Global Growth Slows in February
Global electronic equipment shipments began their normal post-Christmas seasonal slowdown in January 2013 although they were up 2% compared to January 2012 (Chart 1).
However the global PMI leading indicator slipped in February (Chart 2) suggesting that the current rate of the world “recovery” remains very modest. Globally the world, Europe, China and Taiwan saw their PMIs decline while the U.S. and Japan had their leading indicators improve (Chart 3). It should be noted that a company is only growing when the PMI exceeds 50, so for example Japan may have had an improved PMI but is still contracting with a PMI value of 48.5.
U.S. Electronics Demand Weakens in January
Based on the U.S. Commerce Department’s January “Durable Goods” report, electronic equipment orders and shipments softened (Chart 4) as their 3/12 growth rates plateaued (Chart 5).
Stock levels increased as the ratio of electronic equipment inventories/orders rose (Chart 6).
Aircraft shipments (Chart 7) declined and the December spike in U.S. Defense Capital Goods orders was “corrected” downward in January (Chart 8), reaffirming that the large December order increase was a non-recurring event.
Taiwan-listed Companies (change in sales reporting method)
As mentioned last week and effective January 1, 2013 the Taiwan Stock Exchange began requiring its listed companies to provide consolidated (including subsidiaries) as opposed to the previously-reported non-consolidated sales. Custer Consulting Group’s electronic equipment and PCB databases are being corrected to reflect this change.
Fortunately many Taiwan-listed companies historically have reported both consolidated and non-consolidated sales (but some have not). Our database currently reflects the non-consolidated Taiwan sales but we will be converting to consolidated sales shortly.
It should be noted that the non-consolidated sales in our models are historically accurate through December 2012 but necessarily estimated for January 2013 (scaled using the consolidated January 2013 results and January 2012 and December 2012 non-consolidated sales).
Taiwan/China in its Normal Seasonal Decline
A composite of 101 Taiwan-listed OEMs showed a normal post-holiday sales downturn in January (Chart 9) but were up 10% compared to January 2012. ODM company sales mirrored the OEMs (Chart 10).
Wafer foundries rebounded (Chart 11) from a sharp year-end 2012 decline and passive component sales increased slightly (Chart 12).
Solar/photovoltaic revenues appear to be recovering from their recent lows (Chart 13) and rigid (CCL) laminate sales edged up (Chart 14).
Source: Company financials as reported by Taiwan Stock Exchange with Custer Consulting Group analysis
IMF Will Lower U.S. Outlook by at least 0.5% because of Sequestration
The International Monetary Fund will lower its growth forecasts for the U.S. this year because of the $85 billion in “Sequestration” spending cuts, said IMF spokesman William Murray. He commented, "What it means is that we will have to reevaluate our growth forecasts in the U.S. and also our other forecasts."
He said the spending reductions will also hurt global growth as a decline in demand in the U.S. impacts its trade partners.
Foxconn May Move Production Lines out of China
Seeing that Foxconn Electronics (Hon Hai Precision Industry) has no plans to recruit standard workers in China, rumors have started circulating in the IT that Foxconn is considering moving its investment focus from China to countries such as Brazil, Indonesia, Taiwan and the U.S.
Foxconn has declined to comment on the rumors, but some market watchers noted that China will still be an important investment target for the company in 2013, judging by the current market status.
Foxconn's recent investments worldwide should not be regarded as moves out of China since the investments simply show the maker's global market planning, the sources pointed out.
Although China's rising labor costs and strict policies for environmental protection will gradually impact Foxconn's profitability, compared to the U.S., Brazil and Indonesia, China currently has advantages in terms of cost and infrastructure, the sources said.
Worldwide Server Unit Shipments Declined 0.2%; Revenue Increased 5.1% in 4Q’12(Charts 15-18)
In the fourth quarter of 2012, worldwide server shipments declined 0.2% year-on-year, while revenue increased 5.1% from the fourth quarter of 2011, according to Gartner, Inc. For year-end results, worldwide server shipments grew 1.5% in 2012, and server revenue declined 0.6%.
“2012 was a year that definitely saw budgetary constraint which resulted in delays in x86-based server replacements in enterprise and mid-sized data centers,” said Jeffrey Hewitt, research vice president at Gartner. “Application-as-a-business data center such as Baidu, Facebook and Google were the real drivers of significant volume growth for the year.”
“Relatively weak mainframe and RISC/Itanium Unix platform market performance kept overall revenue growth in check,” Hewitt said.
From a geographic perspective, the three highest growth rates were shown by North America (5.5%), Asia/Pacific (3.4%) and Latin America (0.2%) in terms of unit shipments. These were the only regions to experience an increase in shipments. These three regions grew at a rate of 16.3, 15.5 and 6% respectively.
IBM extended its lead in the worldwide server market based on revenue in the fourth quarter of 2012. In the fourth quarter, IBM’s server revenue reached $5.1 billion in the fourth quarter of 2012 to increase its global market share to 34.9%. This was up from 33.7% market share in the fourth quarter in 2011.
Mobile Device Market to Reach 2.6 Billion Units by 2016 (Chart 19)
Smart phones and tablet PCs will continue to impact shipments of other phones and notebook PCs.
Worldwide mobile device shipments (notebook PCs, tablet PCs, smart phones and phones) will reach 2.6 billion units by 2016, according to Canalys. Tablet PCs will be the fastest-growing category, with a compound annual growth rate (CAGR) of 35%, followed by smart phones at a CAGR of 18%. Shipments of other phones will decline; during 2013 smart phones will overtake feature phones for the first time. Notebook PCs will also experience a decline (a CAGR of -6%) as tablet PCs continue taking a greater share of consumer spending. Tablet shipments are expected to exceed those of notebooks in 2014. Canalys estimates that the mobile device market in total will grow at 8% CAGR.
In 2016, smart phone shipments will be double the 695 million achieved in 2012. In terms of operating systems, Android will peak in 2013, with 71% of shipments, falling to 66% in 2016. In 2012, Android took 68%, while iOS achieved 20% and BlackBerry followed with 5%.
Shipments of tablet PCs are forecast to reach 384 million units in 2016. Volumes will be dominated by 7‑inch screens this year, with these making up more than half of the tablet market. In terms of operating systems, Apple will retain the lead over the next five years, although its share will be eroded to just under 40%, from 57% in 2012.
Tim Coulling, Canalys Senior Analyst, said, "Android tablets will continue to proliferate, as both phone and traditional PC vendors seek entry into the market and help drive prices down further. However, Microsoft still has growth opportunities, as consumers become more accepting of Windows 8 and its touch-screen experience, but price points will be critical to its success."
Enterprise WLAN Market Grew 28.5% Year-over-Year in 4Q’12
The combined consumer and enterprise worldwide wireless local area network (WLAN) market segments experienced year-over-year growth of 18.2% in the fourth quarter of 2012 (4Q12). According to International Data Corporation (IDC), the enterprise segment continued on its path of solid growth with an impressive 28.5% increase over the same period last year. The fourth quarter was the seventh consecutive quarter with annual growth in excess of 20%. For the full year 2012, the enterprise WLAN market increased 26.6% year-over-year, the third year in a row of percentage growth in the high twenties. The consumer WLAN market also finished the year on a relative high note and increased 8.2% year-over-year in 4Q12 with the full year 2012 growing at 6.2% year-over-year.
"Rapid growth with bring your own device (BYOD) continues to drive increased WLAN infrastructure rollouts in the enterprise, and is the single largest factor driving increased innovation and differentiation in areas such as security policy and application classification," said Rohit Mehra, Vice President, Network Infrastructure, at IDC. "The second key factor driving growth is the increasing use of Wi-Fi by cellular operators and managed service providers, a trend that is likely to drive increased volumes for enterprise-class access points over the next few years."
Currency Exchange Rates vs. U.S. Dollar
Chart 20 provides the historical trade-weighted values of the U.S. dollar and Charts 21-28 give exchange rates for the dollar vs. the euro, Canada $, Japan yen, China yuan, Taiwan NT$, S. Korea won, India rupee and Brazil real.
Charts 29 to 32 provide historical metal prices for copper, tin, gold and silver.
Sources as noted on charts.