Weekly Global Update for July 30, 2014

07.30.2014 // Walt D. Custer // Industry Conditions

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U.S. June Electronic Equipment Update

The U.S. Department of Commerce “Durable Goods” report for June was just released:

  • June domestic electronic equipment book/bill ratio declined (Chart 1) as orders dropped to approach shipments (Chart 2).
  • Electronic equipment order growth turned negative as its 3/12 sank below 1.0 (Chart 3).
  • The ratio of electronic equipment inventories/orders was little changed from May but remained relatively high (Chart 4).
  • Defense capital goods orders returned to their shipment trend line (Chart 5) although their 3-month average book/bill remained above 1.0 (Chart 6).
  • Aircraft shipments improved sequentially from May due to non-defense aircraft sales (Chart 7).
  • Communication (Chart 8) and computer (Chart 9) equipment orders declined.


“Flash” July PMI Leading Indicator Results (Chart 10)

Markit Economics released preliminary July PMI numbers for a limited number of countries. China increased significantly, Europe edged up and Japan and the U.S. declined. However all areas except France were still in a growth mode (PMI>50).

Full July PMI releases will begin August 1.


Dieter Bergman: Loss of a Friend and Colleague


It is with great sadness that IPC announced the passing of Dieter Bergman, IPC staff member for more than 40 years.

Decorated with countless awards over his lifetime, Bergman's name will forever be synonymous with IPC and he leaves a legacy of friendships, lasting memories, and what is affectionately treasured by IPC staff and close friends as "Dieter-isms" - such as a 45-minute answer to a 10-second question.

Bergman began his career in 1956 as a designer for Philco Ford in Philadelphia, Pa. He assumed the position of supervisor of the printed circuit design group in 1967, and joined the company's advanced technology group where he specialized in printed circuit computer-aided design. In 1962, while at Philco Ford, he became the company's official representative to the IPC; and received the IPC President's Award in 1968, the same year he assumed chairmanship of the IPC Design Committee.

Bergman was elected Chairman of the IPC Technical Activities Executive Committee in 1974, and later that year joined the IPC staff as Technical Director. In that role, he was responsible for the coordination of standards, specifications and guidelines development; round robin test programs; establishment of workshops and seminars; serving as a government and inter-society liaison; and initiating IPC activities in Europe and Asia.

In 1984, he became Director of Technology Transfer to help foster the interchange between design and manufacturing, and to continue to serve as a leader in the identification of future technologies and industry needs.

While Bergman had a special place in his heart for the design community, his contributions to the industry as a whole earned him the IPC Hall of Fame, IPC's highest honor, in 1985. Most recently, Bergman chaired the IPC Ambassador Council, a group of IPC Hall of Famers who provide advice and guidance to IPC, and encourage active participation in IPC activities by all of its members to enhance the electronics industry.

"The staff and I feel very fortunate to have known Dieter, and have benefited from his knowledge and his passion for the industry," said IPC President and CEO John Mitchell. "He will be missed, but always remembered as an icon, pioneer and friend."


Custer Comment: Dieter touched so many of us. He was an extremely kind and productive person whose wonderful ways were infectious to all who knew him.

North American Semiconductor Equipment Industry June 2014 Book/Bill 1.09 (Charts 11 & 12)

North America-based manufacturers of semiconductor equipment posted $1.47 billion in orders worldwide in June 2014 (3-month average basis) and a book-to-bill ratio of 1.09, according to SEMI.

Bookings were 4.3% higher than May 2014 and 10.0% higher than June 2013. The 3-month average of worldwide billings in June 2014 was $1.34 billion, 4.8 % lower than May 2014 and 10.4% higher than June 2013.

“Semiconductor equipment bookings are at the highest level since May 2012,” said Denny McGuirk, president and CEO of SEMI. “The strength of the June bookings (3-month average) substantiates the outlook for strong double-digit sales growth this year.”


Worldwide Tablet Market Grew 11.0% y/y to 49.3 Million Units in 2Q’14 (Charts 13 & 14)

The worldwide tablet market grew 11.0% year over year in 2Q’14 with shipments reaching 49.3 million units according to IDC. Although shipments declined sequentially from 1Q’14 by 1.5%, IDC believes the market will experience positive but slower growth in 2014 compared to the previous year.

"As we indicated last quarter, the market is still being impacted by the rise of large-screen smartphones and longer than anticipated ownership cycles," said Jean Philippe Bouchard, IDC Research Director for Tablets. "We can also attribute the market deceleration to slow commercial adoption of tablets. Despite this trend, we believe that stronger commercial demand for tablets in the second half of 2014 will help the market grow and that we will see more enterprise-specific offerings, as illustrated by the Apple and IBM partnership, come to market."

Despite declining shipments of its iPad product line, Apple managed to maintain its lead in the worldwide tablet market, shipping 13.3 million units in the second quarter. Following a strong first quarter, Samsung struggled to maintain its momentum and saw its market share slip to 17.2% in the second quarter. Lenovo continued to climb the rankings ladder, surpassing ASUS and moving into the third spot in the tablet market, shipping 2.4 million units and grabbing 4.9% markets share. The top 5 was rounded out by ASUS and Acer, with 4.6% and 2.0% share, respectively. Share outside the top 5 grew to an all-time high as more and more vendors have made inroads in the tablet space. By now most traditional PC and phone vendors have at least one tablet model in the market, and strategies to move bundled devices and promotional offerings have slowly gained momentum.

"Until recently, Apple, and to a lesser extent Samsung, have been sitting at the top of the market, minimally impacted by the progress from competitors," said Jitesh Ubrani, Research Analyst, Worldwide Quarterly Tablet Tracker. "Now we are seeing growth amongst the smaller vendors and a leveling of shares across more vendors as the market enters a new phase."

Note: Total tablet market includes slate tablets plus 2-in-1 tablets. References to "tablets" in this release include both slate tablets and 2-in-1 devices.


Global Set-top Box Market Revenues to Increase from US$20.3 billion in 2013 to US$22.8 billion in 2015 (Chart 15)

Following a relatively flat three-year period, the global set-top box (STB) market managed to achieve the highest annual revenue total in its history in 2013, setting the stage for continued growth through 2015, according to IHS.

Worldwide digital STB shipment revenues in 2013 totaled US$20.3 billion, up 3% from US$19.6 billion in 2012. Revenues will set new highs during the next two years and will peak at US$22.8 billion in 2015. This follows the period from 2010 through 2012 when revenues remained in the US$19.5 billion range.

"STB's proved to be critical to the strategies of pay TV operators in 2013," said Daniel Simmons, director for Connected Home research at IHS. "Far from being pushed out of the living room by Internet-enabled consumer electronics, STBs are being repositioned as the hub of the connected home. STBs increasingly are being transformed into multimedia home gateways (MHG), which combine support for pay-TV services with Internet access, residential gateway services, Wi-Fi and other advanced features."


Worldwide Telecom and Datacom Equipment and Software Sales Increased 3% y/y to $183 Billion in 2013 (Chart 16)

  • US$1 Trillion to Be Spent on Telecom and Datacom Equipment and Software Over Next 5 Years
  • Market research firm Infonetics Research released data from its 2014 Telecom and Datacom Network Equipment and Software report, which provides a big picture of the health of the overall market, excluding consumer electronics.

"Despite the fact that enterprises and service providers are in the middle of massive network upheavals due to the evolution of software-defined networking (SDN) and network functions virtualization (NFV) technology, the telecom and datacom networking equipment and software market is on track to grow annually through 2018 with the fastest growth coming in 2015," notes Jeff Wilson, principal analyst at Infonetics Research.

Michael Howard, co-founder of Infonetics and co-author of the report, adds, "Looking at just the service provider equipment space (excluding services and consumer electronics like handsets), we're seeing a shakeup in vendor market share, with Huawei leapfrogging longtime number-one Ericsson to take the top spot in 2013. While Huawei's been doing well in a number of regions, China's economy is a key factor keeping Huawei's growth so strong."


Based on global revenue, the overall telecom and datacom network equipment and software market share leaders are, in rank order: Cisco, Huawei, Ericsson, Alcatel-Lucent, and ZTE – the same top five vendors with virtually the same shares as the year prior.

Vendor share positions held steady in the enterprise segment, with Cisco in the driver's seat and followed distantly by tightly bunched Avaya, Brocade, HP, and Juniper (listed in alphabetical order).

Worldwide, sales of telecom and datacom equipment and software came to $183 billion in 2013, an uptick of 3% versus the previous year.

Asia Pacific put some breathing room between itself and North America in the regional race for telecom/datacom equipment and software revenue, growing 6% year-over-year as compared to North America's 4.5%; this trend is expected to continue through at least 2018.

Infonetics is projecting a cumulative $1.01 trillion will be spent by service providers and enterprises on telecom/datacom gear and software over the five years from 2014 to 2018.


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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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