I am writing this week’s column at 35,000 feet en route to the HKPCA/IPC sponsored 2007 International Printed Circuit & Electronics Assembly Fair on December 4-6 in Shenzhen, China. Custer Consulting Group’s booth will be J006. Please visit us. I will be speaking Wednesday, December 5 from 12:55 – 13:35 on global business conditions. See you there!

U.S Electronic Equipment Orders Drop in October

The U.S. Department of Commerce’s October “Durable Goods” report (released last Thursday) showed a large decline in electronic equipment orders – although shipments (a trailing indicator) continued to rise (Chart 1). Both communication (Chart 2) and computer (Chart 3) bookings dropped as the domestic electronic equipment book/bill ratio plunged to 0.96 on a 1-month basis (Chart 4). The repercussions of the housing/mortgage mess and declining consumer and business confidence are now being reflected in lower durable goods demand.

	Chart 1

	Chart 2

	Chart 3

	Chart 4

Assuming that the October order decline is not an isolated event, no immediate recovery is in sight - causing lower expectations for 2008. The impact will likely be global as offshore suppliers to the United States will also see less demand for their exports. Lower demand coupled with the end of the “fall busy season” suggests that early 2008 will experience a larger than seasonally normal drop in world electronic component demand.

Metal Prices Moderate

As global industrial growth slows copper prices (Chart 5) have eased. Gold (reflecting a weak U.S. dollar) continues to see price increases but at a slower pace (Chart 6). Tin is up slightly (Chart 7), while silver prices have flattened (Chart 8).

	Chart 5

	Chart 6

	Chart 7

	Chart 8

Mobile Phone Sales Up 15% in 3Q’07 (Chart 9, Chart 10 & Chart 11)

Worldwide sales of mobile phones to end users in the third quarter of 2007 reached 289 million units, a 15% increase from the same period last year, according to Gartner. The top five vendors increased their market shares and accounted for 81.6% of the global market share.

	Chart 9

	Chart 10

	Chart 11

Even though relatively few models were introduced this quarter, overall sales exceeded expectations. Mobile phone sales were mainly driven by strong performances in Asia/Pacific and Eastern Europe, the Middle East and Africa, said Gartner’s Carolina Milanesi.

Global cell phone penetration reaches 50%

Worldwide mobile telephone subscriptions reached 3.3 billion - equivalent to half the global population, 26 years after the first cellular network was launched, research firm Informa reported. The mobile phone industry has recently enjoyed strong growth in rural China and India, aided by ever declining phone and call prices. Cell phone vendors are now targeting rural Africa to sustain growth.

Top Ten Chip Companies Ranked by R&D Spending

From ElectronicsWeekly / Financial Times

Here they are the chip suppliers with the largest global spending on R&D:

in billions

Serious DRAM Oversupply

From an article by Mark LaPedus of EETimes

Mehdi Hosseini of Friedman Billings Ramsey stated that “Capital spending in the DRAM sector is expected to fall by more than 30% in 2008, versus prior expectations of down 20%. This will lead to a 10-12% overall reduction in memory capital spending. After a long downturn in DRAMs, there is still a serious oversupply of parts in the marketplace. This is primarily driven by higher-than-expected bit supply growth, with demand remaining relatively in line with expectations.”

Korean DRAM players were supposedly able to convert DRAM to NAND capacity to help ease excess DRAM capacity. “Such conversions not occurring, combined with a higher capacity growth rate, especially in 2H07, has made a bad excess capacity situation worse.''

“We now expect bit capacity growth of nearly 100% in CY07, versus 60% from earlier this year and 70-80”,” he added.

Global NAND flash sales grew 37% in Q3’07

Global sales of NAND flash semiconductors grew 37% in the third quarter to $4.2 billion, said iSuppli. But recent strong growth driven by consumer electronics including Apple's iPod would end this quarter, when average NAND selling prices would drop by 18% as output increases faster than demand.

Worldwide carrier switch and router market grew 12% sequentially to $3.1 billion in Q3'07 (Chart 12)

Per Infonetics Research, ”the market was led by healthy IP routers sales, remarkable sequential revenue growth (16%) from Juniper, and strong router performance by Cisco.” Alcatel-Lucent also posted solid revenue numbers, albeit slightly lower than the gains they posted the previous quarter.

	Chart 12

The top 2 drivers continue to be:

• the ongoing migration of service providers to next generation networks based on an IP, MPLS, and Ethernet data services layer
• growth in consumer broadband, corporate, mobile telephony, and mobile data traffic

"With the workforce becoming increasingly mobile and IP video and peer-to-peer applications becoming increasingly popular (music and video downloading, YouTube clips, online news, social networks like MySpace), service providers must continue investing in routers and switches with higher speed ports to manage the fast growing voice and data traffic," Infonetics Research added.

Worldwide Server Shipments Grew 8.7%; Revenue Grew 2.6% in 3Q’07 (Chart 13 & Chart 14)

Worldwide server shipments for the third quarter of 2007 increased 8.7% over the same quarter last year, while worldwide server revenue for the same period climbed 2.6% according to Gartner. Worldwide server revenue totaled $13.4 billion for the quarter, as worldwide servers shipments reached just over 2.2 million units.

	Chart 13

	Chart 14