Latest U.S. & Global Data: Slowdown Continues

Data released in the last week confirmed the expected U.S. economic slowdown. The Institute for Supply Management’s “Purchasing Managers Index” moved into negative territory, dropping from 50.8 in November to 47.7 in December (Chart 1). At the same time the U.S. civilian unemployment rate jumped from 4.7% to 5% (Chart 2). Although the Bush administration continues to claim that the domestic economy is strong, the numbers sure don’t show it!

	Chart 1

	Chart 2

November U.S. electronic equipment orders (Chart 3) dropped for two successive months (October and November). Weak communication and search & navigation (heavily military) equipment orders were the chief culprits (Chart 4). U.S. military electronic orders plunged sharply in November (Chart 5).

	Chart 3

	Chart 4

	Chart 5

Globally the semiconductor business cycle appears to be nearing a “zero growth” period (Chart 6). Southeast Asia, the main driver, has now ended its fall busy season (Chart 7) and is likely headed for a winter/early spring slowdown. November chip shipments to North America (a measure of domestic electronic assembly activity) plunged (Chart 8).

	Chart 6

	Chart 7

	Chart 8

Japanese Update

Commodity prices remain volatile. Oil (and its petroleum by-products) are at record highs. Copper prices eased a bit (Chart 9) reflecting a softer global economy, but tin remains high (Chart 10). Precious metal prices (silver & gold in US$) continue to climb reflecting the lack of strength of the dollar (Chart 11 & Chart 12).

	Chart 9

	Chart 10

	Chart 11

	Chart 12

North American Printed Circuit Boards – Soft Demand at Year End

(Chart 13) summarizes the 12/12 (annualized) and 3/12 (3-month) growth rates of key components of the U.S. electronic food chain. The 3/12 “leads” the 12/12. Many “yellow” numbers are now apparent.

	Chart 13

Industry News

Here are recent “news clips” from Custer Consulting Group’s Daily News service. E-mail walt@custerconsulting.com for more details.

Germany’s overall electronics manufacturing revenues increased 3.5% YoY to a total of Euro 23.2 billion in the first three quarters of the year.

The U.S. ISM Purchasing Managers’ index weakened to 47.7 in December from 50.8 in November.

Japan’s consumer electronics shipments increased 12.9% YoY in November to 294.5 billion yen thanks to strong demand for flat panel television sets.

Russia’s IT industry is projected to grow from $13.3 billion in 2007 to $39 billion by 2010.

South Korea’s digital electronics sector trade surplus reached a record US$57.1 billion (14.2% of the 371.7 billion total goods exported) in 2007, fueled by strong global demand for display panels and semiconductors. Exports of LCD panels increased 36.4% and computer memory chips increased 30.9% YoY.

Worldwide technology spending growth is projected range between 5.5-6% in 2008, down from 7% in 2007. - IDC

China:

• revised its tariffs to slow down exports. China’s economic growth is expected to decline slightly to a still robust 10.9% with inflation at 4.5%.
• Purchasing Managers’ Index fell to 52.8 in November 2007 from 55.2 in October.
• electronics and IT industry generated 3,943 billion yuan (US$533 million) in main business revenue, up 19.8 % YoY, from Jan to Oct 2007
• mobile phone user base neared 540 million in November 2007.
• mobile phone industry is expected to increase 6.9% sequentially to 179.6 million units in Q4’07. – MIC
• wireless application protocol market will reach 52.2 billion by 2011.

Computers:

• Worldwide notebook PC market grew 24% Q/Q and 42% Y/Y in Q3’07 to 29.0 million units. – DisplaySearch.
• Worldwide PC shipments were projected to rise by 16.7% in Q4’07. – IDC
• Worldwide server shipments grew 8.7% to just over 2.2 million units while revenue grew 2.6% to $13.4 billion in Q3’07. – Gartner
• Worldwide shipments of branded workstations grew 23.2% to 763,000 units in Q3’07. - Jon Peddie Research

Datacom:

• Mobile WiMax will have more than 80 million subscribers globally by 2013. - Juniper Research.
• WiMAX equipment market revenue increased 6% in 3Q’07 to $206 million. - Infonetics Research.
• Worldwide broadband users will grow 17% from 865.2 million in Q4’07 to over 1 billion in Q4’08. - Strategy Analytics
• Worldwide carrier switch and router market grew 12% sequentially to $3.1 billion in Q3’07. - Infonetics Research
• Worldwide Ethernet switch sales increased 10% in 3Q07 to $4.6 billion. - Infonetics Research
• Worldwide IPTV equipment sales rose 23% to $682.5 million in 3Q07. - Infonetics Research
• Worldwide network security appliance and software revenue increased 3% in 3Q’07 to $1.3 billion. - Infonetics Research
• Worldwide optical network hardware market grew 3% sequentially in 3Q’07 to $3.6 billion. - Infonetics Research
• Worldwide PON equipment sales, including BPON, EPON, and GPON, grew sequentially 8% in Q3’07, reaching $422.8 million. - Infonetics Research
• Worldwide sales of carrier Ethernet switch/routers rose 6% QoQ and 25% YoY to $508 million in Q3’07. - Heavy Reading Reports
• Worldwide sales of service provider next generation voice equipment rose 5% YoY to $956.4 million in 3Q07. - Infonetics Research
• Worldwide telecom carrier capex increased 7% YoY in 2007 to $251 billion. - Infonetics Research
• Worldwide wireless LAN equipment market increased 14% to just under $870 million in 3Q’07. Infonetics Research

Handsets:

• Worldwide mobile phone sales grew 15% in Q3’07 to 289 million units. - Gartner
• Global smartphone shipments are projected to top 195 million units in 2008 (16% of total global handset shipments). - Digitimes Research
• GPS-enabled handset sales will exceed $50 billion in 2008 and are projected to rise to $100 billion in 2012. - ABI Research

Consumer Electronics:

• Personal robot industry will grow to $15 billion by 2015. – ABI Research
• Taiwan-based makers shipped over nine million digital photo frames last year. – TRI
• Worldwide portable navigation equipment will grow from 50 million units in 2007 to more than 500 million units in 2015 - Telematics Research Group
• Global PDP market will grow 27.6% YoY from 12.19 million units in 2007 to15.56 million units in 2008. – Displaybank
• TV converter demand is expected to be high. Between 13.5 million and 20 million over-the-air only recipients will need boxes. - U.S. Commerce Department

Storage:

• Worldwide external disk storage systems market revenue grew 5.1% YoY to $4.4 billion in 3Q07. - IDC
• Worldwide HDD shipments increased 19.6% sequentially to 138 million drives in Q3'07. - iSuppli

Semiconductors:

• SIA revised worldwide semiconductor sales figures for January through November 2007. DRAM sales are now estimated at $1.35 billion or 4.8% higher than previously reported.
• Worldwide sales of semiconductors increased 2.3% YoY to $23.1 billion in November 2007. - SIA
• Worldwide semiconductor revenue increased 2.9% to a total of $270.3 billion in 2007. – Gartner
• Global NAND flash semiconductor sales grew 37% in Q3’07 to $4.2 billion. – iSuppli
• China's semiconductor revenue increased 15% to $52 billion in 2007, up from $45 billion in 2006 & will rise 12% to $58 billion. – iSuppli
• French semiconductor market reported a modest 0.7% sequential growth for the Q3’07. - Sitelesc

SEMI CAPEX:

• Worldwide semiconductor equipment is forecast to contract by 9.9% in 2008 to $40.3 billion (from $44.8 billion in 2007) largely due to lower spending from computer memory makers. – Gartner
• North American semiconductor equipment industry posted a book/bill ratio of 0.82 ($1.15 billion bookings and $1.39 billion billings) in November 2007. – SEMI
• Worldwide Japanese chip-making equipment book/bill was 0.87 in November 2007. Orders totaled 129.90 billion yen ($1.15 billion) and sales were 149.32 billion yen.

Printed Circuit Boards:

• PCBs may see shortages in 2008 as capacity expansions have been stalled by China’s environmental rules.
• HDI PCB demand in 3+n+3 structure is expected to grow by 10-15% YoY in 2008. Demand for HDI PCBs in layer structures more than 2+n+2 is expected to expand from 70% to 80%.
• IPC reported a November 2007 a combined (rigid and flex) N. American PCB book/bill ratio in November 2007 of 1.06.
• Japan’s PWB shipments increased 8.1% M/M. in October to a total of 2.28 million sq. meters valued at $822 million.
• Korea's PCB industry will grow from KRW 5.65 trillion in 2007 to over KRW 6 trillion in 2008. Flexible PCBs increased by 11% YOY to KRW 1.35 trillion in 2007. - KPCA

Other Components:

• White LED Shipments rose from 13.2 billion units valued at ¥184.9 billion in 2006 to 18.2 billion units valued at ¥200.2 billion in 2007. - Fuji Chimera Research Institute
• Photovoltaic cells/modules global shipments reached 2,875.1 megawatts (MW) in 2007, with a shipment value of $ 12.9 billion and are projected to grow by 28.6% to reach 3,697 MW in 2008 with a shipment value of $16.1 billion. – BCC Research Analysis
• Global rechargeable lithium battery market will grow from $4.6 billion in 2006 to more than $6.3 billion by 2012 with a compounded annual growth rate of 5.6% - BCC Research