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Weekly Global Update for February 20, 2014

02.18.2014 // Walt D. Custer // Industry Conditions

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Global, Taiwan/China & Europe Updates; 2013 Mobile Phone Sales by Vendor; NAND and DRAM Market; 2013 Silicon Wafer Shipments

Global electronics sales are now in their winter “slow period.” 2013 finished strongly with electronic equipment shipments up an estimated 5.4% in 4Q’13 versus 4Q’12 (Charts 1 & 2). However in January electronic equipment revenues experienced their normal post-holiday seasonal downturn (Chart 3).

Partially muting this year’s seasonal downturn and thanks to generally stronger business conditions and some “stocking up” in Asia prior to Lunar New Year, this January’s electronic equipment shipments were significantly better than last year’s - rising 7.6% compared to January 2013.

Electronic component sales also exhibit strong seasonality. Printed circuit board monthly revenues had their seasonal peak in November (Chart 4) – a bit earlier than electronic equipment. Typically components “lead” electronic equipment by 1-2 months in the ups and downs of the business cycle.

Source: Custer Consulting Group based on aggregated company financial reports

Taiwan/China January Results

Monthly sales of Taiwan-listed OEMs (many of which manufacture in China) peaked in December and then began their normal post-Christmas seasonal decline in January (Chart 5). As previously noted this year’s January slowdown was partially muted by stock building prior to the February Lunar New Year holidays.

Further Taiwan/China January details:

  • Motherboard (Chart 6) and ODM (Chart 7) sales mirrored the January OEM slowdown.
  • Wafer foundry sales increased (Chart 8) while memory (Chart 9) and passive component monthly revenues (Chart 10) held steady.
  • Package & Test (Chart 11) and PCB (Chart 12) sales declined but rigid (CCL) laminate demand (Chart 13) improved slightly.

Source: Financial reports of Taiwan stock exchange listed companies

Europe: Good Fourth Quarter Despite a December Slowdown

Most product groups in the European electronics supply chain had decent 4Q’13 versus 4Q’12 growth (Chart 14). December however showed weaker demand.

Electronic equipment (Chart 15), motor vehicles (Chart 16), aircraft (Chart 17), instruments (Chart 18), medical electronics (Chart 19), PCB assembly (Chart 20) and wiring devices (Chart 21) all had a December sales decline.

Source: Eurostat

Smartphone Surpass Feature Phones Sales for First Time (Charts 22-29)

  • Smartphones Accounted for 57.6% of Total Sales in Fourth Quarter of 2013
  • Sales of Android Phones will Approach One Billion Units in 2014

Worldwide sales of smartphones to end users totaled 968 million units in 2013; an increase of 42.3% from 2012 according to Gartner, Inc. Sales of smartphones accounted for 53.6% of overall mobile phone sales in 2013, and exceeded annual sales of feature phones for the first time.

Smartphone sales grew 36% in the fourth quarter of 2013 and accounted for 57.6% of overall mobile phone sales in the fourth quarter, up from 44% year-over-year.

In the fourth quarter of 2013, mobile phone sales in mature regions fell due to weaker demand. "Mature markets face limited growth potential as the markets are saturated with smartphone sales, leaving little room for growth with declining feature phone market and a longer replacement cycle," said Anshul Gupta, principal research analyst at Gartner. "Lack of compelling hardware innovation has further exacerbated replacement cycles for high-end smartphones in 2013 because consumers don't find enough reasons to upgrade."

Worldwide mobile phone sales to end users totaled 1.8 billion units in 2013, an increase of 3.5% from 2012. Users bought 490.3 million mobile phones in the fourth quarter of 2013, an increase of 3.9% compared with the same quarter in 2012.

Source: www.gartner.com

Android and iOS Continue to Dominate the Worldwide Smartphone Market with Android Shipments Just Short of 800 Million Units in 2013 (Chart 30)

The smartphone market passed an important milestone in 2013 when worldwide shipments surpassed the one billion mark for the first time, driven by continued momentum from Android and iOS. According to the International Data Corporation Android and iOS accounted for 95.7% of all smartphone shipments in 4Q’13, and for 93.8% of all smartphone shipments for the year. This marked a 4.5-point increase from the 91.2% share that the two platforms shared in 4Q’12, and a 6.1-point increase from the 87.7% share they had in 2012.

While smartphone market growth remained strong in 2013, it should be noted that the era of double-digit annual growth has only a few years remaining. In the meantime, handset vendors are doing all they can to capture demand while it is still present. Worldwide smartphone marketing campaigns continue to stay focused on flagship devices like the iPhone 5S, Galaxy Note 3, and the HTC One, yet research shows that consumer buying is rapidly shifting toward products with significantly lower price points.

"In 2013 we saw the sub-$200 smartphone market grow to 42.6% of global volume, or 430 million units," said Ryan Reith, Program Director with IDC's Worldwide Quarterly Mobile Phone Tracker. "While the market moves downstream to cheaper products it makes sense for Samsung and others to continue their marketing investments geared toward high-end products. These efforts build crucial brand perception while having less expensive alternatives that closely relate to these top products helps to close the deal.

Source: www.idc.com

4Q’13 NAND Flash Market (Chart 31)

Micron Technology was the third largest NAND flash supplier in the world in the fourth quarter of last year, replacing SK Hynix. Hynix suffered a loss of production capacity after a fire at its plant in Wuxi in China's Jiangsu province in early September 2013.

In 4Q’13 Micron's sales generated by its NAND flash operations rose 9.7% from a quarter earlier to US$957 million, while Hynix's NAND flash revenue for the fourth quarter fell 17% to US$730 million. Micron's global market share for the fourth quarter rose to 15.5% from the third quarter's 11.1%, while Hynix's market share fell to 11.8% from 14.1%.

Samsung Electronics retained the title as the world's largest NAND flash maker in the fourth quarter, with a market share of 39.8%, compared with 38.4% in the previous quarter. Samsung's NAND flash revenue for the fourth quarter rose 1.8% from the third quarter to US$2.46 billion.

Toshiba was ranked second, with a 25% market share in the fourth quarter, down from the third quarter's 28.9%. The Japanese firm's NAND flash sales for the October-December period fell 15% from a quarter earlier to US$1.54 billion.

Source: www.trendforce.com

DRAM Industry Total Output value Increased 4.8% q/q to US$9.75 Billion in 4Q’13 (Charts 32-34)

The fire at SK Hynix’s plant in 4Q’13 caused decreased DRAM output, This reduced supply caused DRAM ASP to rise, pushing DRAM industry value to US$9.75 billion, a 5% QoQ increase. Furthermore, the top two DRAM suppliers both saw an increase in profits, with differences attributed to the amount of commodity DRAM production each manufacturer produced.

According to TrendForce Assistant Vice President Avril Wu, looking at the contract price trend for the fourth quarter of 2013, as the September SK Hynix fire interfered with DRAM shipments, average 4GB contract price hit a high of US$34, 20% higher than the average price prior to the fire. As the decrease in DRAM supply caused PC OEMs to turn to Samsung and Micron for products, the two suppliers gained the most from the price surge. Samsung had the most stock available since it has already begun volume production on the 25nm process, and most memory sold at higher prices was Samsung’s. SK Hynix lowered contract prices to avoid losing clients, consequently profiting the least during the price surge. DRAM industry value for 2013 reached US$3.44 billion, for 30% year-over-year growth.

Source: www.trendforce.com

Silicon wafer revenues decline in 2013 (Chart 35)

Worldwide silicon wafer revenues declined by 13% in 2013 compared to 2012 according to the SEMI Silicon Manufacturers Group (SMG) in its year-end analysis of the silicon wafer industry. Worldwide silicon wafer area shipments increased 0.4% in 2013 when compared to 2012 area shipments.

Silicon wafer area shipments in 2013 totaled 9,067 million square inches (MSI), slightly up from the 9,031 million square inches shipped during 2012.

Revenues totaled $7.5 billion down from $8.7 billion posted in 2012. "Annual semiconductor silicon shipment levels have remained essentially flat for the past three years," said Hiroshi Sumiya, chairman of SEMI SMG and general manager of the Corporate Planning Department of Shin-Etsu Handotai Co., Ltd.

"However, industry revenues have declined significantly for the past two years."

Source: www.semi.org

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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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