Signs of Economic Improvement?

Although the U.S. economy continues to struggle, the worst may be over. The stock market has rebounded, the ISM (Purchasing Managers’) Index has stopped falling ( Chart 1 ) and bargain hunters are now buying up distressed homes (admittedly at low prices). In the electronics sector the normal winter seasonal slowdown is behind us and in a few months we will be again moving into the summer/autumn “busy season.”

	Chart 1

Recent U.S. Department of Commerce electronic equipment and component sales and order data gave some cause for optimism. The February “Factory Orders” report (released on April 2) was more encouraging than the preliminary “Durable Goods” release of March 26.

February’s updated U.S. electronic equipment book/bill ( Chart 2 ) was 1.01 on a 3-month average basis and 1.03 for the month. These B/B ratios were below those calculated from the preliminary Durable Goods data - for a “good” reason. In the revised “Factory Orders” release electronic equipment shipments dropped much less than in the preliminary Durable Goods release. Since the book/bill is a ratio, stronger shipment (billing) values (at constant orders) cause a decrease in the book/bill. February’s lower book/bill (final vs. preliminary) actually indicated a stronger market situation!

	Chart 2

Electronic Equipment Orders - Seasonally versus Non-seasonally Adjusted

“Factory Orders” information is typically viewed on a “seasonally adjusted” basis. That is, the raw monthly values are corrected for normal seasonality, holiday periods, etc. ( Chart 3 ) shows the historical seasonally and non-seasonally adjusted electronic equipment order data. On an unadjusted basis January 2007 orders were the lowest since July 2005. Fortunately, they rebounded in February.

	Chart 3

End Market Demand Improves Modestly in February

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End Market Performance by Sector – More Details

Automotive sales ( Chart 10 ) have been declining since mid-2007 while military and non-military aircraft shipments have been strong ( Chart 11 ). Military electronic equipment orders ( Chart 12 ) have remained above shipments since mid-2007 and U.S. electromedical, measurement & control equipment ( Chart 13 ) has been on an upward trajectory since early 2003. Communication ( Chart 14 ) and computer ( Chart 15 ) equipment have been little-changed for the last few years.

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Passive Component Order & Shipment Values Flat

( Chart 16 ) shows U.S. produced electronic component (excluding semiconductor) order and shipment data from 1999 to February 2008. Orders and shipments have been flat since early 2006 as their book/bill hovers around 1.0 ( Chart 17 ).Passive component inventories ( Chart 18 ) have been increasing slightly in recent months. ( Chart 19 ) shows the ratio of domestic passive component inventories to orders.

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Global semiconductor materials market grew 14% in 2007 to $42 billion

The global semiconductor materials market grew 14% in 2007 and is forecasted to grow over 11% in 2008 according to SEMI. While the semiconductor industry grew 3% in 2007 to reach the $256 billion per the SIA, the global semiconductor materials market grew 14% in 2007 to reach a record $42 billion.

"As the semiconductor companies continue to ship record amounts of units, demand for materials is increasing as well," said Dan Tracy, senior director of Industry Research and Statistics at SEMI. "Heightened demand in addition to the tight supply for various gases, silicon, and the widespread adoption of advanced packaging technologies are resulting in very strong revenue growth for semiconductor materials suppliers."

2006-2007 Semiconductor Materials Market by World Region
(Dollars in U.S. Millions; % Year-over-Year)

In Summary

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