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Weekly Global Update for October 30, 2013

10.30.2013 // Walt D. Custer // Industry Conditions

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October PMI Leading Indicators are Mixed (Chart 1)

Markit Electronics recent "flash report" showed an October slowing in U.S. manufacturing growth and modest improvement in Europe and China. Final results for all regions will be available in early November.

Source: www.markiteconomics.com

World and Regional Electronic Equipment Shipments (Charts 2-5)

Custer Consulting Group has created a new world electronic equipment model harmonized with Electronic Outlook Corporation (Ed Henderson)’s Electronics Industry Outlook annual data. Monthly shipments by key country in US dollars are included from 2002 to the present and will be updated each month as new country results are available. Regions covered are the USA, Europe, Japan, China/Taiwan, Rest of Asia and Rest of World plus Total World. The model is driven by country-specific monthly statistics and then monthly and annual data are converted to US dollars calculated at fixed 2012 exchange rates (to remove effect of currency fluctuations on growth rates).

World and Regional Printed Circuit Board Shipments (Charts 6-9)

Custer Consulting Group has also produced an upgraded world PCB model harmonized with the 2012 IPC World Market report that details historical and current monthly PCB shipments for North America, Europe, Japan, China/Taiwan, South Korea, Rest of Asia and Rest of World plus Total World from 1999 to present. It is calculated at fluctuating exchange rates so that it matches the IPC World Market estimate totals by year. It will also be updated monthly as new country-specific PCB data are released.

Notes on the Above Two Models

  • Ed Henderson of Henderson Ventures & Custer Consulting Group collaborated on both these models. Forecasts and the actual historical monthly and annual data are available. E-mail walt@custerconsulting.com or hen.ven@comcast.net for details.
  • You can match these models’ monthly data to your company’s sales by region to assess your firm's market opportunity and performance by major country.

U.S. Electronic Equipment Results for September

Due to the recent U.S. government shutdown full August and September electronic equipment and component shipments, orders and inventories will not be available from the Department of Census until November 4. However, here is partial data from the just-released September "Durable Goods" report.

  • The U.S. electronic equipment 3-month average book/bill ratio declined but still remained above 1.0 in September (Chart 10).
  • Electronic equipment order and shipment growth declined on a 3/12 basis (Chart 11) in September as both orders and shipments remained weak (Chart 12).
  • The ratio of electronic equipment inventories/orders continued to climb (Chart 13) – a worrisome sign of weaker demand and inventory overstocking.
  • Defense capital goods (Chart 14), communication equipment (Chart 15) and computer equipment (Chart 16) orders all rose modestly from August to September 2013.
  • Semiconductor shipments to North America are out of balance with domestic electronic equipment growth suggesting that North American semiconductor shipments will experience an imminent downward correction (Chart 17).

Source: www.census.gov/indicator/www/m3/

Japanese Electronics Update

Based on JEITA’s recent release of August Japanese domestic electronic equipment, component and device shipments:

  • Electronic equipment shipments remained weak (Chart 18). They were down 14% in August 2013 vs. August 2012.
  • PCB shipments declined slightly from July to August after generally expanding in early 2013 (Chart 19).
  • "Devices" are in positive growth territory but components are still below the growth mark of a 3/12=1 (Chart 20).

Source: www.jeita.or.jp/

North American Semiconductor Equipment Industry September 2013 Book/Bill=0.97 (Charts 21 & 22)

North America-based manufacturers of semiconductor equipment posted $975.3 million in orders worldwide in September 2013 (3-month average basis) and a book-to-bill ratio of 0.97, according to SEMI.

The 3-month average of worldwide bookings in September 2013 was $975.3 million, 8.3% lower than August 2013 and 6.8% higher than September 2012.

The 3-month average of worldwide billings in September 2013 was $1.01 billion, 7.1% lower than August 2013 and 13.6% lower than September 2012.

"The book-to-bill ratio reflects seasonal softening and near-term deferral in capital spending in some segments of the industry," said Denny McGuirk, president and CEO of SEMI. "We expect that market demand for semiconductors will drive continued capacity investment in 2014."

Source: www.semi.org

Worldwide PC, Tablet and Mobile Phone Shipments to Grow 4.5% in 2013 as Lower-priced Devices Drive Growth (Charts 23 & 24)

PC shipments to decline 8.4% in 2013, while tablet shipments increase 53.4%

Worldwide combined shipments of devices (PCs, tablets and mobile phones) are projected to reach 2.32 billion units in 2013, a 4.5% increase from 2012, according to Gartner, Inc. The market is being driven by a shift to lower-priced devices in nearly all device categories.

Worldwide shipments of traditional PCs (desk-based and notebook) are forecast to total 303 million units in 2013, an 11.2% decline from 2012, and the PC market, including ultramobiles, is forecast to decline 8.4% in 2013. Mobile phone shipments are projected to grow 3.7%, with volume of more than 1.8 billion units.

Tablet shipments are expected to grow 53.4% this year, with shipments reaching 184 million units. Premium tablets are faced with continued price decline in the 7-inch form factor as a larger number of consumers prefer smaller form factors when it comes to content consumption.

A recent consumer study that Gartner conducted in Brazil, China, France, Germany, Italy, the U.K., the U.S. and Japan confirmed Gartner's long-standing assumption that smaller is better when it comes to consumer tablets. The survey showed that the average screen sizes of the tablets in use across the countries ranged from 8.3 inches to 9.5 inches. Forty-seven percent of the 21,500 consumers surveyed owned a tablet that was 8 inches or less.

As the third-quarter earnings season comes to an end, it is clear that our caution for 2013 was well placed as vendors are transitioning their portfolios to the new Intel processors Bay Trail and Haswell, as well as rolling out products that are based on the Windows 8.1 release.

"While consumers will be bombarded with ads for the new ultramobile devices, we expect their attention to be grabbed but not necessarily their money," said Carolina Milanesi, research vice president at Gartner. "Continuing on the trend we saw last year, we expect this holiday season to be all about smaller tablets as even the long-term holiday favorite — the smartphone — loses its appeal."

"Although the preference is for dedicated devices, we see the opportunity for hybrid ultramobile to marry the functionality of a PC and the form factor of the tablet. Users that have to balance work and play will find that the advantage of buying and carrying one device outweighs the compromise in the full experience that single devices can deliver," said Ranjit Atwal, research director at Gartner. "Users who are not limited by their disposable income will likely have a basic tablet as a companion device to their ultramobile on which most of their consumption activities will take place."

The mobile phone market will continue to experience steady growth, but the opportunity for high average selling price (ASP) smartphones is now ending. Growth is expected to come from mid-tier smartphones in mature markets and low-end Android smartphones in emerging markets.

Microsoft's acquisition of Nokia doesn't have a major impact on the forecast, because Gartner already assumed that Nokia would have accounted for the vast majority of Windows Phone share throughout the forecast, with only minimal volume coming from other OEMs, such as HTC or Samsung.

"Windows Phone challenges in the smartphone market remain the same, with the need to bring on board more developers and enrich the ecosystem, as well as turning the Windows Phone brand into a cool smartphone brand. While there are clear benefits to the acquisition, such as channel strength, carrier relationship and emerging-market knowledge, the brand and ecosystem do not directly benefit from it," said Milanesi.

The end of Windows XP support in 2014 isn't expected to impact device sales, as Gartner says 90% of large enterprises have either migrated or are migrating to Windows 7 or Windows 8.

Android will remain the leading device operating system (OS), as it is on pace to account for 38% of shipments in 2013 (see Table 2). The Windows OS is projected to decline 4.3% in 2013 as a result of the decline in traditional PC sales, but will return to growth in 2014 with device OS shipments increasing 9.7%.

Top technology providers see wearable devices as an important market opportunity; however, Gartner expects that wearable devices will primarily remain a companion to mobile phones. Less than 1% of consumers will actually replace their mobile phones with a combination of a wearable device and a tablet by 2017.

"For wearables to be successful, they need to add to the user experience by complementing and enhancing what other devices already offer. They also need to be stylish yet practical, and most of all hit the right price," said Milanesi. "In the short term, we expect consumers to look at wearables as nice to have rather than a "must have," leaving smartphones to play the role of our faithful companion throughout the day."

Source: www.gartner.com

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Statements of fact and or opinions expressed in MarketEYE by its contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc.

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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