3Q’19 Global Electronic Supply Chain Growth
All major companies in our survey having now reported their calendar third quarter financials,
- We estimate that 3Q’19 global electronic equipment sales grew 2 percent sequentially from 2Q’19 and 0.4 percent from 3Q’18 (chart 1).
- Note that all world sales in chart 1 were converted to U.S. dollars at fluctuating exchange rates. Because of the strength of the dollar versus many other currencies, higher 3Q growth occurred in many non-dollar currencies.
- Chart 2 shows 3Q’19/3Q’18 growth by sector in the world supply chain. Results vary significantly by product type.
- Global electronic equipment growth appears to have reached bottom for this current business cycle and has begun its next expansion stage (chart 3).
Source: Company financial reports analyzed by Custer Consulting Group
November Purchasing Managers’ Indices
IHS Markit and the Institute for Supply Management have released their November purchasing managers’ indices:
- Global PMI barely edged back into expansion territory (chart 4). Results varied by country, but most regions improved (chart 5).
- In the U.S., both the ISM and IHS Markit PMIs rose; however, the ISM was still in contraction territory (chart 6).
- The Eurozone, although still deep in contraction, may have reached bottom on a PMI basis (chart 7).
- ASEAN countries in general saw slightly improved PMIs (charts 8 and 9).
Source: www.markiteconomics.com and www.instituteforsupplymanagement.org
Signs of Growth in U.S. Factory Orders for October
The U.S. Commerce Department released its October “Factory Orders” report detailing monthly shipments, orders and inventories of domestically manufactured goods:
- Electronic equipment shipments and orders have plateaued, but may be nearing growth again (chart 10).
- Military electronics orders and shipments have recently declined (chart 11).
- Electromedical, measurement and control equipment orders and shipments improved in October after a number of months of weakness (chart 12).
- Chart 13 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain through October.
Source: www.census.gov
Worldwide Semiconductor Sales Fell 13.1% Year-Over-Year in October; Up 2.9% from Sept. ‘19 (Charts 14-18)
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $36.6 billion for the month of October 2019 – an increase of 2.9 percent from the previous month’s total of $35.6 billion, but down 13.1 percent compared to the October 2018 total of $42.1 billion.
Additionally, a newly-released industry forecast from the World Semiconductor Trade Statistics (WSTS) organization projects annual global sales will decrease 12.8 percent in 2019, followed by increases of 5.9 percent in 2020 and 6.3 percent in 2021.
“While the global semiconductor market has slumped somewhat in 2019 compared to the record sales posted in 2018, the recent trend is more positive, with month-to-month sales increasing in October for the fourth consecutive month,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Global sales are projected to decrease by double digits in 2019, then rebound with moderate growth expected in 2020 and 2021.”
SIA endorsed the WSTS Autumn 2019 global semiconductor sales forecast, which projects the industry’s worldwide sales will be $409 billion in 2019, a 12.8 percent decrease from the 2018 sales total of $468.8 billion.
WSTS projects year-to-year decreases across all regional markets for 2019: Europe (-6.9 percent), Asia Pacific (-8.8 percent), Japan (-11.1 percent), and the Americas (-26.7 percent). In 2020 and 2021, global sales are expected to increase by 5.9 percent and 6.3 percent, respectively. WSTS tabulates its semi-annual industry forecast by convening an extensive group of global semiconductor companies that provide accurate and timely indicators of semiconductor trends.
Source: www.semiconductors.org
Worldwide Semiconductor Market Forecast to Reach US$409 billion in 2019; Recovery Expected in 2020 (Charts 19 & 20)
WSTS expects the world semiconductor market to be down in 2019 to US$409 billion. This reflects expected decreases in almost all major categories, with an extraordinary decrease from Memory (-33.0 percent) followed by Analog (-7.9 percent) and Logic (-4.3 percent).
In 2019, all geographical regions are expected to decrease.
For 2020, all regions are forecasted to grow with the overall market up 5.9 percent, with Optoelectronics contributing the highest growth followed by Logic.
Source: www.wsts.org
IDC: Worldwide Personal Computing Devices Shipments to Reach 408 Million in 2019 Before Declining Through 2023 (Chart 21)
On the heels of strong growth during the third quarter of 2019 and changing dynamics in the market for personal computing devices (PCDs), International Data Corporation (IDC) has raised its outlook for the remainder of 2019.
According to IDC overall PCD shipments will reach 407.7 million by the end of 2019, up 0.5 percent from 2018. However, despite recent growth long-term forecasts remain negative as the market will dip to 366.7 million units in 2023 with a compound annual growth rate (CAGR) of -2.6 percent from 2019–2023.
“The upcoming end of support for Windows 7 has been a boon for the industry as commercial organizations around the globe have been pursuing hardware upgrades in 2019,” said Jitesh Ubrani research manager for IDC’s Worldwide Mobile Device Trackers. “However, 2020 will remain challenged as the runway for OS-driven hardware purchases shortens and as upcoming tariffs combined with expected chip shortages lead to a 7 percent decline in new shipments.”
While the overall market remains challenged, IDC anticipates growth in modern form factors such as 2-in-1s and thin and light notebooks. “The migration of consumers toward higher price bands with each product lifecycle will be critical to the long-range health of the personal computing device industry,” said Linn Huang, research vice president, Devices & Displays.
“With compute increasingly moving into the cloud and spreading out across an exploding number of devices, things, and sensors, substantial market expansion for PCs and tablets is unlikely over the long haul,” Huang said. “Consequently, rising average selling prices (ASPs) will help offset persistent sluggishness in mature technology categories.”
Though other form factors such as traditional desktops and notebooks will continue to decline, IDC anticipates a growing share of those form factors will cater to emerging demand for creator PCs as well as sustained demand for gaming PCs.
Meanwhile, slate tablets will continue their downward trajectory as their lifecycles extend and incumbents such as Apple, Samsung, and Huawei slowly shift their product portfolio toward detachable tablets.
Finally, a growing supply of cellular-enabled PCs will also provide an uplift for notebooks and detachable tablets as telcos around the world work closely with the likes of Intel, MediaTek and Qualcomm to bring 4G-enabled devices in the short term, and 5G-enabled devices in the long term into the hands of consumers and businesses alike.
Source: www.businesswire.com
Gartner: Global Smartphone Sales Contracted 0.4% Y/Y to 389 Million Units in 3Q’19 (Charts 22 & 23)
Global sales of smartphones to end users continued to decline in the third quarter of 2019, contracting by 0.4 percent compared with the third quarter of 2018, according to Gartner, Inc. Demand remained weak as consumers became more concerned about getting value for money.
“For the majority of smartphone users, desire has shifted away from owning the least expensive smartphone. Today’s smartphone user is opting for midtier smartphones over premium-tier ones because they offer better value for money,” said Anshul Gupta, senior research director at Gartner. “In addition, while waiting for 5G network coverage to increase to more countries, smartphone users are delaying their purchase decisions until 2020.”
This shift has led brands such as Samsung, Huawei, Xiaomi, OPPO and Vivo to strengthen their entry-level and midtier portfolios. This strategy helped Huawei, Samsung and OPPO grow in the third quarter of 2019. By contrast, Apple recorded another double-digit decline in sales, year over year.
Huawei Recorded Double-Digit Sales Growth in a Slowing Smartphone Market
Huawei was the only one of the top-five global smartphone vendors to achieve double-digit growth in smartphone sales in the third quarter of 2019. The company sold 65.8 million smartphones, an increase of 26 percent, year-over-year. Huawei’s performance in China was the key driver of its global smartphone sales growth. It sold 40.5 million smartphones in China and increased its share of the country’s market by almost 15 percentage points.
Source: www.gartner.com
NAND Flash Revenue Up 10.2% in Q3 2019 (Charts 24 & 25)
According to the DRAMeXchange research division of TrendForce, 3Q19 NAND flash industrial revenue showed a nearly 15 percent growth of total bit shipment, owing to the seasonality-driven demand for products shipments and the additional product shipment made available in preparation for U.S. tariffs.
On the other hand, suppliers were able to improve their inventory levels and deter a mass sell-off in the wafer market driven by low prices, in turn diminishing the dip in contract price. 3Q19 industrial revenue reached $11.9 billion – growth of 10.2 percent.
Looking towards Q4 2019, TrendForce projects an improvement in the revenue performance of suppliers, once contract price adjusts itself to properly reflect the Yokkaichi power outage-induced price hike, and peak season market demand becomes healthy again.
Source: https://press.trendforce.com
German Component Distributors Sales Down 12.6% in Q3; Orders Declined 34% (Chart 26)
In line with the general components market and the German economy, sales in the German component distribution business declined significantly in the last quarter. Sales of distributors organized within the German component distributors’ association FBDi fell by 12.6 percent to 808 million euros. Orders declined by 34 percent to 674 million euros. This has taken the book-to-bill rate to a low 0.83.
Significant declines in sales were recorded in semiconductors (down 13.3 percent to 566 million euros) and electromechanical components (down 14.6 percent to 87 million euros), while passive components fared slightly better, with sales down 8.1 percent to 103 million euros. Power supplies shrank by 11.5 percent, displays by 13 percent, modules and systems by 10.9 percent.
In contrast, sensors saw growth once again, this time by 8.7 percent. The market breakdown remained unchanged: semiconductors 70 percent, passive components 13 percent, electromechanical components 11 percent, and the rest together accounting for 6 percent.
“The expected decline in sales in the summer quarter was unfortunately somewhat more pronounced than expected,” said FBDi Executive Chairman Georg Steinberger. “The last comparable drop occurred during the banking crisis of 2008. As root cause, we are seeing a mix of drastically reduced inventories, over-cautious planning (driven by macroeconomic uncertainty), and economic slowdown in some our customers’ target markets. So there is a possibility of a double-digit decline in our industry in 2019.”
Steinberger identifies excessive “German” skepticism as major challenge: “In no other European or OECD country is the mood worse than in Germany, even though the economy is certainly not performing that badly.”
From January to October, the IHS Markit Production & Manufacturing Index (PMI) fell from a good 50 points to 41.7; 50 is regarded as the threshold between downturn and upswing. Even in a crisis-ridden country like Italy, the mood is much better. And in the UK too. Steinberger adds: “One might almost think that Brexit was happening in Germany!”
A further factor is that Germany currently is not being very innovative in striving towards a more climate-friendly infrastructure. “The revolution in energy supply – a potential technology driver – has not only not happened since 2011, it is also being prevented from happening. That is not helping the German high-tech sector; climate targets are being missed, and Germany risks being left behind in terms of environmental protection.”
According to Steinberger, the FBDi sees rays of hope for the components industry at least:
“2019 was certainly worse than expected but, in spite of all skepticism and political paralysis, we expect to see a positive trend next year, and a return to former strong performance levels in 2021. The turnaround starts in people’s heads.”
Source: www.fbdi.de
U.S. 3Q’19 GDP Growth Revised Higher to 2.1% Annualized Rate (Chart 27)
According to the U.S. Bureau of Economic Analysis, real gross domestic product increased at an annual rate of 2.1 percent in the third quarter of 2019, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.0 percent.
Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $4.6 billion in the third quarter, compared with an increase of $75.8 billion in the second quarter.
Source: www.bea.gov/national/