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In this week’s edition of MarketEye, Walt Custer provides an update on the global electronic component industry, noting that the economic slowdown is ubiquitous. .

No Big Surprises in Recent Global Electronic Food Chain Data

Walt Custer Dec. 01, 2008

The key electronic equipment sectors (except SEMI equipment) were still in positive territory in this year’s third quarter. Comparing 3Q’08 and 3Q’07 global revenue growth ( Chart 1 ). However, PCB and SEMI capital equipment suppliers, passive components (including PCBs), and medium-sized EMS companies all saw sales decline.

Regional End Markets Continue to Slow

Recent regional electronic equipment 3/12 growth ( Chart 2 ) shows Japan well negative, Europe and the United States near zero growth, and Taiwan/China at +11% but slowing.

Japan Remains Weak

Japan continues to slide in electronic equipment ( Chart 3 ) and component ( Chart 4 ) production. The JEITA website ( Chart 5 ) shows Japanese electronic component production by type for the first nine months of 2008. Despite Japan’s overall component production decline, printed circuit boards recovered a bit in September ( Chart 6 ).

Europe – Steady in Local Currency

Electronic equipment growth in Europe ( Chart 7 ), when denominated in euros, hovers in low single digits. However, U.S. dollars denominated growth, which had been inflated by the strong euro/weak dollar conversion, is now dropping sharply as the euro weakens.

U.S. Electronic Equipment Demand Continues to Weaken

U.S. electronic equipment order growth ( Chart 8 ) dropped to -4% in October as shipment growth (which trails order growth) just crossed the “zero” line. The 3-month average U.S. electronic equipment book/bill ratio ( Chart 9 ) was 1.0 in October; however, the 1-month book/bill was only 0.96. Demand continues to slow ( Chart 10 ). Computer orders and shipments ( Chart 11 ) are especially weak, possibly reflecting Dell’s decreased domestic desktop PC production.

Chip Shipments Reflect Declining Global Electronic Assembly Activity

October global semiconductor shipment growth moved negative ( Chart 12 ) with only Southeast Asia ( Chart 13 ) expanding, albeit at a slower pace. However, all region’s 3/12 growth trajectories ( Chart 14 ) clearly depict a chip demand/electronic assembly slowdown (no surprise). ( Chart 15 ) gives the actual October semiconductor $ shipments for North America, West Europe, Japan, and Southeast Asia. When depicted on a 1-month (rather than 3-month average) basis the magnitude of the October decline is very apparent – especially for Southeast Asia.

Domestic Rigid Printed Circuit Orders & Shipments Dropping

North American rigid PCB orders and shipment took a big hit in October ( Chart 16 ) as orders dropped 17% versus October 2007. Our domestic rigid PCB book/bill ratio dipped to 0.95 ( Chart 17 ) as 2008 orders have trailed 2007 for much of this year ( Chart 18 ). Both North American rigid PCB and U.S. electronic equipment order growth peaked near year-end 2007 and are now heading south ( Chart 19 ). Comparing the domestic end markets, only instruments and control equipment orders ( Chart 20 ) are still expanding.

None of the above information comes as a great surprise. We are clearly in a global slowdown.

Here is some additional market information.

Recent forecasts and market estimates:

  • Alternative energy sector to grow from $38 billion in 2008 to $115B in 2013. - Databeans
  • Worldwide IT spending to increase 2.6% Y/Y. Japan, Western Europe and the United States are expected to expand by only 1% - IDC.
  • Global HDD shipments to increase 16.9% y/y to 573.92 million units in 2008. - Yano Research Institute
  • Worldwide mobile phone sales increased 6% Y/Y to more than 309 million units in 3Q'08. – Gartner
  • PC shipments to increase only 4.3% in 2009, and 7.1% in 2010. – iSuppli
  • Worldwide notebook personal computer shipments to grow 11.3% to 138 million units in 2009; netbook PC shipment volume is expected to increase 102% to 22.64 million units. – MIC
  • PC gaming hardware in 2008 was just over $20 billion, and will grow to over $34 billion by 2012. - Jon Peddie Research
  • Global semiconductor sales to grow 2.2% y/y to $261.2 billion in 2008 and decline 5.6% to $246.7 billion in 2009. – SIA
  • Germany’s electronic components market in 2008 is expected to drop by 4% to Euro 16.4 billion. – ZVEI
  • North American semiconductor equipment industry October 2008 book-to-bill ratio was 0.93; bookings were $843 million and billings were $908 million (both 3-month avg. basis).
  • Semiconductor venture capital investment decreased 44% Q/Q and 57% Y/Y to $231.6m in 3Q'08. - SEMI World Fab Forecast
  • EMS market to grow 13.5% annually from $261 billion in 2007 to $492 billion in 2012. - Lincoln International

Maquiladoras in Juárez and maquila suppliers in El Paso cut jobs due to the depressed automotive industry and the U.S. economic downturn.