2Q’15 Sector Growth
With more companies having now released their 2Q’15 financial reports:
- Global electronic equipment “growth” is revised down to -2.1% for 2Q’15 versus 2Q’14 (Chart 1). However sales increased 0.5% sequentially from 1Q’15.
- Overall world electronic supply chain was at or near zero growth (Chart 2) in the second quarter.
- Most sectors of the supply chain declined in 2Q’15 versus 2Q’14 with only communication, datacom (“Internet”) and SEMI equipment and also semiconductor chips expanding (Chart 3).
- SEMI capital equipment sales declined sequentially from the first quarter but were up modestly versus 2Q’14 (Chart 4).
- Passive component shipments were flat vs. a year ago but up slightly from the first quarter (Chart 5).
- Electronic component distributor revenues increased sequentially from the first quarter and were unchanged compared to 2Q’14 (Chart 6).
- PCB process equipment, materials and “CCL” laminate all saw decreased revenues in 2Q’15 versus 2Q’14 as their rates of decline accelerated (Chart 7).
- As noted last week international financial data for this analysis were consolidated at fluctuating exchange rates so both week demand and the stronger dollar (versus non-USA currencies) contributed to the declines.
- Although most companies have now reported their 2Q’15 financials the results are still preliminary. Some large OEMs including HP, Applied Materials, Medtronic and Cisco closed their quarter in July rather than June so their results will not be included until later in August.
Source: Company financial reports with Custer analysis
July PMI leading indicators were released by Markit Economics and The Institute for Supply Management:
- Global PMI was unchanged from June at 51, remaining in “slow growth” territory (Chart 8).
- USA PMI continues to forecast an expansion but at a much slower pace than in late 2014 (Chart 9).
- Europe is mixed with total Europe, Germany, France and Spain seeing slower growth and Czech Republic, Sweden, UK and Italy accelerating (Chart 10).
- China, Taiwan, South Korea and Indonesia continue to contract while India, Vietnam and Japan accelerated (Chart 11).
U.S. “Factory Orders”
The U.S. Department of Commerce released its June “Factory Orders” report including details on shipments, orders and inventories for the electronic and related supply chains:
- Electronic equipment orders have been flat for the last three months (Chart 12).
- Vehicle shipments remained near their high but have been little changed since March (Chart 13).
- Military electronics orders continued to drop from their most recent high in March (Chart 14).
- Electromedical, measurement and control equipment remained the growth sector although orders weakened sequentially from May (Chart 15).
Chart 16 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain. A value of 100 indicates no growth versus the same period a year earlier. The 3/12 “leads” the 12/12.
Smartphone and Tablet Component Suppliers unable to Clear Inventories until 4Q’15
The current high levels of inventory held by upstream component and part suppliers for smartphones and tablets are unlikely to ease until the fourth quarter of 2015 due to sluggish demand in the end market.
In addition to display products, sales of IC parts, RF modules, chassis and keypads for smartphone and tablet applications will also be affected by high inventories in the second half of the year.
Visibility of Chip Orders Slipped due to Sluggish Demand for Handsets, Tablets, Notebooks and LCD TVs
Order visibility for NFC chips, power amplifiers (PA) and optical communication solutions has slipped due to sluggish demand for handsets, tablets, notebooks and LCD TVs. The supply of those chips was actually tight in the second quarter.
Shipments of PAs for Android phones have been weak.
NFC chipmakers have seen their clients overstock previously, and anticipate shipments will slow down in the third quarter.
It was a seller's market for both PA suppliers and NFC chip providers in the first half of 2015, but the chip firms have recently started to experience a cutback of orders from second-tier and small-scale handset brand companies, according to sources from China's handset industry.
As for optical communication solutions, supply was previously short of demand by about 10%, industry sources noted. However, the sector is set to reach a supply-demand balance by the end of the third quarter – earlier than the chip providers had expected – due to a slowdown in demand.
Top 20 Semiconductor Suppliers' Sales Increase 1% in 2Q’15 compared 1Q’15 (Charts 17 & 18).
The top-20 worldwide semiconductor (IC and O S D – optoelectronic, sensor, and discrete) sales ranking for 1H’15 is depicted in Chart 17 & 18. As shown, it took just over $2.2 billion in sales just to make it into the 1H’15 top-20 ranking and eight of the top 20 companies had 1H15 sales of at least $5.0 billion. The ranking includes seven suppliers headquartered in the U.S., four in Japan, three in Taiwan, three in Europe, two in South Korea, and one in Singapore. The top-20 supplier list includes three pure-play foundries (TSMC, GlobalFoundries, and UMC) and four fabless companies.
IC Insights includes foundries in the top 20 semiconductor supplier ranking since it has always viewed the ranking as a top supplier list.
IC Insights has recently lowered its 2015 worldwide semiconductor market forecast from 5% to 2%.
Chart 18 shows how the 1H’15 top 20 ranking would have looked if the Avago/Broadcom and NXP/Freescale mergers were in place. As shown, Avago/Broadcom would have been ranked 7th and NXP/Freescale would have moved into the 10th spot. IC Insights believes that additional acquisitions and mergers over the next few years are likely to continue to shake up the future top 20 semiconductor company rankings.
Global Tablet Shipments to decline 15% y/y in 3Q’15
Global tablet shipments are expected to decline 15% on year to reach 51.88 million units in the third quarter as the mobile device market continues to see weak demand. However, China-based white-box players will see a 15% growth from the second quarter because orders from overseas markets will recover, boosting their shipments to over 19 million units, according to Digitimes Research's latest report on the global tablet market.