1Q’08 – More Details on “Food Chain” Growth

With most companies now having reported their 1Q’08 financials we can construct a decent model by food chain segment for first quarter 2008 performance. It wasn’t that bad!

OEMs ( Chart 1 ) saw sales grow 12%. Inventories crept up throughout the supply chain ( Chart 2 ), but much of this increase was a normal (post-Christmas) seasonal effect. By sector in the supply chain ( Chart 3 ) all of the electronic equipment end markets were up with the exception of SEMI gear.

	Chart 1

	Chart 2

	Chart 3

SEMI Equipment Recovery Later This Year?

Per the Nikkei news service, semiconductor fab equipment demand is expected by some manufacturers to recover later this year, as chipmakers are expected to shed their cautious capital investment stance now that memory prices appear to be turning up.

Kiyoshi Sato, president of Tokyo Electron, said orders will likely bottom out in the April-June after plunging 56% year on year in January-March. Tokyo Electron projects that DRAM supply and demand will balance out in the July-September period.

Nikon’s Kazuo Ushida said, "A recovery in the semiconductor market will become clear in the second half of this year, and shipments of chipmaking equipment will pick up in the latter half of fiscal 2008 (the six months through March 2009)." Demand for expensive, cutting-edge equipment will likely grow, because "chipmakers cannot do without investing in advanced areas," he added. Nikon expects shipments of liquid immersion lithography to grow over 30% through March 2009.

U.S. Industrial Output Plunged in April ( Chart 4 )

	Chart 4

U.S. industrial production dropped 0.7% in April, due to large cutbacks in the automobile and other manufacturing industries.

Auto production was hurt by declining demand for new cars and also problems related to a strike at a parts supplier for General Motors.

A bright spot for manufacturing has been continued strong overseas demand, helped by a weak dollar which has boosted the competitiveness of U.S. products in foreign markets.

Dollar Strengthens Slightly ( Charts 5-11 )

The U.S. currency seems to have stopped its freefall plunge. The trade-weighted value of the dollar has increased slightly (or at least stabilized) in the last month versus most major currencies.

Metal Prices: Copper, Gold & Silver Stabilize; Tin Continues to skyrocket ( Charts 12-15 )

Platts reported that the Malaysian domestic tin price has gathered upward momentum over the past two days (May 14-16) breaching the USD 25,000 per tonne level on the Kuala Lumpur Tin Market.

As per report the Kuala Lumpur Tin Market price gained USD 300 per tonne to settle at USD 25,100 per tonne a new high for the bourse, erasing the previous record at USD 24,800 per tonne.

A Kuala Lumpur Tin Market source said that buyers were seen eagerly bidding, providing support to the domestic price. He added that the Malaysian tin price was also tracking stronger tin prices on the London Metal Exchange, which firmed up above USD 25,000 per tonne Tuesday.

According to European sources, tin prices on the LME continued to be courted by canny investors, who are now trading in a very dangerous market. Tin was once again making fresh records due to supply concerns emanating from Indonesia and China.

Taiwan: Normal Seasonality Overlaid on an Economic Slowdown

With all companies now reporting their April results a broad composite of Taiwan-listed OEMs was down 6% in April vs. March 2008 but up 21% in April ’08 vs. April’07 (Chart 16). 3-month (3/12) growth was +14.1%, the lowest level since 2002 ( Chart 17 ).

	Chart 17

Motherboards ( Chart 18 ), ODM companies ( Chart 19 ) and printed circuit makers ( Chart 20 ) all experience normal, seasonal April declines with month-to-month growth not likely to return until June. Memory ( Chart 21 ) continued to stabilize while wafer foundry sales improved ( Chart 22 ) and solar/photovoltaic panels makers ( Chart 23 ) continued their strong sales ascent.

Note the almost total lack of seasonality in solar panel revenues. Consumer buying patterns are not evident. People are not giving solar panels for Christmas!

	Chart 18

	Chart 19

	Chart 20

	Chart 21

	Chart 22

	Chart 23