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Weekly Global Update for March 12, 2014

03.12.2014 // Walt D. Custer // Industry Conditions

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January U.S. Electronic Equipment Supply Chain Performance

The U.S. Department of Commerce released its factory orders report detailing electronic equipment and component sales, orders and inventories for January.

  • Electronic equipment book/bill improved (Chart 1) as orders increased slightly (Chart 2).
  • Shipment and order 3/12 growth rates remain close to the “zero growth” mark (Chart 3).
  • Electronic equipment product mix is shifting to less military-related equipment (Chart 4) as electromedical, measurement and control equipment remains by far the largest equipment sector (Chart 5).
  • Vehicle shipments dropped with the severe winter weather hampering sales in the northern Midwest and East coast (Chart 6).
  • Aircraft sales improved from December (Chart 7).
  • Defense capital goods book/bill continued to plunge (Chart 8) as defense capital goods (Chart 9) and military electronics (Chart 10) orders remained well below their shipment trend lines.
  • Electromedical, measurement and control equipment demand held (Chart 11) while communication (Chart 12) and computer (Chart 13) orders weakened slightly.
  • Passive components’ book/bill dropped further (Chart 14) as orders and shipments remained flat (Chart 15) and inventory levels stayed uncomfortably high (Chart 16).
  • U.S. PMI leading indicator points to further deterioration of U.S. passive component order “growth” (Chart 17).

Source: www.census.gov/manufacturing/m3

Worldwide Semiconductor Sales Increased 8.8% y/y to $26.28 Billion in January 2014 (Charts 18-22)

  • Global semiconductor industry posts highest-ever January sales
  • Year-to-year global sales increase by largest margin in nearly three years; sales in Americas up 17.3% compared to last January

The Semiconductor Industry Association announced that worldwide sales of semiconductors reached $26.28 billion for the month of January 2014, an increase of 8.8% from January 2013, marking the industry’s highest-ever January sales total and the largest year-to-year increase in nearly three years. Global sales from January 2014 were 1.4% lower than the December 2013 total of $26.65 billion, reflecting normal seasonal trends. Regionally, sales in the Americas increased by 17.3% compared to last January.

“The global semiconductor industry has built on its record revenues from 2013 with an impressive start to 2014, led largely by continued strength in the Americas market,” said Brian Toohey, president and CEO, Semiconductor Industry Association. “Sales in January were up across most regions and nearly all product categories compared to last January, which bodes well for continued growth during the rest of 2014.”

Source: www.sia-online.org

Note: Per Custer Consulting Group’s semiconductor leading indicator, global semiconductor growth would likely deteriorate from its January level (Chart 23).

Worldwide Tablet Sales Grew 68% y/y in 2013 to 195.4 Million Units, with Android Capturing 62% of the Market (Charts 24 & 25)

  • Tablets Represented 90% of Overall Ultramobile Sales in 2013
  • Android Grew 127% and Reached the Number one Position in 2013

Worldwide sales of tablets to end users reached 195.4 million units in 2013, a 68% increase on 2012, according to Gartner, Inc. While sales of iOS tablets grew in the fourth quarter of 2013, iOS's share declined to 36% in 2013. The tablet growth in 2013 was fueled by the low-end smaller screen tablet market, and first time buyers; this led Android to become the Number one tablet operating system (OS), with 62% of the market.

"In 2013, tablets became a mainstream phenomenon, with a vast choice of Android-based tablets being within the budget of mainstream consumers while still offering adequate specifications," said Roberta Cozza, research director at Gartner. "As the Android tablet market becomes highly commoditized, in 2014, it will be critical for vendors to focus on device experience and meaningful technology and ecosystem value — beyond just hardware and cost — to ensure brand loyalty and improved margins."

Source: www.gartner.com

External Disk Storage Systems Factory Revenues Increased 2.4% to $6.9 Billion in 4Q’13 (Charts 26 & 27)

Worldwide external disk storage systems factory revenues increased year over year by 2.4%, totaling $6.9 billion, during 4Q’13 according to the International Data Corporation. For the quarter, the total (internal plus external) disk storage systems market generated $8.8 billion in revenue, representing a 1.3% increase from the prior year's fourth quarter and a sequential increase of 17.2% compared to the seasonally lower 3Q’13. Total disk storage systems capacity shipped surpassed 10.2 exabytes, growing 26.2% year-over-year.

“Industry stakeholders able to capitalize the most on this demand were often those with recent product refreshes and strong go-to-market initiatives targeted at integrated infrastructure and storage optimization.”

"The disk storage systems market was able to break free of recent headwinds due to traditional year-end budget flushes, improved economic sentiment, and a strong desire to address long-standing storage infrastructure inefficiencies," said Eric Sheppard, Research Director, IDC Storage. "Industry stakeholders able to capitalize the most on this demand were often those with recent product refreshes and strong go-to-market initiatives targeted at integrated infrastructure and storage optimization."

Source: www.idc.com

Wearable Electronics Business to Grow from Over $14 Billion in 2014 to Over 70 Billion in 2024

Wearable technology mainly concerns devices and apparel/textiles. Devices are discrete electronic and electrical hardware sold on its own for bodywear. It may be utilized by being attached to apparel or by constituting worn accessories such as electronic watches and earphones. Glasses, jewelry, headgear, belts, armwear, wristwear, legwear, footwear and even skin patches are involved and the device business is already large. By contrast, the apparel/textiles option concerns electronics and electrics integral in or distributed through apparel including rucksacks and bandages.

It will be a big business later in the decade. It involves disruptive new technologies: it is not incremental at all and it will even enable electronic fashion and luxury goods.

Five-fold growth over the next decade
As the wearable electronics business powers over five times from over $14 billion today to over 70 billion in 2024, the dominant sector by value will remain the increasingly merged medical, healthcare, fitness, wellness sector. It has the largest number of big names behind the most promising new developments such as Adidas, Accenture, Fujitsu, Nike, Philips, Reebock, Roche, Samsung and SAP, with Apple recruiting top people from that industry for obvious reasons. Their intellectual property is profound: their agenda is heroic, addressing many of the biggest issues of our time such as the greying of the population, the epidemic of obesity and diabetes. This even extends to a replacement pancreas as a skin patch and exoskeletons and limbs to make the disabled whole again.

Infotainment vs infomatics
The advanced infotainment sector will grow to exceed it in numbers but not value in 2024. Here, Google Glass and other eyewear will be a large sub-sector alongside smart wristwear. Smart glasses have excellent hands free user interfaces such as speaking to you, voice recognition and "blink to take a picture" and they are very easy to use compared to most wristwear, with the exception of the popular fitness-monitoring wristbands. Advanced infotainment does not have a particularly heroic agenda in the main. For instance, it makes mobile phones more useful and provides more realistic video games through vibrating suits and 3D headwear, attracting little support from governments. Just as the first volume wearable electronics - basic earphones and electronic wrist watches - moved to China at collapsed prices, the largely conventional electronics in most wearable advanced infotainment today means that much of it will also be commoditized within the decade. As yet, there is no equivalent to Samsung cornering OLEDs for early smart phones and Apple cornering other valued early smart phone technology.

Wristwear currently has the largest sale within advanced informatics but it has particular problems. As a speaker at a recent event on the subject said, the most promising ones need to be mobile-phone based and multi-functional but using these, "Is like assembling an ocean liner through a keyhole".

At the other extreme, basic earphones and electronic wristwatches are a static market massively over-supplied. Add the other important sectors of wearable electronics - industrial, commercial, military and lastly fashion - and we have a wearable technology business where the number of developers and manufacturers is growing to 17,000 in 2024 (when we include the 2,000 involved in generally applicable key technology).

Source: www.IdTechEx.com

U.S. Manufacturing Purchasing Managers Index Increased to 53.2 in February (Chart 28)

  • PMI at 53.2
  • New orders, employment and inventories growing
  • Production contracting
  • Supplier deliveries slowing

Economic activity in the manufacturing sector expanded in February for the ninth consecutive month, and the overall economy grew for the 57th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business. Bradley Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee stated the February PMI registered 53.2, an increase of 1.9 percentage points from January's reading of 51.3 indicating expansion in manufacturing for the ninth consecutive month. The New Orders Index registered 54.5, an increase of 3.3 percentage points from January's reading of 51.2. The Production Index registered 48.2, a decrease of 6.6 percentage points compared to January's reading of 54.8. Inventories of raw materials increased by 8.5 percentage points to 52. As in January, several comments from the panel mention adverse weather conditions as a factor impacting their businesses in February. Other comments reflect optimism in terms of demand and growth in the near term."

Source: www.ism.ws/

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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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