Printer Friendly
Sales in Asia have rebounded, but the general outlook for the electronic component industry is for slowing growth according to business analyst, Walt Custer. .

Economic Outlook, Europe's End Markets & Taiwan/China's "Mixed" March Recovery

Walt Custer April 14, 2008

Economic Outlook

My colleague Ed Henderson just published his April Electronic Market Forecast. His first paragraph reads:

Dimmer Economic Prospects

The financial crisis continues despite dramatic steps taken by the U.S. Federal Reserve Board (Fed) to head off a global meltdown of financial markets, the credit crisis has not fully been resolved. Credit markets continue to be jittery and liquidity remains quite viscous. Even after large interest-rate reductions by the Fed, banks are still not lending freely. Perceptions of higher lending risks, along with a desire to build up a capital cushion, have led to more stringent lending requirements, tighter credit markets and a squeeze on economic growth. And while the Fed has loosened monetary policy, the other major central banks have not followed suit because of inflation fears. Consequently, global GDP is expected to decelerate sharply this year. After a 3.8% surge in 2007, world economic activity is predicted to advance by only 2.8% this year. Moreover, the recovery is expected to be muted. Only a 3.2% gain is forecast for 2009, but a 3.6% burst is projected for 2010. See ( Chart 1 and Chart 2 ). For more details on this monthly forecast visit www.hendersonventures.com.

Global Electronic Equipment Growth Continues to Slow

Per ( Chart 3 ) world electronic equipment production growth has dipped substantially in Southeast Asia, flattened in Europe and the United States and is “under water” in Japan.

The European end market results (per Eurostat) are a bit strange. In Euros most of the growth is in the computer sector ( Chart 4 ). Total European electronic equipment production ( Chart 5 ) is showing modest growth in local currency but a misleading sharp expansion when expressed in U.S. dollars. Of course the reason for the “U.S. $ growth” is currency exchange related. As the euro strengthens / dollar weakens the changing FOREX amplifies the apparent $ growth. ( Chart 6 ) shows 12/12 (annualized) and 3/12 (3-month) growth by sector for European electronic equipment production.

Taiwan/China Recovers in March - Degree of Recovery Varies by Product

After the “triple whammy” of seasonality, Lunar New Year and snow in China caused a sharp February drop, electronic equipment sales rebounded in March ( Chart 7 ). However, growth has slowed ( Chart 8 ) – dropping from +37% in October 2007 to +13% in March 2008. While most regions would be delighted with 13% (3-month basis) end market growth, this represents a noticeable slowdown for China/Taiwan.

Recovery varied by product. Motherboards ( Chart 9 ) and TFT displays ( Chart 10 ) had a modest upturn while chip foundries ( Chart 11 ) and package & test ( Chart 12 ) recovered less. Memory chip maker sales ( Chart 13 ) actually declined from February to March while passive components
( Chart 14 ) enjoyed a reasonable increase.

Solar/Photovoltaic panel producers ( Chart 15 ) stood out based upon this sectors strong growth. A February slowing was hardly noticed in solar panel producers’ impressive expansion.

The Taiwan-listed ODM companies ( Chart 16 ) recovered much like the OEM companies ( Chart 7 ). Rigid (Chart 17 ) and flexible ( Chart 18 ) printed circuit boards and PCB laminate producers ( Chart 19 ) improved as did Flip-Chip substrate producers ( Chart 20 ). However, vendors of process equipment (for PCBs, flat panels and touch screen displays) appear to be seeing more cautious capital spending, and hence less demand
( Chart 21 ).