwide External Controller-based Disk Storage Market Grew 4.8% in Fourth Quarter of 2011 – Gartner (Charts 23 & 24)
Worldwide external controller-based (ECB) disk storage vendor revenue totaled $5.9 billion in the fourth quarter of 2011, a 4.8% increase from revenue of $5.6 billion in the fourth quarter of 2010, according to Gartner, Inc.
"The fourth quarter 2011 results represent the ninth consecutive quarter of revenue growth, but fell short of Gartner's expectations of a 7.6% year-over-year increase," said Roger Cox, research vice president at Gartner. "Historically, the fourth quarter produces 29.2% to 29.7% of the total year's vendor revenue, but the fourth quarter of 2011 came in shy at 27.9% because of three reasons — economic weakness in North America and EMEA, some hard-disk drive supply problems caused by the October 2011 flood in Thailand, and the inability of HP and IBM to keep pace with their improving performance during the first nine months of 2011."
EMC, NetApp, Hitachi/Hitachi Data Systems (HDS) and Fujitsu beat the year-over-year market growth rate in the fourth quarter. EMC gained share with its VNX, VMAX and Data Domain platforms, as well as the accretive influence of the Isilon acquisition. After a couple of spotty quarters, and with its platform portfolio (FAS6000/3000/2000) fully in place, NetApp realized above market results from its core ONTAP-based unified storage platforms. With best in class year-over-year revenue growth performance, the high-end VSP remained Hitachi/HDS's primary strength. Fujitsu's entry to midrange modular ETERNUS DX-series produced solid above market results, propelling a 22.7% annual growth rate.
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