Taiwan’s “Fall Busy Season” is less Busy

Taiwan-listed electronics companies (many with manufacturing in China) are well into their “fall busy season” - based upon the consolidated August sales of 101 large OEMs ( Chart 1 ). Although August revenues were up 5.5% versus July (normal seasonality), industry growth has slowed. On a 3-month growth basis (Jun+Jul+ Aug’08 vs. Jun+Jul+Aug’07), sales grew at a +11.5% rate versus +36.7% last October ( Chart 2 ). ODM ( Chart 3 ) and motherboard ( Chart 4 ) producers behaved in a similar fashion.

	Chart 1

	Chart 2

	Chart 3

	Chart 4

Disturbingly Taiwan wafer foundries reported a slight sales decline in August
( Chart 5 ) at a time when demand should be seasonally strong. DRAM sales softened ( Chart 6 ) and passive component revenues flattened
( Chart 7 ). However, printed circuit board makers ( Chart 8 ) reported a nice August recovery.

	Chart 5

	Chart 6

	Chart 7

	Chart 8

SEMI Reports 2Q’08 Worldwide Semiconductor Equipment Figures Billings Down 26% vs. 1Q’08 ( Chart 9 & Chart 10 )

SEMI reported that worldwide semiconductor manufacturing equipment billings reached $7.83 billion in 2Q’08, 26% less than 1Q’08 and 29% less than 2Q’07. SEMI also reported worldwide semiconductor equipment bookings of US$6.99 billion in 2Q’08, 30% less than 2Q’07 and 13% less than 1Q’08. “Spending for new semiconductor equipment is down considerably as anticipated,” said Dan Tracy, senior director of Industry Research and Statistics at SEMI. “Overall 2008 spending will approach 2005 levels, with a recovery expected for next year.”

	Chart 9

	Chart 10

Global demand for contract manufacturing slowing; revenue is expected to rise from $305.5 billion in 2007 to $432.3 billion in 2012

While the growth rate of the global contract manufacturing market will slow down, total revenue will still rise from $305.5 billion in 2007 to $432.3 billion in 2012, according to iSuppli. The contract manufacturing market (EMS and ODM providers) will post a 7.2% growth rate through 2012. Several factors are inhibiting revenue growth said iSuppli’s Adam Pick. One factor is the “statistical law of large numbers, which makes it difficult for such a large market to expand much on a percentage basis.” Other factors include a slowdown at Foxconn, shifting EMS/ODM business models and new OEM procurement strategies.

Lear auto electronics manufacturing facility in Tampa will close by next September

Lear Corp. confirmed that hard times in the automotive industry are forcing it to close its Tampa, FL facility. “Lear and many other companies have been negatively impacted by declining industry production ( Chart 11 ), rising commodity prices and intense pressure from our customers to reduce our overall cost structure,” stated a Lear memo.

	Chart 11

Worldwide PC shipments are projected to grow 15.7% in 2008 to 311 million units and to over 482 million in 2012
( Chart 12 )

	Chart 12

Despite continuing economic concerns in both mature and emerging regions, recent shipment volume and increasing competition in the rapidly growing low end of the Portables market are expected to drive solid growth for the next few years, according to IDC. Worldwide PC shipments are projected to grow by 15.7% in 2008 to reach 311 million units. Growth will remain in double-digits through 2011, with growth above 9% in 2012, boosting annual shipments to over 482 million in 2012.

“We continue to see a rapid transition to Portable PCs around the world, even as economic pressures rise,” said IDC’s Loren Loverde. “The trend reflects the increasing importance of computing, not just in the home or office, but as an integrated part of our lives. Falling prices, more design choice and competition for PC makers to capture this market continue to drive a rapid transition.”

“The right way to gauge the success of consumer PCs is no longer the adoption rate of households with PCs, or even the number of PCs per household, but rather the number of machines per individual,” said IDC’s VP Bob O’Donnell.

Declining Demand Hammering Copper Product Prices ( Chart 13 )

	Chart 13

“Prices of lead frame and other copper products have fallen across the board since August, with demand from the electronics and housing industries weakening amid the global economic slowdown. The median price of 0.25mm-diameter lead frame quoted by producers to volume users is now at 1,230 yen per kilogram—down 60 yen, or 5%, from a recent high in August. This marked the first drop in three months for lead frames.”

Tin Supply Limited ( Chart 14 )

	Chart 14

Indonesia, the world’s largest tin exporter, plans to cap production to extend mine life and sustain a rally in prices. Bloomberg new service says Indonesia’s government will cap output of tin at 90,000 metric tons/year, starting this year. Indonesia accounted for about a third of global tin-in-concentrate production last year, according to ITRI Ltd.