Weekly Global Update for January 8, 2014
01.08.2014 // Walt D. Custer // Industry Conditions
Global Expansion Continues in December, but Signs of Slowing
Manufacturing growth as measured by the Purchasing Managers Index expanded globally in December with Europe, Taiwan, South Korea and Japan accelerating and the U.S. and China slowing a bit. All major regions remained in "growth" territory with PMIs greater than 50 (Chart 1).
On a 3/12 growth basis (comparing 4Q’13 to 4Q’12) China growth appears to have peaked (Chart 2) and for the major Asian countries (Chart 3) only Japan showed improved 4Q’13/4Q’12 growth.
U.S. December 2013 ISM Purchasing Managers Index 57.0 (Chart 4)
Economic activity in the U.S. manufacturing sector expanded in December for the seventh consecutive month, and the overall economy grew for the 55th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
The report was issued by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 57%, the second highest reading for the year, just 0.3 percentage points below November's reading of 57.3%. The New Orders Index increased in December by 0.6 percentage points to 64.2%, which is its highest reading since April 2010 when it registered 65.1%. The Employment Index registered 56.9%, an increase of 0.4 percentage point compared to November's reading of 56.5%. December's employment reading is the highest since June 2011 when the Employment Index registered 59%. Comments from the panel generally reflect a solid final month of the year, capping off the second half of 2013, which was characterized by continuous growth and momentum in manufacturing." Growth was reported for Computer & Electronic Products but contraction occurred for Electrical Equipment, Appliances & Components.
Global Semiconductors Sales Increased 6.8% y/y to $27.24 Billion in November 2013 (Charts 5-12)
Worldwide sales increase for ninth straight month; Americas continue to lead growth
The Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors reached $27.24 billion for the month of November 2013, an increase of 6.8% over November 2012 when sales were $25.51 billion and an uptick of 0.6% over the previous month’s total. The global industry notched its ninth consecutive month of increasing sales in November, led largely by the Americas, which grew by 18.6% year-over-year and 4.2% month-over-month. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.
"Buoyed by sustained growth in the Americas and Asia Pacific and a recent rebound in Europe and Japan, the global semiconductor industry has shown increasing strength in 2013 and is on pace for record revenue," said Brian Toohey, president and CEO, Semiconductor Industry Association. "With solid momentum across all regions and most product categories, the industry is well-positioned for a strong start to the new year."
Regionally, sequential monthly sales increased in the Americas (4.2%), Europe (2.0%), and Japan (0.1%), but fell slightly in Asia Pacific (-1.0%). Compared to November 2012, sales increased in the Americas (18.6%), Europe (10.9%), and Asia Pacific (5.5%). Sales in Japan decreased (-8.8%) compared to November 2012, in part due to the devaluation of the Japanese yen, but the region has been closer to last year’s pace in recent months.
Global Semiconductor Sales in 2013 $317.9 billion, up 4.9% from $302.9 Billion in 2012
Following a 2.5% decline in 2012, the global semiconductor market has regained its footing in 2013 with revenue set to expand by nearly 5% because of the strong performance of the memory sector.
Global semiconductor sales in 2013 will amount to $317.9 billion, up 4.9% from $302.9 billion in 2012, according to preliminary estimates from the Semiconductor Value Chain service at IHS. Market growth is being driven by the strong expansion of the dynamic random access memory (DRAM) and NAND flash memory markets, which are expected to rise by 35.0% and 27.7%, respectively, in 2013.
Partly because of its success in the booming DRAM and NAND markets, U.S. based Micron Technology Inc. will grow by an industry-leading 109.2% in 2013, catapulting the company up the semiconductor market's ranks to number four in 2013, rising from number ten in 2012.
Memory chips have come to the rescue of the semiconductor business in 2013. In particular, solid pricing and expanding demand for DRAM and NAND in smartphones and tablets have caused revenue for these memory devices to surge. Without these two high-performing product segments, the semiconductor industry would attain zero growth this year.
Big growth for Micron
Micron is expected to end the year with $14.2 billion in semiconductor revenue, more than doubling its $6.8 billion total in 2012. In addition to its success in DRAM and NAND, Micron's growth in 2013 is being propelled by its acquisition of Elpida Memory.
Out of the more than 150 semiconductor suppliers tracked by IHS, no other company will grow more than Micron in 2013. Micron's share of the total semiconductor market will more than double to 4.5% in 2013, up from 2.2% in 2012.
Also benefiting from the memory boom is SK Hynix of South Korea, whose chip revenue is on track to expand by 48.7% in 2013. The company will jump to No. 5 in the semiconductor market rankings in 2013, up from No. 7 in 2012. SK Hynix's performance is all the more outstanding since it was entirely driven by organic sales growth-and not by any acquisitions.
Qualcomm closes in on market leaders
Qualcomm Inc.'s incredible success in the wireless world continues to drive it to the top of the semiconductor industry. The U.S.company is set to attain 31.6% semiconductor growth in 2013, causing it to gain 1.2 percentage points of share and take 5.5% of total semiconductor market revenue. Number three ranked Qualcomm's strong growth in 2013 will allow it to narrow its market share gap with industry leaders Intel Corp. and Samsung.
Some semiconductor suppliers suffer
Sony, Renesas Electronics, and Rohm Semiconductor are set to deliver disappointing results with expected declines of 28.1%, 15.3% and 14.3%, respectively. As a result, Renesas will drop all the way to number ten, down from number six in 2012, and Sony will fall to No. 15, declining from No. 11. Rohm Semiconductor will completely fall out of the ranks of the Top 20.
Texas Instruments and Nvidia also are struggling in 2013 with the companies suffering declines of 5.5% and 5.6%, respectively.
Intel will maintain its status as the number one semiconductor supplier, but its projected semiconductor revenue decline of 1.0% means it will drop from its historically high 15.7% share of the market in 2012 to 14.8% in 2013.
Wireless winning streak
Of the major application markets for semiconductors, the hot wireless segment will drive the largest increase in semiconductor consumption of chips in 2013. Semiconductor revenue from wireless communications products are projected to grow by 11.7% in 2013.
The next fastest-expanding application will be industrial electronics, with double-digit semiconductor sales growth of 10.7%. Meanwhile, semiconductor revenues driven by consumer electronics products will decline, with a drop of 5.2%.
Asia-Pacific will lead all regions in terms of consumption of semiconductors with growth of 8.9% in 2013. The Americas will not be far behind with a 5.0% increase. Japan will experience a decline of 7.9%.
Overall, 53% of the more than 150 companies tracked by IHS are expected to expand their semiconductor revenue in 2013, while 47% will decline.
Semiconductor winners and losers
Beyond the DRAM and NAND segments, other products that will yield healthy growth in 2013 are expected to be light-emitting diodes (LEDs) with 9.5%, complementary metal-oxide semiconductor (CMOS) image sensors at 5.7%, standard logic up by 4.2%, sensors and actuators by 3.6% and analog application-specific integrated circuits with 3.5%.
Markets experiencing significant declines will be charge-coupled device (CCD) image sensors, which are expected to plunge by 40.6%; specialty memory, with a 19.6% drop; digital signal processors, down by 16.5%; SRAM declining by 15.9%; NOR flash memory falling by 14.8% and logic ASICs, with an 11.6% decrease.
Mil/Aero Industry to Grow 5% in 2014 (Chart 13)
Although overall revenue growth in the aerospace and defense (A&D) industry is projected to grow 5% in 2014, global revenues for defense companies is on a downward trend, falling 1.3% in 2012 and 1.9% in 2011, according to Deloitte Touche Tohmatsu Limited (DTTL). The good news: Commercial aerospace demand continues to grow.
While global defense spending is shrinking due to reduced armed conflict in Iraq and Afghanistan and cost concerns, according to DDTL, defense spending is increasing in several regions including the Middle East, India, China, Russia, South Korea, Brazil, and Japan. DDTL’s report 2014 Global Aerospace and Defense Outlook also reveals that global revenues for defense companies in 2013 will fall about 2.5%. Analysts believe the continued decline in military spending will result in new revenue streams for the military/aerospace industry in the areas of intelligence, precision strike technologies and cyber security. The report also noted potential opportunities in adjacent markets, new commercial ventures, and acquisitions of synergistic businesses.
"It is anticipated that global revenues for the defense sector will track to similar levels as in the past two years, particularly in the U.S. and Europe," said Tom Captain, DTTL Global Aerospace and Defense Sector Leader, in a statement.
Still, the report finds there is significant demand for new commercial aircraft. DTTL projects high single to double-digit growth rates in the commercial aerospace subsector in 2014.
The commercial aerospace sector is expected to set records for aircraft production, driven by the "accelerated replacement cycle of obsolete aircraft with next generation fuel-efficient aircraft, and growing passenger travel demand, especially in the Middle East and the Asia Pacific regions," said DDTL.
This demand also is expected to drive improvements in several areas: engineering design, manufacturing, and supply chain management capabilities.
"2014 and the rest of the decade promises to deliver even more exciting technology innovations that will focus on the way consumers travel by commercial aircraft, communicate via satellites, shop over the internet, conduct armed conflict when necessary, and assist with humanitarian missions to far reaches of the globe," stated Captain.
Global Tablet Shipments Will Reach 289 Million Units in 2014 (Chart 14)
Digitimes Research estimates that in 2014 global tablet shipments will reach 289 million units. This report analyzes the main players, their strategies and shipments forecasts for 2014, as well as other factors contributing to either growth or decline in various segments within the tablet market, with a particular focus on Apple, Google, Samsung, and Microsoft, along with whitebox vendors. Moreover, the report discusses Taiwan tablet EMS/ODM makers and their shipment forecasts, along with their related market shares and shipment growth.
Global Flip Chip Technology Market was $18.9 Billion in 2012, increasing to $20.1 Billion in 2013
According the "Flip Chip Technologies and Global Markets" report from BCC Research, the global market for flip chip technology was valued at $18.9 billion in 2012 and is expected to increase to $20.1 billion in 2013. BCC Research projects the market to grow to nearly $36.5 billion by 2018, and register a five-year compound annual growth rate of 12.7% from 2013 to 2018.
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