September PMI Leading Indicators – Growth in Most Regions
In general PMI leading indicators continue to rise in Europe and the USA but growth, although positive, is more moderate in China and the total world (Chart 1).
- The global PMI was unchanged in September vs. August at 53.2, still well into expansion territory (Chart 2).
- ISM’s U.S. PMI surged to 60.8 in September, its highest level since early 2004 (Chart 3).
- Eurozone’s PMI rose to 58.1, a high since 2011 (Chart 4). All major European countries were in expansion with Germany leading the manufacturing growth (Chart 5).
- The major Asian countries’ PMIs were all above 50 (Chart 6) as China (Chart 7), Taiwan (Chart 8), South Korea (Chart 9) and Japan (Chart 10) all saw manufacturing expansion in September
www.markiteconomics.com, China National Bureau of Statistics and www.instituteforsupplymanagement.org
Monthly Semiconductor Sales Reach $35 Billion Globally for First Time in August (Charts 11 & 12)
Worldwide sales up 24% year-to-year and 4% month-to-month; Americas market leads the way with growth of 39% year-to-year and 9% month-to month
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $35.0 billion for the month of August 2017, an increase of 23.9% compared to the August 2016 total of $28.2 billion and 4.0% more than the July 2017 total of $33.6 billion. All major regional markets posted both year-to-year and month-to-month increases in August, and the Americas market led the way with growth of 39.0% year-to-year and 8.8% month-to-month. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.
"Global semiconductor sales were up significantly in August, increasing year-to-year for the thirteenth consecutive month and reaching $35 billion for the first time," said John Neuffer, president and CEO, Semiconductor Industry Association. "Sales in August increased across the board, with every major regional market and semiconductor product category posting gains on a month-to-month and year-to-year basis. Memory products continue be a major driver of overall market growth, but sales were up even without memory in August."
Year-to-year sales increased in the Americas (39.0%), China (23.3%), Asia Pacific/All Other (19.5%), Europe (18.8%), and Japan (14.3%). Month-to-month sales increased in the Americas (8.8%), China (3.7%), Japan (2.8%), Asia Pacific/All Other (2.2%), and Europe (0.6%).
"With about half of global market share, the U.S. semiconductor industry is the worldwide leader, but U.S. companies face intense global competition," said Neuffer. "To allow our industry to continue to grow and innovate here at home, policymakers in Washington should enact corporate tax reform that makes the U.S. tax system more competitive with other countries. The corporate tax reform framework released last week by leaders in Congress and the Trump Administration is an important step forward. We look forward to working with policymakers to enact corporate tax reform that strengthens our industry and the U.S. economy."
- Global semiconductor shipments reached an all-time high on a 3-month average basis in August (Chart 13) but the current business cycle appears to be peaking (Chart 14).
- Shipments to North America have surged to a record high (Chart 15) with their growth well exceeding end market demand on a 3/12 growth basis (Chart 16).
- Custer Consulting Group’s semiconductor shipment leading indicator points to slowing but still positive semiconductor growth ahead (Chart 17).
South Korea Electronics Producers 2Q’17 Revenues up 22% (Chart 18)
Composite sales of 24 Korean electronics manufacturers (including Samsung (+20%) and SK Hynix (+70%) were up a total of 22% in 2Q’17 vs. 2Q16.
Source: Company financial reports
U.S. “Factory Orders” – Modest Growth in August
- Electronic equipment order and shipment growth, although positive, remains in low single digits (Chart 19).
- Electromedical, instruments and control equipment remains the largest domestically produced electronic equipment sector (Charts 20 & 21).
- Vehicle shipments have been flat although an imminent sales increase is anticipated to replace losses due to hurricane damage (Chart 22).
- Growth in the aircraft sector is minimal (Charts 23 & 24).
- Military electronics orders and shipments are rising modestly (Chart 25). Orders were up 2.1% in June-August 2017 vs. the same period in 2016.
- Electromedical, measurement and control equipment demand remain steady with orders up 1.9% on a 3-month basis (Chart 26).
- Passive component growth is modest (Chart 27) with its 3/12 growth rate WELL below semiconductor shipments to Noth America (Chart 28).
Chart 29 summarizes the annualized and 3-month growth of the domestic electronic supply chain
Global IT Spending to Reach $3.7 Trillion in 2018 (Chart 30)
Worldwide IT spending is projected to total $3.7 trillion in 2018, an increase of 4.3% from 2017 estimated spending of $3.5 trillion, according to the latest forecast by Gartner, Inc. Enterprise software and IT services continue to exhibit strong growth, with communications services continuing to drive the majority of spending. Software spending is projected to grow 8.5% in 2017, and it will grow another 9.4% in 2018 to total $387 billion. IT services spending is on pace to grow 4% in 2017 to reach $931 billion, and increase 5.3% in 2018 to reach $980 billion.
The devices segment is expected to exhibit growth for the first time in two years with an increase of 5.3% in 2017 and 5% in 2018. Increased average selling prices for premium phones in mature markets, partially due to the introduction of the iPhone 8 and 10, along with an underlying demand for PCs from businesses replacing their machines with Windows 10 PCs is driving the growth in this segment.
NAND Flash Market to Regain Balance in 2018 with Annual Bit Supply Growing by 42.9%
Demand has exceeded supply in the global NAND Flash market for six consecutive quarters since the third quarter of 2016, according to the latest research from DRAMeXchange, division of TrendForce. During this 2017, NAND Flash demand continues to expand because of the increase in average memory content of smartphones and the strong server market. At the same time, the growth in NAND Flash supply has been constrained by the pace of the major suppliers’ respective technology migrations, which in general have been slower than anticipated.
On the other hand, DRAMeXchange’s NAND Flash market outlook indicates that supply and demand will reach a balance in 2018, moving away from the undersupply situation of 2017. In terms of annual changes in supply and demand for 2018, the global NAND Flash bit supply growth rate is currently projected at 42.9%, while the bit demand growth rate is projected at 37.7%.
Shortages of All-screen Displays to Continue into 2018
The current shortage in the supply of smartphone panels is expected to continue into 2018 due to strong demand for customized all-screen panels from the smartphone sector, according to industry sources.
All-screen panel size requirements vary from client to client, depending on the design of the handset, which means all-screen panels of a specific size can only be shipped to a specific client, instead of multiple clients as they could previously.
Thus, the design and manufacture of all-screen displays with an aspect ratio of 18:9 is time consuming, which has made volume shipments of such display products rather difficult, said the sources.
The production of 18:9 all-screen panels will consume nearly 20% more glass substrates than the 16:9 panels, further aggregating the shortages, the sources added.
Prices of all-screen panels will increase by a double-digit rate in the third quarter and continue trending upward in the fourth quarter, said the sources.
Copper price has risen 51% since January 2016 (Chart 31), tin is up 50% (Chart 32), silver up 17% (Chart 33) and gold up 15% (Chart 34)
Sources as noted on charts