01.29.2015 // Walt D. Custer // Industry Conditions
January “Flash” PMI Leading Indicators
January Purchasing Managers Indices (PMI Leading Indicators) were released on a “flash” basis for a few countries.
- Chart 1 compares the December PMIs vs. these recent “flash” January values. China, Europe, France and Japan while the U.S. and Germany declined.
- Historical PMIs are given for Europe (Chart 2), Japan (Chart 3) and China (Chart 4).
- Keep in mind the PMIs greater than 50 indicate growth and below 50 indicate contraction.
Japan November Electronics Results
November domestic electronic equipment, device and component production results were just released by JEITA.
Electronic equipment production declined 1.4% sequentially from October 2014 and 22% from November 2013 (Charts 5 & 6).
November’s increase in semiconductor shipments to Japan appears to be out of balance with domestic electronic equipment demand (Chart 7).
Electronic component and device growth improved (Chart 8).
PCB shipments declined sequentially from October (Chart 9) and Japan’s PMI leading indicator points to further PCB shipment slowing (Chart 10).
Top Global Semiconductor Customers in 2014 (Chart 11)
Samsung Electronics and Apple remained the top semiconductor buyers in 2014, representing with a combined semiconductor demand of 17%, according to Gartner, Inc. Samsung Electronics and Apple together consumed $57.9 billion of semiconductors in 2014, an increase of $3.9 billion from 2013.
"Samsung Electronics and Apple have topped the semiconductor consumption table for four consecutive years and their decisions have considerable technology and pricing implications for the whole semiconductor industry," said Masatsune Yamaji, principal research analyst at Gartner. "However, while Samsung Electronics kept its position as the number one largest customer of semiconductor chip vendors, its growth rate in 2014 was lower than the global semiconductor market's growth, firstly because it struggled in the smartphone market, and secondly because it is withdrawing from some parts of the PC market."
The top 10 companies bought $125.6 billion of semiconductors, to account for 37% of semiconductor chip vendors' worldwide revenue in 2014. This was up from $114.8 billion, accounting for 36.4% in 2013. The top 10 outperformed the semiconductor buying market and grew by 9.4% overall.
As a result of the stabilization of memory prices from 2013, eight companies among the top 10 increased their semiconductor demand in 2014. All of the top 10 companies in the design total available market (TAM) ranking for 2013 remained in the top 10 in 2014, although a number exchanged places. Through mergers and acquisitions, fourth-place Lenovo significantly increased its semiconductor demand in 2014 with growth of 33.9%. With growth of 21.6%, Huawei climbed to number seven in 2014, up from No. 9 in 2013, while LG Electronics climbed to number nine in 2014, up from number ten in 2013, with growth of 15.9%.
European EMS Revenues to Grow from Euro 26.07 billion in 2015 to Euro 27.81 billion in 2018
The European EMS Industry - A Strategic Overview of the European Electronic Manufacturing Services Industry 2013-2018
Weaker than originally anticipated growth in the Eurozone and the emerging markets will result in the European EMS Industry posting only modest growth in 2014, extending the period of market stagnation to three years. The geopolitical situation in Eastern Europe and elsewhere in the world, combined with the economic slowdown in the second half of 2014, will continue to subdue demand and result in the current market stagnation in the European EMS industry continuing into 2015.
Against this backdrop of low growth we estimate that in 2015, the total European EMS revenues are forecast to reach Euro 26.07 billion with the greater part euro 15.11 billion achieved by companies in Central and Eastern Europe (CEE), Middle East and North Africa, (MENA) and other countries and Western Europe euro 10.95 billion.
Growth is expected to gain some traction over the period to 2018 when we expect that total European revenues will reach euro 27.81 billion with CEE/MENA showing a compound average annual growth rate (CAAGR) of 2.4% to total euro 16.27 billion. Similarly, we expect the EMS revenues in Western Europe to grow to euro 11.55 billion at a CAAGR of 1.4% over the period 2013-2018.
Although made up of over 1,000 companies, the industry is dominated by a small number of Global players with the Top 3 − Foxconn, Flextronics and Jabil − accounting for around 44% of revenues in 2013, with nearly 90% from plants in CEE focused on the Computer, Consumer and Communication (3C) sectors. In response to weaker end market demand and the migration of some production to Asia, output has been scaled back in recent years. Any escalation in the transfer of volume production to Asia could have a marked impact on overall EMS revenues in the region and Europe overall.
Over 80% of the total sales (euro 20.2 billion) are achieved by 97 companies who are less than 10% of the total number. We are expecting that there will be further consolidation across the industry due to the downward price pressure, slow economic growth and requirement to broaden and deepen the design, development and aftercare services to customers.
For EMS companies based in Western Europe, the most attractive sectors are those of Control & Instrumentation, Industrial, Medical, Aerospace and Defense, Automotive and Energy, particularly Renewables. In the CEE and other low cost countries, the focus remains on the transfer of production of low and medium volume/high mix electronic assembly from Western European EMS.
The Twelfth edition of The European EMS Industry report 2013-2018 highlights the issues impacting the European EMS industry. This comprehensive report provides:
- An analysis and revenue forecasts for both West and East and Central Europe in a single report.
- The key trends impacting the major EMS companies by market group.
- Detailed profiles of the Top 20 European EMS companies, including a ranking for 2013.
- A detailed review by major country and sub-region including an overview of electronics production, profiles of the leading EMS providers including a ranking of leading companies by country/region.
- A directory of over 1,300 manufacturing locations across Europe.
- Two appendices containing a ranking of the top 50 EMS in Europe and the Top 50 European owned EMS in 2013 with sales turnover, and a list of the actual exchange rates used.
Global Smartphone Shipments increased 25.9% y/y to 1.167 billion units in 2014 (Chart 12)
Combined shipments of Chinese brands reach 453.4 million units (Chart 13)
Global smartphone shipments totaled 1.167 billion units in 2014, a year-on-year increase of 25.9%, with combined shipments of Chinese brands reaching 453.4 million units. Chinese vendors thus managed to encompass almost 40% of the global shipments and represent six of the top ten smartphone brands worldwide.
"2014 was definitely an impressive year for Chinese brands as they gained more share of the global market," said Avril Wu, global smartphone analyst of TrendForce. Even so, Wu noted that the pooled shipments of numerous Chinese brands were still less than the combined shipments of the 2014 brand leader, Samsung, and the second best, Apple. Their shipments together accounted for 518 million units. "This shows that the fierce competition among the brands relatively and severely narrowed their profit margins," said Wu.
Samsung and Apple retained their first and second spot in worldwide smartphone shipments
Chinese brands represent six of the global top ten due to their high C/P products and rising domestic demands in China
Lenovo officially completed its acquisition of Motorola from Google in the fourth quarter of 2014. The acquisition and reorganization process took almost a year since Lenovo's announcement. With the merger finalized, Lenovo's total shipments in 2014 exceeded 90 million units and its annual growth surpassed 100%. It ranked first place among Chinese smartphone vendors and third worldwide with its 7.9% global market share.
Global Notebook Shipments to Decrease16.4% q/q and 2.4% y/y to 38.525 Million Notebooks in 1Q’15 (Chart 14)
Taiwan-based ODMs together will ship 31.105 million notebooks in the quarter (Chart 15)
There will be 38.525 million notebooks shipped globally during the first quarter of 2015, decreasing 16.4% on quarter and 2.4% on year, according to Digitimes Research.
Lenovo will be the largest vendor accounting for 20.0% of shipments, followed by Hewlett-Packard with 19.5%, Dell 12.8%, Asustek Computer 10.9%, Acer 9.3%, Apple 8.6%, Toshiba 6%, Samsung Electronics 2.9% and Fujitsu 1.3%, Digitimes Research indicated.
Taiwan-based ODMs together will ship 31.105 million notebooks in the quarter, slipping 15% on quarter and 7.8% on year and taking up 80.7% of the global total. Quanta Computer will be the largest ODM accounting for 33.7% of shipments, followed by Compal Electronics 3.2%, Wistron 15.6%, Pegatron 7.6% and Inventec 6.1%.
IMF Lowered Forecast for Global Economic Growth in 2015 to 3.5% for 2015 and 3.7% for 2016, Calls for Accommodative Policy
The International Monetary Fund lowered its forecast for global economic growth in 2015, and called for governments and central banks to pursue accommodative monetary policies and structural reforms to support growth.
Global growth is projected at 3.5% for 2015 and 3.7% for 2016, the IMF said in its latest World Economic Outlook report, lowering its forecast by 0.3 percentage points for both years.
"New factors supporting growth, lower oil prices, but also depreciation of euro and yen, are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries," Olivier Blanchard, the IMF's chief economist said.
The IMF advised advanced economies to maintain accommodative monetary policies to avoid increasing real interest rates as cheaper oil heightens the risk of deflation.
If policy rates could not be reduced further, the IMF recommended pursuing an accommodative policy "through other means".
The United States was the lone bright spot in an otherwise gloomy report for major economies, with its projected growth raised to 3.6% from 3.1% for 2015.
The United States largely offset prospects of more weakness in the euro area, where only Spain's growth was adjusted upward.
Projections for emerging economies were also broadly cut back, with the outlook for oil exporters Russia, Nigeria and Saudi Arabia worsening the most.
The drop in world oil prices, which have fallen more than 50% since June, is largely the result of OPEC not cutting supplies, a decision that is unlikely to change, Blanchard said.
"We expect the decrease in price to be quite persistent," he told reporters at a news conference launching the report. "We expect some return, some increase, but surely not an increase back to levels where we were, say, six months ago."
The IMF predicts that a slowdown in China will draw a more limited policy response as authorities in Beijing will be more concerned with the risks of rapid credit and investment growth.
Slower 2015 growth in China "reflects the welcome decision by the authorities to take care some of the imbalances which are in place and the desire to reorient the economy towards consumption and away from the real estate sector and shadow banking," Blanchard said.
The IMF also cut projections for Brazil and India.