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The most recent U.S. electronic equipment and component data have provided reason for cautious optimism.
Certainly there are serious issues; skyrocketing oil prices (Chart 1), a derailed housing market (Chart 2) and lower consumer (Chart 3) and business (Chart 4) confidence, but the September domestic electronic “food chain” numbers showed signs of life.
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Chart 1 |
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Chart 2 |
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Chart 3 |
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Chart 4 |
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U.S. Electronic Equipment Shipments, Orders and Inventories – Demand Improves
September’s domestic electronic equipment book/bill ratio climbed to 1.07 (Chart 5) as orders have exceeded shipments for every month since February 2007 (Chart 6). Instruments, controls and medical electronics and military gear (Chart 7) have become increasingly important to the U.S. market. Inventories remain in control but not surprisingly they have swelled slightly for the higher growth market sectors (Chart 8).
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Chart 5 |
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Chart 6 |
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Chart 7 |
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Chart 8 |
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By sector military electronics orders (Chart 9) descended from their July and August “bubble” to return to their historic trend line. Domestic aircraft & parts shipments (Chart 10) have been on a 2-year growth run – led by the commercial sector. A weak $/strong euro (Chart 11) certainly aids Boeing’s efforts against Airbus.
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Chart 9 |
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Chart 10 |
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Chart 11 |
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Electromedical and measurement & control equipment (Chart 12) remains solid while communication (Chart 13) and computer (Chart 14) equipment remain flat.
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Chart 12 |
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Chart 13 |
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Chart 14 |
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Global Semiconductor Shipments – Strong September Upturn
Per the SIA’s recent press release:
For the second consecutive month, worldwide sales of semiconductors rose sharply in September. Global microchip sales in September were $22.6 billion, an increase of 5.9% from September 2006 when sales were $21.3 billion. Sales were up 5.0% from August 2007 when sales were $21.5 billion.
"The increase in worldwide sales of 13.2% from the prior quarter reflects historic patterns as the holiday season build began," said SIA President George Scalise. "Demand from the consumer products sector was very robust as sales of semiconductors for traditional consumer applications rose by 35% quarter-to-quarter. The two largest demand drivers for semiconductors - PCs and cell phones - continued to show healthy growth.
According to the Gartner Group, worldwide unit sales of PCs increased by 14.4% over the immediate-prior quarter. Gartner currently expects that PC sales will increase by 13% year-on-year. Microprocessor revenues increased by 18.7% compared to the prior quarter.
The quarterly reports from the four largest cell phone vendors indicate that unit sales in the third quarter grew by approximately 11% from the prior quarter. "Strong sales of cell phones and personal electronics products were a major contributor to sharp increases in revenue for NAND flash," said Scalise. "Sales of NAND flash were up by 46.2% from the prior quarter and by 58.5% in September 2007 compared to September 2006. ASPs for NAND flash increased by nearly 32% from the second quarter."
On a 3/12 growth basis the global semiconductor business cycle moved further into positive territory (Chart 15) in September. Although Southeast Asia remains the runaway chip-consuming (electronic assembly) winner all regions enjoyed a September increase (Chart 16).
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Chart 15 |
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Chart 16 |
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Focusing on shipments to North America (Chart 17), it would appear that our domestic electronics assembly market has definitely improved.
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Chart 17 |
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Passive Components – Modest Improvement
U.S. made electronic component (excluding semiconductors) bookings and shipments have been generally flat since mid-2006 (Chart 18). Inventories fortunately remain controlled (Chart 19).
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Chart 18 |
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Chart 19 |
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North American Printed Circuits
The domestic September 3-month average book/bill ratio of 1.08 for rigid printed circuit boards (Chart 20) gave reason for smiles. Importantly orders were up 18% vs. the same month in 2006 (Chart 21). Finally North American printed circuit orders appear to be on an upward trend (Chart 22). Rigid PCBs appear to have finished their downward order correction and their growth is again “in sync” with end market growth (Chart 23).
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Chart 20 |
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Chart 21 |
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Chart 22 |
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Chart 23 |
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Wrapping Up
(Chart 24) summarizes the annualized (12/12) and 3-month (3/12) growth of the September domestic electronics “food chain.” The 3/12 is a leading indicator.
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Chart 24 |
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September was a better month but don’t overlook the first four charts. We are still in a challenging business environment.
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