U.S. Electronic Demand Remains Soft in February
Based on last week's "Durable Goods" report the domestic electronics industry was still struggling in February:
- Although the U.S electronic equipment book/bill ratio increased to 1.03 (Chart 1), both shipment and order growth declined on a 3/12 basis (Chart 2).
- Actual orders increased very slightly sequentially while shipments declined compared to January (Chart 3)
- The ratio of electronic equipment inventories/orders remained near its highest level since 2002 (Chart 4).
- Commercial aircraft and parts shipments dropped for the second straight month (Chart 5).
- Defense capital goods orders returned to their trend line following a spike in December and a sharp drop in January (Chart 6).
- Communication equipment orders declined (Chart 7) while computer orders were little changed (Chart 8).
Japan Manufacturing PMI Leading Indicator Rises in March
Japan's manufacturing PMI leading indicator rose to 50.4 in March, up from 48.5 in February and reached its highest level since May 2012 (Chart 9).
Andrew Harker, Senior Economist at Markit and author of the report said: "There was evidence that the recent weakness of the yen provided a boost to manufacturers in March as output and new orders both returned to growth during the month.
"On the other hand, the effects of the yen depreciation can also be seen in the input costs data, with inflation rising to an 18-month high. A further cause for concern was a faster reduction in employment, although this trend may begin to change should workloads continue to rise in coming months."
IPC Releases North American PCB Industry Results for February 2013 (Charts 10 & 11)
Total North American PCB shipments were down 10.2% in February 2013 from February 2012, and bookings decreased 9.2% year-over-year. Year-to- date, rigid and flex PCB shipments were down 5.7% and bookings were down 6.7%. Compared to the previous month, rigid and flex PCB shipments in February decreased 6.5%, but bookings increased 1.1%. The book-to-bill ratio for the North American PCB industry continued to strengthen in February, reaching 1.06.
"Sales are still sluggish in the North American PCB industry, but the book-to-bill ratio strengthened in February for the third straight month," said Sharon Starr, IPC director of market research. "When orders exceed sales over several months, this is an encouraging sign for future sales growth."
Custer comments: Looking forward the situation looks brighter:
- Both the North American rigid PCB and U.S. electronic equipment book/bill ratios are improving (Chart 12) and their 3/12 order growth rates appear to be rising (Chart 13).
- The U.S. PMI leading indicator is pointing to coming improvement in North American rigid PCB order growth (Chart 14).
U.S. February Unemployment Rate Drops to 4-Year Low of 7.7% (Chart 15)
The domestic unemployment rate fell to 7.7% in February, a 4-year low, from 7.9% in January.
Top 25 Worldwide Semiconductor Sales Leaders for 2012
The 2013 McClean Report will show a ranking of the 2012 top-50 semiconductor suppliers in April; a preview of the top-25 companies is listed in Chart 16. The top 25 worldwide semiconductor (ICs and O-S-Ds—optoelectronics, discretes, and sensors) sales leaders for 2012 include 10 suppliers headquartered in the U.S., seven in Japan, three in Taiwan, three in Europe, and two in South Korea, a relatively broad representation of geographic regions. The top 25 ranking also includes three pure-play foundries (TSMC, GlobalFoundries, and UMC) and six fabless companies.
Worldwide Smart Connected Device Shipments grew 29.1% y/y in 2012 to over 1 Billion Units with a Value of $576.9 Billion (Chart 17)
According to International Data Corporation (IDC), worldwide shipments of smart connected devices grew 29.1% year-over-year in 2012, crossing 1 billion units shipped with a value of $576.9 billion. The market expansion was largely driven by 78.4% year-over-year growth in tablet shipments, which surpassed 128 million in 2012.
Looking specifically at the results for the fourth quarter of 2012 (4Q12), combined shipments of desktop PCs, notebook PCs, tablets, and smartphones was nearly 378 million and revenues were more than $168 billion. In terms of market share, Apple significantly closed the gap with market leader Samsung in the quarter, as the combination of Apple's iPhone 5 and iPad Mini brought Apple up to 20.3% unit shipment share versus 21.2% for Samsung. On a revenue basis for the fourth quarter, Apple continued to dominate with 30.7% share versus 20.4% share for Samsung.
Going forward, IDC expects that tablet shipments will surpass desktop PCs in 2013 and portable PCs in 2014. In 2013, worldwide desktop PC shipments are expected to drop by 4.3% and portable PCs to maintain a flat growth of 0.9%. The tablet market, on the other hand, is expected to reach a new high of 190 million shipment units with year-on-year growth of 48.7% while the smartphone market is expected to grow 27.2% to 918.5 million units.
From a regional perspective, the smart connected device volume in emerging markets grew by 41.3% in 2012 with the tablet volume growing by 111.3% and smartphone volume by 69.7% year over- year. Mature markets, on the other hand, grew by 15.6% and saw a huge plunge in the PC market in the year 2012. By the end of year 2017, IDC predicts that the tablet and smartphone markets will have a huge growth potential in the emerging markets. During this time, tablet unit shipments are expected to increase by a factor of three with a shipment value of $125 billion dollars while smartphone unit shipments are expected to double and reach a shipment value of $462 billion dollars. Portable PCs, on the other hand will show a moderate single-digit growth while desktop PCs are expected to consistently decline year over year with almost no growth in 2017.
"In emerging markets, consumer spending typically starts with mobile phones and, in many cases, moves to tablets before PCs," said Megha Saini, Research Analyst for IDC's Worldwide Smart Connected Device Tracker. "The pressure on the PC market is significantly increasing and we can see longer replacement cycles coming into effect very soon and that, too, will put downward pressure on PC sales."
Looking forward, IDC predicts the worldwide smart connected device space will continue to surge with shipments surpassing 2.2 billion units and revenues reaching $814.3 billion in 2017. "Consumers and business buyers are now starting to see smartphones, tablets, and PCs as a single continuum of connected devices separated primarily by screen size," added Bob O'Donnell, IDC Program Vice President for Clients and Displays. "Each of these devices is primarily used for data applications and different individuals choose different sets of screen sizes in order to fit their unique needs. These kinds of developments are creating exciting new opportunities that will continue to drive the smart connected devices market forward in a positive way."
Worldwide IT Spending on Pace to Reach $3.8 Trillion in 2013 (Chart 18)
Worldwide IT spending is projected to total $3.8 trillion in 2013, a 4.1% increase from 2012 spending of $3.6 trillion, according to Gartner, Inc. Currency effects are less pronounced this quarter with growth in constant dollars forecast at 4% for 2013.
The Gartner Worldwide IT Spending Forecast is the leading indicator of major technology trends across the hardware, software, IT services and telecom markets. For more than a decade, global IT and business executives have been using these highly anticipated quarterly reports to recognize market opportunities and challenges, and base their critical business decisions on proven methodologies rather than guesswork.
"Although the United States did avoid the fiscal cliff, the subsequent sequestration, compounded by the rise of Cyprus' debt burden, seems to have netted out any benefit, and the fragile business and consumer sentiment throughout much of the world continues," said Richard Gordon, managing vice president at Gartner. "However, the new shocks are expected to be short-lived, and while they may cause some pauses in discretionary spending along the way, strategic IT initiatives will continue."
Worldwide devices spending (which includes PCs, tablets, mobile phones and printers) is forecast to reach $718 billion in 2013, up 7.9% from 2012. Despite flat spending on PCs and a modest decline in spending on printers, a short-term boost to spending on premium mobile phones has driven an upward revision in the devices sector growth for 2013 from Gartner's previous forecast of 6.3%.
"The global steady growth rates are a calm ocean that hides turbulent currents beneath," said John Lovelock, research vice president at Gartner. "The Nexus of Forces — social, mobile, cloud and information — are reshaping spending patterns across all of the IT sectors that Gartner forecasts. Consumers and enterprises will continue to purchase a mix of IT products and services; nothing is going away completely. However, the ratio of this mix is changing dramatically and there are clear winners and losers over the next three to five years, as we see more of a transition from PCs to mobile phones, from servers to storage, from licensed software to cloud, or the shift in voice and data connections from fixed to mobile."
The outlook for 2013 for data center systems spending is forecast to grow 3.7% in 2013, down 0.7% from Gartner's previous forecast. This reduction is largely due to cuts to the near-term forecast for spending on external storage and the enterprise in the economically troubled EMEA region.
Worldwide enterprise software spending is forecast to total $297 billion in 2013, a 6.4% increase from 2012. Although the growth for this segment remains unchanged from Gartner's previous forecast, this belies significant changes at a market level, as stronger growth expectations for database management systems (DBMS), data integration tools and supply chain management compensate for lower growth expectations for IT operations management and operating systems software.
While the outlook for IT services remains relatively unchanged since last quarter, continued hesitation among buyers is fostering hyper-competition and cost pressure in mature IT outsourcing (ITO) segments and reallocation of budget away from new projects in consulting and implementation.
The global telecom services market continues to be the largest IT spending market and will remain roughly flat over the new several years, with declining spending on voice services counterbalanced by strong growth in spending on mobile data services.