U.S. Electronic Durable Goods – Slower Growth in Orders & Shipments in May

Although the May 2008 U.S. electronic equipment book/bill was positive ( Chart 1 ), most of this ratios growth was due to a decline in shipments rather than an increase in orders ( Chart 2 ). On a 3-month (3/12 rate of change) basis both order and shipment growth is declining ( Chart 3 ). Inventories ( Chart 4 ) have increased but no massive glut is apparent. We are certainly not in a “2000 bubble” situation.

	Chart 1

	Chart 2

	Chart 3

	Chart 4

( Charts 5-8 ) show monthly orders and sales and also the ratio of inventories to orders for U.S. communication and computer equipment. No dramatic changes.

U.S. produced semiconductors ( Chart 9 ) continued their downward (but very volatile) slide in May. Note that this chart represents “U.S. chip production” and not the “chips shipped to North America” as reported by the SIA.

	Chart 9

Exchange Rates – a Mixed Bag

The trade weighted value of the U.S. dollar ( Chart 10 ) has stabilized in the last few months although currency-to-currency the situation varies. The euro ( Chart 11 ), Chinese yuan ( Chart 12 ) and Taiwanese NT$ ( Chart 13 ) have all continued to grow stronger versus the U.S. dollar. The Canadian dollar ( Chart 14 ) has stabilized while the Japanese yen ( Chart 15 ) and S. Korean ( Chart 16 ) won have changed direction and weakened vs. the dollar in recent months.

	Chart 10

	Chart 11

	Chart 12

	Chart 13

	Chart 14

	Chart 15

	Chart 16

Economic Notes

The U.S. Federal Reserve voted last week to keep its key policy rate at 2% - stating that the dangers to GDP growth had “diminished somewhat” but that inflation risks had increased.

The Economist magazine reported that “firms in the euro area suffered a drop in business in June, according to initial results from surveys of purchasing managers. The headline readings for manufacturing and service industries both sunk below 50, indicating falling activity. The index of German business sentiment fell in June to its lowest level since December 2005.”

Metal Prices – Copper, Gold & Silver Up; Nickel Takes a Slight Breather

Inflation remains a huge problem, primarily driven by much higher petroleum and food prices. Metals ( Charts 17-20 ) have also been a major inflation contributor in the electronics industry. With the exception of tin, other key “electronics” metals resumed their price inflation in June.

MSI Urges Motherboard Makers to End Price War

Note: Presumably “Price Collusion” is done in the United States but apparently OK in China (Walt Custer).

According to Digitimes: “With Asustek Computer recently cutting prices for its Intel P45-based motherboards to grab market share, Micro-Star International (MSI) has stated that the price war is an unwise decision and hopes first-tier motherboard makers can end the war, according to a Chinese-language Economic Daily News (EDN) report." This year motherboard makers are feeling the impact of exchange losses as well as China’s new labor laws which have also added to makers’ costs. MSI said it believes makers should compete over technology not pricing, added the paper.

Battery Makers to Raise Prices by 6-8% in Q3’08

Per Digitimes Japan and Korea‘s battery suppliers have recently decided to raise quotations of battery cells by 6% to 8% in July. They also report nearly all notebook PC brands have already agreed to the price adjustment. Price hikes on cobalt and nickel were a key reason.

Severe, prolonged shortages of battery cells have prompted notebook PC brands to move to secure enough supply to embrace a seasonal boom in the third quarter. To counter tight supply of lithium-ion cells, some notebook PC brands have tried to use lithium-ion polymer batteries in their products.

Quanta Remained Number One Notebook OEM in 1Q08

According to DisplaySearch Quanta Computer was the top notebook PC OEM maker. Hewlett-Packard was the top notebook LCD panel customer of Samsung, LG Display and AUO. ( Chart 21 & Chart 22 )

	Chart 21

	Chart 22

HP Maintains 20% World Notebook PC Market Share in Q1’08 ( Chart 23 )

	Chart 23

DisplaySearch reported that the notebook PC market grew 35% Y/Y in Q1’08 to 31 million units. Apple, Asus, Dell, HP and Lenovo all significantly out-paced the Y/Y market growth.

Worldwide Semiconductor Fabless Revenue $13.4 billion in 1Q’08 ( Chart 24 )

	Chart 24

The trade group Global Semiconductor Alliance said fabless revenue totaled $13.4 billion in 1Q’08, up 16% vs. 1Q’07 and accounted for 20% of total global semiconductor sales. The top 10 fabless companies by 1Q’08 revenue combined for $7.8 billion, or 58% of total fabless revenue. See (Chart 24).

Japan-Made Chipmaking Equipment Orders Fall for 15th Month in May ( Chart 25 )

	Chart 25

Orders for chipmaking equipment manufactured by Japanese companies fell 44.6% to 88.9 billion yen from May ‘08 to May ‘07. Orders dropped 43.8% to 63.6 billion yen for wafer-processing equipment (including steppers) and 64% to 10.1 billion yen for testing equipment, the Semiconductor Equipment Association of Japan said. Chipmaking equipment May sales plunged 46.9% to 82.8 billion yen to extend its losing streak to a sixth month.