Taiwan/China Update
May sales of Taiwan-listed companies (many of which manufacture in China) were just released:
- Based on the May PMI leading Indicators China and South Korea are contracting, Japan is at zero growth and Taiwan is expanding modestly (Chart 1)
- May 2014 was unseasonably weak for Taiwan-listed OEMs as their composite sales declined 1.4% sequentially from April and were down 5% versus May 2013 (Chart 2).
- Motherboard (Chart 3) and ODM (Chart 4) sales declined from the prior month.
- Semiconductor shipment growth to Asia flattened as electronic equipment production growth stalled (Chart 5).
- Looking forward, foundry (Chart 6), package & test (Chart 7), memory (Chart 8) and passive component (Chart 9) sales rose suggesting that assembly activity will soon accelerate.
- Solar/photovoltaic sales continued to improve (Chart 10).
- Printed circuit board sales (Chart 11) increased as CCL (PCB laminate) shipments mirrored rigid PCB performance (Chart 12).
Sources: Taiwan-listed company financials with Custer interpretation, www.markiteconomics.com
European Update
Eurostat just released its April European electronic supply chain results:
- The European May PMI leading indicator continued to signal expansion (PMI>50) but at a slower rate (Chart 13).
- Electronic equipment shipments rose sharply in April (Chart 14).
- Automotive (Chart 15) and aerospace (Chart 16) shipments weakened.
- Instrument & control equipment shipments held (Chart 17) and medical equipment sales jumped (Chart 18).
- Electronic assembly (Chart 19), component & board (Chart 20) and wiring device (Chart 21) shipments grew sequentially.
- Chart 22 shows the 3/12 growth of the European electronic supply chain and Chart 23 gives the 12/12 (annualized) and 3-month (3/12) growth of the European electronic-related sectors.
Sources: Eurostat and www.markiteconomics.com
Worldwide SEMI Equipment Billings US$ 10.15 Billion in 1Q'14 (Charts 24 & 25)
SEMI reported that worldwide semiconductor manufacturing equipment billings reached US$ 10.15 billion in the first quarter of 2014, 9% higher than 4Q'13 and 39% higher than the same quarter a year ago.
Worldwide semiconductor equipment bookings were $9.89 billion in 1Q'14, 27% higher than the same quarter a year ago and 5% lower than bookings for 4Q'13.
DRAM Industry Value Nears US$10 Billion in 1Q'14 (Charts 26-28)
The DRAM market became highly profitable last year after transforming into an oligopoly, according to DRAMeXchange, the memory and storage research division of TrendForce.
The entire Q1 industry value grew 2% QoQ to reaching new heights at US$ 9.94 Billion. SK Hynix, one of the industry's largest DRAM manufacturers, managed to show a highly noteworthy performance following its recovery from last year's fire accident with operating margin growth jumping from 29% to 36%. As other DRAM manufacturers display similarly impressive performances this year, 2014 is considered an optimal for the entire DRAM industry.
TrendForce predicts that the total DRAM industry value will grow 30% YoY to approximately US$ 45 Billion.
DRAM Quarterly Volumes and Average Selling Prices (Chart 29)
DRAM ASP forecast to decline in 2Q'14 as compared to 1Q'14 but still was up 24% over 2Q'13.
IC Insights Initial research for its Mid-Year Update shows that the 2Q'14 DRAM ASP is expected to be just slightly less than in 1Q'14. DRAM unit volume shipments are forecast to be 3.40 billion in 2Q'14, flat with 1Q'14 but down 5% compared with 2Q'13 and down 15% from 2Q'12.
Samsung Electronics Rushes to Vietnam for More Production Sites
Already, Samsung Electronics is manufacturing 120 million mobile handsets a year in Vietnam at its plant in the northern province of Bac Ninh and is preparing a similar-sized mobile phone plant in nearby Thai Nguyen Province. Now, it plans to add another one in Ho Chi Minh City for home appliances production.
Recently, Samsung won an approval from the People's Committee of Ho Chi Minh City for its plan to build a home appliances factory in the Saigon Hi-Tech Park* (SHTP) in the eastern part of the city, which will give wings to its ambitious plan to make Vietnam one of its production bases.
The Saigon Hi-Tech Park (SHTP) is a park for high technology enterprises located 15 km from downtown Ho Chi Minh City, opposite to Thu Duc University Village, along the Hanoi Highway and on the future line 1 of the HCMC metro (2014). The park covers an area of 326 ha (95% utilized) and is currently being expanded to 913 ha. High-tech investors are given preferential treatments here with land leases and taxation, as well as support for customs services. (Wikipedia)
Especially, Vietnam is fast emerging as Samsung's mobile handset production hub. Along with the Bac Ninh factory, it invested US$2 billion to set up the super-sized Thai Nguyen factory. It has begun pilot production since last March and will employ some 40,000 local residents by the end of this year for the full operation.
Following the mobile handset factories, Samsung decided to construct a home appliances plant in Vietnam at SHTP and discussed detailed plans with the city authorities. On the site of 700,000 square meters, Samsung plans to hold a groundbreaking ceremony for the construction of the factory within this year and produce home appliances including air-conditioners, TVs, refrigerators and washing machines.
Once the home appliances factory begins full production, Vietnam will be the second largest production base after Korea. In particular, Samsung plans to move some of the home appliance lines in China, Malaysia and Thailand to Vietnam after the completion of the SHTP factory.
Samsung's choice of Vietnam as an important production base is due to its abundant young workforces who are more cost effective than those in China. According to sources including the Korea Trade-Investment Promotion Agency, among the total population of 90 million in Vietnam, more than 50 percent are younger than 30 years of age and their minimum wage ranges from $90 to $120 a month, less than a half of the average wage of Chinese workers.
Samsung's choice of Vietnam as an important production base is due to its abundant young workforces who are more cost effective than those in China. According to sources including the Korea Trade-Investment Promotion Agency, among the total population of 90 million in Vietnam, more than 50 percent are younger than 30 years of age and their minimum wage ranges from $90 to $120 a month, less than a half of the average wage of Chinese workers.
Along with these benefits, the willingness of Lee Jae-yong, vice chairperson of Samsung, to promote its business in Vietnam acted as another factor for Samsung's large investment in Vietnam. During the Thai Nguyen factory project, which was often called the "Lee Jae-yong" project, Lee directly led the project by coming in and out of Vietnam frequently. If Samsung's investment in Vietnam proves successful, his status within the company will rise proportionally.
Last year, Samsung's factories in Vietnam recorded $24 billion of exports, accounting for 18 percent of total exports of Vietnam.
Source: John Choi, Korea Bizwire
IBM Close to Selling Chip-making unit to Globalfoundries
IBM Corp is close to selling its chip fabs to Globalfoundries Bloomberg reported.
Globalfoundries is interested in acquiring IBM's engineers and intellectual property rather than manufacturing facilities, which have little value as they are more than a decade old, the report said.
Globalfoundries, which has its own plant in New York state and a technology joint development project with IBM, will act as a supplier for IBM's microprocessors, the report said.
The terms of the deal were not available, but according to reports in April, IBM had asked for $2 billion but potential bidders offered more than $1 billion.
