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In this week’s edition of MarketEye, Walt Custer provides information on industrial production growth, electronic equipment shipments, the Japanese electronic market, pricing information, and a status on the semiconductor and world server shipments. .

Global News

Walt Custer Aug. 25, 2008

West Europe and North America Continue to Soften – Industrial Production and Electronic Equipment Manufacturing Growth Slows


Global Industrial Production

The western economies continue to soften. A compilation of year-on-year industrial production growth by country ( Chart 1 ) shows many negative values in Western Europe as well declines in Canada and the United States.

European and Japanese Electronic Equipment Electronic equipment production growth by region ( Chart 2 ) reveals declining rates in all major geographic areas – Japan, Europe, Taiwan/China, and the United States.

Europe

Europe’s June electronic equipment production results by end market were just released ( Chart 3 ). The three largest equipment categories (computers, communication equipment, and industrial electronics) all had a noticeable June dip. ( Chart 4 ) gives 12/12 (annualized) and 3/12 (3-month) growth by European end market. The 3/12 is a leading indicator of the 12/12. If a 3/12 is less than the corresponding 12/12 a slowdown is likely in progress.

Japan

In Japan ( Chart 5 ) electronic equipment production was down 5% in June 2008 versus June 2007. Printed circuit board shipments (which have been dropping in Japan since the beginning of 2008) rebounded a bit in June ( Chart 6 ). ( Chart 7 ) shows Japan’s 1H’08 PCB product mix by board type while ( Chart 8 ) gives monthly 3/12 printed circuit shipment growth. Japan’s PCB 3/12 has been in negative territory for all of 2008. ( Chart 9 ) shows Japan’s electronic component output by type for the first half of this year and ( Chart 10 ) displays its near flat (3/12 = 1) recent component growth.

Copper Clad Laminate Prices Increase in Japan


Sumitomo Bakelite is reportedly raising laminate prices September 1, 2008 as following:

Epoxy based laminates 10%
Phenolic based laminates 15%
Glass prepreg 10%

According to Dr. Hayao Nakahara “It will be a matter of day or two before the two other major laminate makers in Japan, Hitachi Chemical and Mitsubishi Gas Chemical follow.”

But DRAM Prices Soften


According to Nikkei news service the price of large-lot shipments of DRAM for personal computers fell in the first half of August, after also dropping in the second half of July. Memory chip makers raised productivity at the same time that PC sales started showing signs of slowing after a sustained run. One gigabyte modules sold for about 21 dollars each in the first half of August, down one dollar from two weeks earlier. The break-even point is said to be about 24 dollars.

North American SEMI B/B 0.83 in July ( Chart 11 & Chart 12 )

North American-based manufacturers of semiconductor equipment posted $905 million in orders in July 2008 (3-month average basis) and a book-to-bill ratio of 0.83 according to the July 2008 Book-to-Bill Report published by SEMI.

July 2008’s 3-month average worldwide bookings were 3% less than June 2008, and about 36% less than the $1.41 billion in orders posted in July 2007. The 3-month average of worldwide billings in July 2008 was $1.09 billion, about 6% less than the June 2008’s $1.16 billion and about 36% less than the July 2007’s $1.69 billion.

"Orders for semiconductor equipment continue to reflect the pronounced cutback in capital expenditures this year and are at the lowest levels since November of 2003," said Daniel Tracy, senior director of Industry Research and Statistics at SEMI. "While chip-makers remain attentive to cost controls, this remains a highly cyclic industry. Factory utilization levels, unit demand growth and planned fab projects suggest that new investment activity will resume in 2009."

Japanese July SEMI Equipment Orders Drop 27.8% ( Chart 13 )

Orders for Japanese SEMI equipment fell 27.8% in July from the same month last year as chip makers reined in spending. It was the 17th straight month of year-on-year declines amid a glut of memory chip supply, and the Semiconductor Equipment Association of Japan said it didn't expect the situation to improve for equipment makers in 2008.

Server Shipments Up 12.2% ( Chart 14 & Chart 15 )

Worldwide server shipments for 2Q’08 increased 12.2% over the same quarter last year, while worldwide server revenue for the same period climbed 5.7% according to Gartner, Inc. Worldwide server revenue totaled $13.8 billion for the second quarter, as worldwide servers shipments reached 2.3 million units.

"In spite of economic constraints in some markets like the United States, on a worldwide basis, servers continued to grow in the second quarter of the year,” said Jeffrey Hewitt, research vice president at Gartner. “The most significant driver in the quarter continued to be an upswing in x86 server replacements that started in the first quarter. This, coupled with Web data center build outs and growth in emerging markets, produced solid Q2 results.”