U.S. Electronics Demand Still Flat in March
Based on last week’s "Factory Orders" report from the U.S. Department of Census electronic equipment and component orders and shipments remained soft in March.
- Electronic equipment orders were sequentially flat from February to March (Chart 1).
- Inventories climbed for the instrument and communication equipment sectors (Chart 2).
- Automotive shipments have been rising however they were relatively unchanged from February (Chart 3).
- Military electronics orders and shipments continued their recent decline (Chart 4).
- The instrument (Chart 5), communication (Chart 6) and computer (Chart 7) sectors saw increases.
- Although the passive electronic component book/bill was positive in March (Chart 8), both orders and shipments declined (Chart 9) as 3-month growth rates hovered around the "no change" line on a 3/12 basis (Chart 10).
- Component inventories are bloated. The ratio of inventories/orders is at its highest level since 2001 (Chart 11).
- Component order growth is in excess of electronic equipment order growth suggesting that passive component orders may "correct downward" over the next few months (Chart 12).
Global Semiconductor Sales Outpace Last Year Through 1Q’13 (Charts 13 & 14)
The Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors reached $23.48 billion for the month of March 2013, an increase of 1.1% from the previous month. Global sales for March 2013 were 0.9% higher than the March 2012 and total sales through the first quarter of 2013 were 0.9% higher than sales from the first quarter of 2012. All monthly sales numbers represent a 3-month moving average.
"Through the first quarter of 2013, the global semiconductor industry has seen modest but consistent growth compared to last year," said Brian Toohey, president and CEO Semiconductor Industry Association. "Sales have increased across most end product categories, with memory showing the strongest growth. With recent indications that companies could be set to replenish inventories, we are hopeful that growth will continue in the months ahead. Regionally, the Americas slipped slightly in March after a strong start to the year, but Asia Pacific and Europe have seen impressive growth recently."
- Semiconductor shipments to North America rebounded in March following a sharp February decline (Chart 15).
- Southeast Asia’s share of semiconductor consumption continues to climb – reaching 58.5% of global chip purchases in March (Chart 16). This figure should approximate the percentage of the world’s electronic assembly that is done in SE Asia.
- Custer Consulting Group’s semiconductor leading indicator points to minimal global semiconductor shipment growth (relative to the same period last year) for the next few months of 2013 (Chart 17).
Global Manufacturing Growth Slows to Near-stagnation; April Global Manufacturing PMI 50.5 (Chart 18)
At 50.5 in April the JPMorgan Global Manufacturing PMI – a composite index produced by JPMorgan and Markit in association with ISM and IFPSM – signaled expansion for the fourth straight month.
The rate of expansion decelerated slightly during April, meaning that growth so far in 2013 has remained, at best, only marginal. This is still an improvement compared to the contractions signaled throughout much of the second half of last year.
Japan, South Korea, Indonesia and Vietnam were the only nations to report a faster rate of improvement in operating conditions during April. Europe remained the main drag on the global aggregate, with the euro area contracting at the sharpest pace in the year-to-date and the UK stagnating.
The U.S. PMI fell sharply to signal the slowest growth for six months. There was further stagnation in neighboring Canada, while Mexico expanded at the weakest pace in 20 months in Mexico. Growth of manufacturing also slowed to near-stagnation in China, Russia, India and Brazil. Rates of expansion weakened in Taiwan and Turkey.
April saw manufacturing production increase at the slowest rate in the year-to-date, as growth of new order inflows also slipped to a near-stagnant pace. New export orders posted a marginal gain for the second month running in April. Japan, the UK and South Korea reported the fastest rates of expansion in new export business. Modest increases were seen in the U.S., Canada, India and Taiwan, but rates of growth eased to near-stagnation in Italy, Indonesia, Turkey, Vietnam and Mexico. Reductions were signaled by the other nations, including China and Germany.
Worldwide Semiconductor Manufacturing Equipment Spending Declined 16% in 2012 (Chart 19)
Worldwide semiconductor capital equipment spending totaled $37.8 billion in 2012, a 16.1% decline from 2011, according to final results by Gartner, Inc. Wafer-level manufacturing underperformed the market in 2012, pulled down by weakness in lithography and deposition. Among the major sectors, those more strongly driven by logic manufacturing, 28/20-nanometer (nm) processing and yield ramps-ups did better.
"Continued oversupply in DRAM and the shift to NAND into oversupply led to a reduced need for capacity," said Klaus-Dieter Rinnen, managing vice president at Gartner. "Memory manufacturing-related purchases declined significantly. Logic-related spending provided only a weak counterforce, impacted by slowing overall semiconductor device demand in the second half of 2012 and bulging inventories. Consequently, manufacturing equipment sales realized a declining quarterly pattern, starting in the second quarter through the end of the year."
Worldwide Semiconductor Assembly and Test Services Market Grew 2.1% in 2012 (Chart 20)
The worldwide semiconductor assembly and test services (SATS) market totaled $24.5 billion in 2012, a 2.1% increase from 2011, according to final results from Gartner, Inc.
"After experiencing relatively mild 1.8% growth in 2011, the SATS market remained in a slow-growth mode for 2012," said Jim Walker, research vice president at Gartner. "Weakness in the PC market, which started in 2011 and carried into 2012, and lower overall consumer demand were contributors to the slow growth. This weak demand for semiconductor devices resulted in inventory buildup for much of the year."
Worldwide Semiconductor Foundry Market Grew 16.2% in 2012 (Chart 21)
The worldwide semiconductor foundry market totaled $34.6 billion in 2012, a 16.2% increase from 2011, according to final results by Gartner, Inc.
"2012 was the first year that the semiconductor revenue for mobile devices surpassed that of PCs and notebooks," said Samuel Wang, research vice president at Gartner. "It also marked the first year that advanced technology for mobile applications drove the foundry revenue. Furthermore, 2012 saw not only major foundries improve the yield of 28 nanometer (nm) technology, but also many foundries fine-tuned the device performance of legacy nodes."
Fabless Suppliers Play Increasing Role in IC Market (Chart 22)
Unlike the relatively close annual market growth relationship between fabless IC suppliers and foundries, fabless IC company sales growth versus IDM (integrated device manufacturer) IC supplier growth has typically been very different. Except for 2010, fabless company IC sales growth has always outpaced IDM IC sales growth (or the decline was less severe). In 2010, for the first and only time on record, IDM IC sales growth (35%) outpaced fabless IC company sales growth (29%).
Fabless IC companies have been increasing their share of the total IC market. In 2012, fabless IC suppliers represented 27.8% of worldwide IC sales, a new record high.
IC Insights forecasts that, in 2017, fabless IC companies will command at least one-third (33%) of the total IC market, especially if more large companies like IDT, LSI, Agere, and AMD become fabless over the next five years. Over the long-term, IC Insights believes that fabless IC suppliers, and the IC foundries that serve them, will continue to become a stronger force in the total IC industry.