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Business analyst, Walt Custer, provides an end of the year update of the electronics industry. He specifically focuses on Asia as well as providing a global perspective. .

Taiwan/China January Revenues + Updated 2007 Global Market Data

Walt Custer Feb. 18, 2008

Taiwan/China Electronic Food Chain - January Results

After a brief delay due to the Lunar New Year holidays the Taiwan-listed electronics companies have now all released their January revenues. Since many of these companies produce a significant portion of their products in China, these revenues provide a timely measure of Taiwanese/Chinese business activity.

The normal winter seasonal slowdown is again underway in Southeast Asia. A composite of 101 Taiwan listed OEMs reported a 6% sales drop from December to January ( Chart 1 ). I assume this February will show an even larger drop due normal seasonality made worse by early-month New Year’s holiday plant shutdowns coupled with lost production caused by severe snowstorms in China.

After peaking at +37% 3-month (3/12) growth in October 2007, the Taiwan-listed electronic equipment sales expansion slipped to +22% in January with further declines likely ( Chart 2 ).

In the semiconductor sector Taiwan-listed chip foundries saw a modest sales increase in January. These foundries are traditionally a leading indicator for SIA global chip shipments ( Chart 3 ). Hopefully this portends a rebound in early spring. In January package & test companies ( Chart 4 ) dipped while memory chip makers ( Chart 5 ) reported a slight increase following almost a year of price-erosion driven declines. The Taiwan listed ODMs ( Chart 6 ) turned in an impressive 33% composite sales growth in 2007 versus 2006 with Foxconn, Quanta, Asustek and Compal leading the charge. However a slightly narrower sample ( Chart 7 ) of these ODMs, after expanding 32% in 2007, peaked in November and then reported their normal seasonal sales plunge in December and January. Printed circuit board and rigid laminate manufacturers followed suit with normal winter revenue declines ( Chart 8 ).

2007 Global End Market Growth

Now that most companies have reported their 4th quarter 2007 financials we can get a reasonable idea of last year’s growth by end market. Total revenues for 61 large multinational companies rose 14% in 4Q’07 versus 4Q’06 ( Chart 9 ). Since these composite international sales were combined using fluctuating exchange rates this 14% growth was amplified by perhaps 4 to 5% by the weakening dollar compared to other currencies. Inventories compared to sales declined for all levels of the electronic food chain ( Chart 10 ). It would appear that we are entering 2008 without bloated stock levels.

The “large company” EMS sector was up 14% in 2007 ( Chart 11 ) although growth varied dramatically by company. In the fourth quarter the composite revenues of eleven large EMS companies rose 12% ( Chart 12 ).

( Chart 13 ) shows sector growth for 2007 versus 2006 while ( Chart 14 ) compares 4Q’07 to 4Q’06 growth. Both these US$-growth charts were created using fluctuating exchange rates so the weakening dollar effectively amplified the 2007 growth.

Some of this “Global 2007 Data” is still preliminary as a few large companies (whose financial quarters end in January rather than December) have been estimated (1-3 Q’07 actual + 4Q’07 estimate). Dell, HP and Medtronic are key examples.