Weekly Global Update for March 19, 2014

Industry Overview

Thanks to a relatively strong showing in Taiwan/China world electronic equipment sales were up 12.8% in February 2014 vs. February 2013 (Chart 1). There was clearly a seasonal slowdown but it was muted compared to last year. Printed circuit board shipments (Chart 2) dropped more than equipment, rising only 1.4% in February 2014 compared to February of last year.

Looking forward global growth rates for PCBs, semiconductors, electronic equipment and the PMI world leading indicator are all in positive territory but their rates of growth have plateaued with the PMI 3/12 providing “leading indicator” guidance (Chart 3). This suggests modest electronic supply chain expansion in early-mid 2014 but not robust global growth in the first half of this year. The exception is capital equipment which should grow more.

Taiwan/China - Seasonal Downturn but Up Significantly versus Last Year

February sales of Taiwan-listed electronics companies (many with manufacturing in China) showed their expected post-Christmas seasonal downturns - exacerbated by February Lunar New Year vacation shutdowns. However compared to this time a year earlier 2014 sales were up significantly:

• February 2014 OEM sales dipped to a probable seasonal low point but were up 28% compared to February 2013 (Chart 4).
• Motherboard shipments declined sharply (Chart 5) and display demand continued to weaken (Chart 6).
• February wafer foundry sales dipped seasonally but were up 20% in February 2014 versus February 2013 (Chart 7) pointing to expanded 2014 global semiconductor shipments
• Memory sales were much stronger than last year at this time - probably in part due to firmer pricing (Chart 8).
• Passive component shipments dipped seasonally but were ahead of 2013 (Chart 9).
• Solar/photovoltaic suppliers showed almost no seasonal slowdown (Chart 10).
• PCB sales declined (Chart 11) and so did CCL (PCB rigid laminate) (Chart 12).

Source: Composite TSE-listed company financials

Europe - Sequential Downturn but Beginning to Grow versus 2013

Europe’s January electronic equipment and component shipment indices were just released by Eurostat:

• January 2014 electronic equipment shipments declined 2.1% compared to January 2013 (Chart 13).
• January’s annualized (12/12) growth was -3.6% but it was -0.2% on a 3-month (3/12) basis (Chart 14). Europe is very close to being in a year-on-year expansion mode.
• Motor vehicle (Chart 15) and aerospace (Chart 16) shipments weakened.
• Instrument and control equipment shipments were relatively flat (Chart 17) but medical equipment sales rebounded (Chart 18).
• Electronic assembly activity improved (Chart 19) as did wiring device shipments (Chart 20).

Chart 21 summarizes the 3-month growth (relative to prior year) of the European electronic supply chain.

Source: Eurostat

Global Semiconductor Equipment Sales $31.6 Billion in FY13 (Charts 22 & 23)

Worldwide sales of semiconductor manufacturing equipment totaled $31.58 billion in 2013, a year-over-year decrease of 14%. SEMI’s Worldwide SEMS Report summarizes monthly billings and bookings figures for the global semiconductor equipment industry. The report, which includes data for seven major semiconductor producing regions and 24 product categories, shows worldwide billings totaled $31.58 billion in 2013, compared to $36.93 billion in sales posted in 2012. Categories cover wafer processing, assembly and packaging, test, and other front-end equipment. Other front-end includes mask/reticle manufacturing, wafer manufacturing, and fab facilities equipment.

Spending rates declined for all the regions tracked in the WWSEMS report, except for China and Taiwan. For the second year in a row Taiwan remained the region with the highest amount of spending with $10.57 billion in equipment sales. The North American market surpassed South Korea to claim the second place with $5.26 billion in sales; South Korea fell to the third position with a regional decrease of 41%.

The global other front end equipment segment decreased 34%; the assembly and packaging segment decreased 26%; total test equipment sales decreased 24%; and the wafer processing equipment market segment decreased 11%.

Source: www.semi.org

North American PCB Industry Book/Bill Improves, but Sales Continue to Lag in January (Charts 24-27)

IPC announced the January findings from its monthly North American Printed Circuit Board Statistical Program. January PCB sales and orders were below the levels of January 2013. The book-to-bill ratio in January continued climbing, but remains below parity at 0.95.

Slow Start to 2014

Total North American PCB shipments decreased 7.5% in January 2014 from January 2013, while bookings came in at 3.7% below the same month last year. Compared to December 2013, January sales were down 16.9% and bookings were 7.0% below the prior month, based on the same sample of reporting companies.

"January is typically a slow month in electronics manufacturing, especially compared to December, but this winter the industry may also be feeling the effects of weather-related slowdowns," said Sharon Starr, IPC's director of market research. "The good news is that the book-to-bill ratio continued to climb in January," she added.

Source: www.ipc.org

Custer comments:

• Chart 28 shows domestic PCB vs electronic equipment order growth by type. Only electromedical, instrument and control equipment is expanding significantly.
• The U.S. PMI suggests further deterioration in North American PCB orders (Chart 29).
• The global PMI leading indicator points to slower world PCB growth short term (Chart 30)

Component Suppliers See Strong Game Console Orders for 2Q’14

As competition between the PlayStation 4 and the Xbox One continues to heat up, their upstream component suppliers are seeing strong growth in orders in March and expect shipments in the second quarter to reach a level similar to that at the end of 2013, the previous peak.

The sources pointed out that demand for games consoles normally starts picking up around the third quarter and vendors increase orders for components around that time; however, component suppliers are already seeing increasing orders for the second quarter of 2014. Games console orders are expected to become a key driver of component suppliers' second-quarter sales.

Microsoft reportedly will start its next promotion for the Xbox One in April in the Asia Pacific and will launch in China and Eastern Europe in October.

Source: www.digitimes.com

Worldwide TV shipments were 225.1 Million Units in 2013, down from 238.3 Million in 2012

The global TV market shrank in 2013 for the second year in a row after total shipments declined by 6% from already soft 2012 levels, accompanied this time by a rare deceleration in the LCDTV space in China, Asia-Pacific and eastern Europe, according to IHS.

Shipments worldwide of TVs in 2013 amounted to 225.1 million units, down sharply from 238.3 million in 2012. It was the second straight year of contraction after a 7% loss in 2012, contrasting with the market's big 11% surge in 2010 and a more modest 1% uptick in 2011.

"The global TV market continues to be in transition following a golden period of tremendous growth from 2009-2011," said Jusy Hong, principal analyst for consumer devices at IHS. "TV shipments were down again in 2013 just like in 2012, but an unusual development was the slow market in China, Asia-Pacific and Eastern Europe-until recently among the brighter spots for the industry."

Adding to the market's woes, Hong added, cash-strapped consumers in North America and Western Europe showed little appetite to buy new TVs, especially as these territories are nearly saturated from flat-panel sets during the last major upgrade of the growth years, said IHS.

For North America and Western Europe, once the most powerful engines of the global TV industry, the weak state of the market renewed disappointment.

Overall TV shipments in 2013 for North America fell 9% on the year, while Western Europe showed an annual loss of 4%.

Source: www.digitimes.com