August Looks Better (Chart 1)
Based on Markit Economics’ “flash” PMI indices, manufacturing activity improved in China, the U.S. and Europe in August. Final PMI (Purchasing Managers Indices) for August will be released about September 1, but the preliminary results look encouraging.
Japan – Slow Improvement
June Japanese electronic equipment and component shipments were just released.
- Electronic equipment shipments grew sequentially from May to June but were down 17% in 2Q’13 vs. 2Q’12 (Charts 2 & 3).
- Semiconductor shipments to Japan continue to exceed electronic equipment on a 3/12 growth basis (Chart 4).
- PCB shipments improved slightly from May but were down 19% in 2Q’13 vs. 2Q’12 (Charts 5 & 6).
- Japan’s PMI leading indicator points to further PCB growth (Chart 7).
- Electronic device growth is now in positive territory but component growth is lagging (Chart 8).
2Q’13 Global Electronics Growth by Sector
With all major companies in our sector analyses now reporting their 2Q’13 financials here are the results:
- OEM sales rose 0.3%, net income was up 53% and inventory increased 2% in 2Q’13 vs. 2Q’12 (Chart 9), although their annualized (12/12) and 2Q’13/2Q’12 (3/12) growth rates appear to have reached their low point in this business cycle (Chart 10).
- Chart 11 summarizes 2Q’13/2Q’12 growth by sector.
- Compared to 2Q’12:
- Business and office equipment was down 3.3% (Chart 12).
- Military equipment declined 5.3% (Chart 13).
- Instruments and Control equipment rose 0.2% (Chart 14) and medical equipment declined 0.5% (Chart 15).
- Telecom equipment rose 3.9% driven by smartphones (Chart 16) while datacom rose 5.5% (Chart 17).
- Computer sales declined 0.7% as a decline in desktops and notebooks was offset by tablet growth (Chart 18).
- Data storage equipment (Chart 19) was down 7.3% in 2Q’13/2Q’12 but this was relative to a hard disk drive sales surge last year once Thailand production recovered from flooding.
- SEMI fab, test and measurement equipment sales rose 8.4% with a significant increase expected in 3Q’13 based on combined company guidance (Chart 20).
- Memory sales jumped 23% (Chart 21).
- Passive component revenues rose sequentially to 2Q’12 levels (Chart 22).
- Electronic component distributor sales were up 4% with +6% guidance for 3Q’13 (Chart 23).
- Large EMS sales stayed below 2012 levels (Chart 24). Excluding Foxconn they have declined for seven straight quarters (Chart 25).
- PCB process equipment was up 6% (Chart 26), rigid and flex (CCL) laminate was down 1% (Chart 27) and other PCB materials dropped 4.3% (Chart 28).
PS: We plan to expand the 115 OEM sector to include consumer electronics and automotive material suppliers. We have done this on a preliminary basis with little change in the total 2Q’13 growth rate.
Source: Custer Consulting Group based on company financials
North America Semiconductor Equipment July 2013 Book/Bill=1.00 (Charts 29 & 30)
North America-based manufacturers of semiconductor equipment posted $1.27 billion in orders worldwide in July 2013 (3-month average basis) and a book-to-bill ratio of 1.00, according to SEMI.
The 3-month average of worldwide bookings in July 2013 was $1.27 billion. The bookings figure is 4.6% lower than the final June 2013 level of $1.33 billion, and is 3.1% higher than the July 2012 order level of $1.23 billion.
The three-month average of worldwide billings in July 2013 was $1.27 billion. The billings figure is 4.6% higher than the final June 2013 level of $1.21 billion, and is 12.0% lower than the July 2012 billings level of $1.44 billion.
"Billings for new semiconductor manufacturing equipment continue to increase and the ratio has been at or above parity for the past seven months,” said Denny McGuirk, president and CEO of SEMI. "However, order data moderated slightly in the July report and we will look to the month ahead to determine if this reflects a trend change."
South Korea's Photoresist Market to Bottom Out at $220 Million in 2013 (Chart 31)
The consumption of photoresists by the South Korean semiconductor industry was estimated at $240 million in 2012, down from 2011 in value due to a drop in shipment volume, and it will decline further to $220 million in 2013. With the prospective adoption of high-end extreme ultraviolet (EUV) photoresist in 2014, the photoresist market is expected to post an annual growth of more than five percent in value going forward, despite a minimal volume growth.
The number of wafer inputs into semiconductor fab lines has barely changed since the industry is increasingly adopting microfabrication process. Despite anemic growth in photoresist demand compared with the chip output increase, the rising portion of high-end ArF resists will push the photoresist market higher in terms of value.
Source: SolidState Technology
Taiwan-based PCB Makers Production to Decrease 3.06% in 2013
The production value of PCBs produced by Taiwan-based companies in Taiwan and China is forecast to decrease 3.06% to NT$499.6 billion (US$16.68 billion) in 2013, according to the Industrial Economics and Knowledge Center (IEK) of Taiwan's Industrial Technology Research Institute (ITRI). IEK previously estimated a small 0.99% drop.
For 2Q’13 the production value of PCBs totaled NT$121.1 billion, up 4.8% sequentially but down 5.3% on year.
Total PCB production value is expected to grow 9% on quarter and 1% on year to NT$132 billion in 3Q’13 before edging down 0.8% sequentially and 1.7% on year to NT$131 billion in the fourth quarter.
By product category, the production value of IC substrates and HDI boards both posted significant growth in the second quarter, accounting for 34.1% and 16%, respectively, of total production. Meanwhile, the ratio of flexible PCBs dropped to 12.3% but is likely to bounce again in the third quarter buoyed by the release of new iPhones.
However, the rise of China-based brands in the global PC, smartphone and LCD TV markets is not necessary a blessing to Taiwan-based PCB makers since China's brand players are inclined to use PCBs from local suppliers, in part due to the China government's policy to support its home-grown industries, commented the IEK.
The manufacturing technologies of China-based PCB makers have also improved significantly in recent years; China-based PCB suppliers are now capable of producing 3-layer and above HDI boards as well as high-end IC substrates and are posing an increasing threat to Taiwan's makers as far as the production scale is concerned, IEK said.
Should We Count Tablets as PCs? (Chart 32)
Canalys has counted tablets as PCs, reporting that Apple is now the world's leading PC manufacturer.
When including tablets, Apple is the world's leader in PCs with 27% market share. Its closest competitor, according to Canalys, is HP with 15% market share, followed by Lenovo at 14.8% and Samsung at 11.7%.
Notebook Shipments Slowed in July and August; Expected to Affect Supply Chain in 3Q’13
Notebook shipments have been slow throughout July and August 2013 and are not likely to pick up until September, according to supply chain sources.
The sources said that upstream makers in the notebook supply chain have continued to see notebook vendors adjust their reserves through the third quarter, which has affected the performance of their supply chains as a result.
Notebook vendors will likely release new units in September but will be up against new tablet releases, which is expected to limit the shipments notebook vendors will see in the second half of 2013, as well as limit the profits the supply chains hope to rake in.
This trend in the market is a major reason why notebook panel pricing has dropped in August, the sources believe.
The sources also believe that notebook vendors are likely to further resort to low-priced touch screen notebooks in the future to counterbalance competition from the tablet segment, which means that low-priced touch solutions such as OGS are likely to see steady demand throughout the second half of the year.
Digitimes Research meanwhile said that shipments of the top-five notebook vendors in July 2013 were down 20% on year.
Longreach Group acquired Hitachi Via Mechanics
Hitachi Via Mechanics,Ltd was sold to The Longreach Group. Key products are PCB mechanical and laser drilling machines.
The Longreach Group intends to further develop the Hitachi Via Mechanics' global customer base. It will provide the necessary management resources such as capital, a global network and strategy formation and execution to assist Hitachi Via Mechanics.
Longreach is an independent private equity firm with offices in Hong Kong and Tokyo. It focuses on buyouts in Japan and Greater China in the mature industrial and technology, financial services, business services and consumer related sectors.
Source: Company press releases
Endicott Interconnect (ex-IBM Endicott PCB Factory) Selling Assets
Endicott Interconnect is selling off its assets next month as a part of bankruptcy proceedings.
A hearing in federal bankruptcy court in Utica established rules to sell the company. Bids will be due September 19th. Any objections will need to be in by September 26 and Endicott Interconnect will be sold that day. Parts of the company could go to different bidders.
Source: Various local Endicott sources