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Weekly Global Update for August 6, 2014

08.06.2014 // Walt D. Custer // Industry Conditions

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2Q'14 Electronic Industry Supply Chain Growth by Sector

Although not all companies have reported their calendar second quarter financials, we have enough information to estimate 2Q'14 global growth by sector for the supply chain.

  • Electronic equipment world sales are estimated to have grown 4.7% in 2Q'14 versus 2Q'13 (Chart 1).
  • This growth estimate is based on the sales of 160 global OEMs (Chart 2). This contrasts to 3.1% growth in 1Q'14 verus 1Q'13 and 2.4% sequential growth from 1Q'14 to 2Q'14.
  • Chart 3 shows quarterly electronic equipment growth for these 160 OEMs from 2001 to present.
  • OEM growth has been accelerating since mid-2013 (Chart 4).
  • The ratio of inventories/sales declined throughout the supply chain in 2Q'14 (Chart 5). This is a normal seasonal occurrence.
  • Chart 6 is a preliminary of 2Q'14/2Q'13 growth throughout the global supply chain. As noted earlier this is an initial estimate that will be updated as the balance of the companies report their calendar second quarter results.

Custer Consulting Group maintains much more details on the above including the results and identity of all companies in each sector. More information is available on request.

Source: Company financials

Business Outlook: Global Electronics Industry Supply Chain

Thursday, August 7, 2014 10:00 -11:00 am PDT (California time)

Sign up for a free 60 minute webinar with Walt Custer, President of Custer Consulting Group.

  • Electronic Industries' business cycles, market drivers and the relationship between components, materials, process equipment and end market demand.
  • Business outlook for the global electronics industry including:
    • Forecasts for Electronic Supply Chain − business cycles, market drivers and the relationship between components, materials, process equipment and end market demand
    • Global economy including size, geographic scope and growth
    • Leading indicators
    • Electronic equipment end markets including global and regional growth
    • Semiconductor world and regional markets and growth
    • Electronic component distribution
    • Solar/photovoltaic market
    • EMS/ODM performance
    • Printed circuit board fabrication and assembly
    • Electronic materials, process and assembly equipment

To register for this SiliconExpert Technologies webinar:
https://www3.gotomeeting.com/register/627021222

June Semiconductor Shipments up 10.8% Worldwide

SIA has just released its June results:

  • Semiconductor shipments rose in all regions (Chart 7) and in June reached their all-time high on a 3-month average basis (Chart 8).
  • Custer consulting Group's leading indicator points to continued short term growth (Chart 9).
  • On a 1-month basis sales were up in all areas in June (Chart 10) with global geographic share trends shown in Chart 11.

Source: www.sia-online.org

PMI Leading Indicator July Results

Here are the latest PMI results:

  • Chart 12 summarizes July versus June PMI results for some key countries. While most regions are in expansion mode (PMI >50), in general Asia-Pacific is improving while Europe's growth is moderating.
  • The JPMorgan Global PMI is positive but its growth has flattened (Chart 13).
  • Asian PMI growth rates reached lows in early 2014 and are now increasing (Chart 14) while global PMI growth varies significantly by region (Chart 15).

Source: www.markiteconomics

July U.S. Purchasing Managers Index at 57.1 (Chart 16)

New Orders, Employment and Production Growing; Inventories Contracting; Supplier Deliveries Slowing

Economic activity in the manufacturing sector expanded in July for the 14th consecutive month, and the overall economy grew for the 62nd consecutive month said ISM.

"The July PMI® registered 57.1%, an increase of 1.8 percentage points from June's reading of 55.3%, indicating expansion in manufacturing for the 14th consecutive month. The New Orders Index registered 63.4%, an increase of 4.5 percentage points from the 58.9% reading in June, indicating growth in new orders for the 14th consecutive month. The Production Index registered 61.2%, 1.2 percentage points above the June reading of 60%.

Employment grew for the 13th consecutive month, registering 58.2%, an increase of 5.4 percentage points over the June reading of 52.8%. Inventories of raw materials registered 48.5%, a decrease of 4.5 percentage points from the June reading of 53%, contracting after five months of consecutive growth. Comments from the panel are generally positive, while some indicate concern over global geopolitical situations."

WHAT RESPONDENTS ARE SAYING

  • "We see slow growth in business as we see a slow growing economy." (Fabricated Metal Products)
  • "Bookings down, but shipments strong." (Electrical Equipment, Appliances and Components)
  • "Overall business conditions still good in our industry." (Computer and Electronic Products)
  • "Geopolitics still presents a considerable risk as well as the European market." (Chemical Products)
  • "Economy shows many signs of strength." (Machinery)
  • "Russia's demand for medical devices from the U.S. has dropped by 40%." (Miscellaneous Manufacturing)

Source: www.ism.ws

North American PCB Orders and Book-to-Bill Ratio Show Improvement (Charts 17-19)

IPC announced the June findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Sales growth was flat in June, but orders were up and the book-to-bill ratio returned to parity.

Flat Sales and Growing Orders Reported in June

Total North American PCB shipments decreased 0.9% in June 2014 from June 2013, leaving year-to-date shipment growth flat at -0.3%. Compared to the previous month, PCB shipments were up 9.1%.

PCB bookings increased by 4.2% compared to June 2013, making this the first year-on-year bookings increase in eight months. This increase improved year-to-date order growth, which now stands at -6.0%. Order growth jumped 28.3% in June over the previous month.

The North American PCB book-to-bill ratio returned to parity at 1.00 in June.

"The PCB book-to-bill ratio has been hovering around 1.00 since February, which explains the flat year-to-date sales growth we are seeing," said Sharon Starr, IPC's director of market research. "This month's growth in orders is a positive sign, however, and if it continues we can expect to see sales improve later this year," she added.

www.ipc.org

DRAM Bit Volume Growth Slowing (Chart 20)

Average annual DRAM bit volume growth forecast to drop from 83% in the 1995-1999 time period to only 36% from 2010 through 2014.

IC Insights' shows that DRAM bit volume has been trending downward since the mid-1990s and in the most recent five-year span is forecast to show an average annual growth rate of only 36% per year.

A worldwide economy mired in recession stunted DRAM bit volume growth to an all-time low of 21% in 2009, quite a contrast from 1994 to 2000 when annual bit volume growth was above 70%. With recovery from the recession in full swing in 2010 and DRAM suppliers transitioning to ≥1Gb DRAMs, bit volume increased 47% that year and an additional 51% in 2011. But the fairly strong bit volume growth was short-lived. In 2012 and 2013, bit volume grew just 28% and 26%, respectively, due to a decrease in standard PC shipments (the primary application for DRAM) and no major operating system upgrades to boost the average DRAM memory content in these systems. IC Insights forecasts a similar scenario will play out again in 2014−low DRAM bit volume growth due to declining shipments of standard desktop and notebook PCs.

Source: www.ICInsights.com

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Statements of fact and or opinions expressed in MarketEYE by its contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc.

Featured Contributor:
Walt D. Custer

Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.

Custer Consulting Group

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