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Weekly Global Update for May 14, 2014

05.14.2014 // Walt D. Custer // Industry Conditions

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Global Manufacturing PMI Dropped to 51.9 in April, a Six Month Low

The growth rate of the global manufacturing sector eased to a six-month low at the start of the second quarter. At 51.9 in April, the J.P.Morgan Global Manufacturing PMI − a composite index1 produced by JPMorgan and Markit in association with ISM and IFPSM − still signaled expansion (but at a slower rate) for the seventeenth successive month.

The slower rate of improvement highlighted by the headline global PMI partly reflected weaker increases in production and new orders. In both cases, the world aggregates were affected by a marked turnaround in the performance of Japan.

Japanese manufacturing output and new business fell sharply following a recent increase in sales tax. However, other evidence from the Japan survey suggests the downturn may be brief, providing a boost to the global indices in coming months.

In contrast, the UK and the U.S. remained bright spots, with output and new order growth accelerating from already elevated rates. The Czech Republic also remained one of the strongest performers. In the euro area, output growth reached a three-month high and was only slightly off of January’s near three-year high.

Commenting on the survey, David Hensley, Director of Global Economics Coordination at J.P.Morgan, said:

  • “Growth of global manufacturing output and new orders slowed during April. However, this mainly reflected the timing of a change in sales tax in Japan that impacted on the performance of that nation’s manufacturing sector. The effects of this should only be temporary and, with rates of expansion tracking slightly higher on average elsewhere, growth of world IP should settle back at its Q1 pace moving toward mid-year.”
  • Conditions in Asia remained subdued in comparison. Apart from the sharp downturn in Japan, there was also a solid decline in Chinese output. South Korean and Indonesian output also contracted, while growth slowed in India and Taiwan. Elsewhere, Brazil and Russia both registered lower production.
  • International trade flows also rose again during April, although the rate of increase was modest and among the weakest signaled during the current ten- month sequence of expansion.
  • Global manufacturing employment increased for the ninth successive month in April. Jobs growth was recorded in 22 out of the 26 nations for which April data were available, with China, France, Brazil and Russia the sole exceptions.
  • Inflationary pressures remained generally subdued during the latest survey period, with input costs rising at the slowest pace for ten months and selling prices falling for the second straight month.

Source: www.markiteconomics.com & www.jpmorgan.com

Custer Comments:

  • Globally on a 3/12 growth basis the U.S. and Europe’s PMI improved, the world PMI was unchanged and China continued to contract but at a slower pace (Chart 2).
  • In Asia as the China remained in contraction territory Japan, Taiwan and South Korea’s PMI growth declined (Chart 3).
  • Chart 4 shows the actual PMI vales for March and April 2014 for some key countries plus Europe and the world.

1Q’14 Electronic Supply Chain Growth

Chart 5 provides preliminary growth rates for most sectors of the supply chain comparing 1Q’14 to 1Q’13. PCB materials and process equipment changed from 4Q’13 growth to a 1Q’14 decline.

These are still preliminary growth rates as a few large companies (HP, Medtronic, Applied Materials, Agilent and others) have not yet reported their recent quarter’s financial results.

Source: Custer Consulting Group based on company financial reports

Smartphone 1Q’14 Operating System Results: Android Dominates High Growth Developing Markets (Chart 6)

ABI Research reports that Android once again dominated the Q1 2014 shipment numbers for smartphone advanced operating systems with 80% market share (including AOSP) of just under 300 million smartphones shipped in Q1 2014.

“Interestingly, basic mobile phones lost 5% market share and Android picked up almost all of these users, suggesting Android is set to gain almost all of the billions of mobile subscribers still upgrading to smartphones. Certainly, Android looks set to completely dominate the high growth developing markets and increase its market share still further,” said Nick Spencer, senior practice director, mobile devices.

Microsoft’s Windows Phone (essentially Nokia/Microsoft) continued its steady progress with 16% sequential growth and an increase of 1% in market share. “Microsoft Windows Phone is currently the only viable third ecosystem. BlackBerry has faded on all fronts (BlackBerry 10 and OS) and while Firefox remains a potential low-cost challenger, it has yet to make any significant impact,” added Spencer.

The attached chart includes Basic Mobile Phones not just Advanced Operating Systems.

Apple’s iOS also achieved steady progress with 17% year-on-year growth, but growth is undoubtedly flattening and the iPhone 5c has done little to boost sales volumes.

Source: www.abiresearch.com

Worldwide Tablet plus 2-in-1 Shipments Increased 3.9% y/y to 50.4 Million Units in 1Q’14 (Chart 7)

Worldwide tablet plus 2-in-1 shipments slipped to 50.4 million units in the first calendar quarter of 2014 (1Q’14) according to preliminary data from the International Data Corporation (IDC) Worldwide Quarterly Tablet Tracker. The total represents a sequential decline of -35.7% from the high-volume holiday quarter and just 3.9% growth over the same period a year ago. The slowdown was felt across operating systems and screen sizes and likely points to an even more challenging year ahead for the category.

"The rise of large-screen phones and consumers who are holding on to their existing tablets for ever longer periods of time were both contributing factors to a weaker-than-anticipated quarter for tablets and 2-in-1s," said Tom Mainelli, IDC Program Vice President, Devices and Displays. "In addition, commercial growth has not been robust enough to offset the slowing of consumer shipments."

Apple maintained its lead in the worldwide tablet plus 2-in-1 market, shipping 16.4 million units. That's down from 26.0 million units in the previous quarter and well below its total of 19.5 million units in the first quarter of 2013. Despite the contraction, the company saw its share of the market slip only modestly to 32.5%, down from the previous quarter's share of 33.2%. Samsung once again grew its worldwide share, increasing from 17.2% last quarter to 22.3% this quarter. Samsung continues to work aggressively with carriers to drive tablet shipments through attractively priced smartphone bundles. Rounding out the top five were ASUS (5%), Lenovo (4.1%), and Amazon (1.9%).

"With roughly two-thirds share, Android continues to dominate the market," said Jitesh Ubrani, Research Analyst, Worldwide Quarterly Tablet Tracker. "Although its share of the market remains small, Windows devices continue to gain traction thanks to sleeper hits like the Asus T100, whose low cost and 2-in-1 form factor appeal to those looking for something that's ‘good enough'."

Note: Total tablet market includes slate tablets plus 2-in-1 tablets.

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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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