Weekly Market Updates for February 22, 2012
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European Electronic Supply Chain Update (Charts 1 – 14)
Europe’s economic situation continued to deteriorate in December and its electronic supply suffered. Data from Eurostat, SIA and Custer Consulting Group:
- Industrial production declined modestly in December for the Eur27 countries, with a larger drop in Germany (Chart 1).
- European electronic supply chain growth was negative in 4Q’11 for many categories with components affected the most (Chart 2).
- Electronic equipment shipments declined from their July 2011 high but rebounded slightly in December (Chart 3). Three month (3/12) growth of European electronic equipment shipments dropped from the +10% range in early 2011 to +2% in December (Chart 4).
- Motor vehicle sales dropped in December (Chart 5) but automotive electronics shipments rose (Chart 6); perhaps because of business brought back to Europe due to Thailand’s floods?
- Aircraft, space and related equipment sales continued their strong growth (Chart 7).
- Instruments and controls (Chart 8) and medical equipment (Chart 9) sales dropped in December.
- Computers and related equipment (Chart 10) saw December shipments improve slightly following a plunge in most of 2H’11.
- Electronic assembly related activity softened (Charts 11 & 12) as did wiring devices (Chart 13).
The European electronic supply chain ended 2011 at or near “zero” growth (Chart 14).
European Semiconductor Distribution (DMASS) Experiences Further Market Weakness (Charts 15 & 16)
The European Semiconductor Market experienced an ongoing cyclical correction at the end of 2011. DMASS (Distributors' and Manufacturers' Association of Semiconductor Specialists), reported a decline of consolidated sales of 9.1% to 1.35 billion Euro, compared to Q4’10. The total year ended with an increase of 7.6% to 6.37 billion Euro.
Georg Steinberger, chairman of DMASS, commented on the results, "As expected, 2011 remained positive and set another sales record for semiconductor distribution. However, the last quarter displayed very precisely the current market trends of cautious ordering behavior in some and inventory corrections in some other industry segments. The two halves of 2011 couldn't have been more different, from 23% plus to 7% minus.
Predictions under the current climate would be dangerous, but I would not be surprised to see exactly the opposite in 2012 - weak first half and stronger second half."
Regionally, there were still some islands of growth in Q4, mainly in Eastern Europe and due to some unusual effects in the Nordic (Sweden), but the main regions were all declining, between 7.5% (UK) and 25% (Austria). Germany declined by 12.7% to 434 mmillion Euro, Italy by 17.7% to 118 million Euro, the UK by 7.5% to 117 million Euro and France by 14.5% to 96 million Euro.
Eastern Europe grew by 3% in total to 209 million Euro, the Nordic by 4.8% to 142 million Euro.
Georg Steinberger stated, "Eastern Europe remains driven by low-cost manufacturing and benefits from ongoing production transfers. The Baltic countries have begun to play a more prominent role now with manufacturing shifts from Scandinavia; therefore DMASS will change the reporting in the future and count the Baltic states into the Nordic bucket."
On the product side, neglecting the aforementioned unusual effects, the decline was across the board, between -5.8% for memory (to 119 Million Euro) and 21.8% for standard logic (24 million Euros). Analog ICs, by far the biggest product group, dropped by 14.2% (359 million Euro) and MOS Micro by 13.2% to 279 million Euro. Power dropped by 10.1% to 137 million Euro, opto by 9.9% to 114 million Euro and programmable logic by 7.9% to 125 million Euro.
Georg Steinberger concludes, "Today, significantly more than 50% of the Distribution business comes from design-in efforts with customers across industry segments. It is apparent that the classical model has changed to a more advanced and all-encompassing support model."
U.S. Composite Leading Indicator Predicts Sustained U.S. Expansion
The Conference Board’s composite index of U.S. leading indicators rose 0.4% in January. This followed a 0.5% increase in December yielding the strongest back-to-back gains in almost a year.
"There is some pretty good momentum in the (U.S.) economy," said Michael Feroli, chief U.S. economist of JPMorgan Chase. "Inflation seems to be in a sweet spot - not too hot, not too cold."
Top Optical Network Hardware Vendors (Chart 17)
Market research firm Infonetics Research reported in its Optical Network Hardware Vendor Market Share report that spending on optical gear grew 8% globally in (4Q’11) over the previous quarter.
“Regional spending trends for optical network hardware were volatile in the final quarter of 2011, with North America down and the rest of the regions up sequentially, including a huge 63% gain in Latin America -- a region showing very positive long-term trends,” notes Andrew Schmitt, directing analyst for optical for Infonetics Research.
Schmitt continued, “While the typical end-of-year budget flush failed to materialize in North America with AT&T and Verizon spending less, it did appear in full effect in EMEA, particularly Europe, up almost 11%. But the surge in Europe was due mainly to a surge in legacy SDH spending rather than of new WDM gear. Rising legacy spending is a negative leading indicator, as is the reversal in EMEA’s rolling four-quarter revenue, which turned negative in 4Q11 after only two quarters of gains.”
OPTICAL HARDWARE MARKET HIGHLIGHTS
- The global optical network equipment market, including WDM and SONET/SDH equipment, grew 8% sequentially in 4Q11, from $3.4 billion to $3.6 billion.
- For the full year 2011, the overall optical network hardware market is up 9%.
- In 4Q11, the largest optical vendors benefitted most − with the exception of
Cisco − including Huawei (up 35%), Alcatel-Lucent (up 20%), and Ciena (up 10%).
- Both Ciena and Infinera bucked the North America down-trend with positive quarterly optical revenue.
- In 2011, WDM optical spending grew 22% while SONET/SDH spending shrank 6%, as carriers continued to abandon investments in legacy technology in favor of ROADMs, coherent optics, packet-optical transport, and optical transport network (OTN) equipment.
- ROADM spending is on a 7-quarter streak of consecutive gains, with shipments up a stunning 36% in 2011 over 2010.
LED Supply Exceeded Demand by 30% in 2011 (Chart 18)
In 2011, LED supply exceeded demand by 30% due to poor LED TV sales and slow growth in LED lighting. However, this gap is closing in 2012 due to recovering backlight demand and increasing demand for lighting. According to the recent NPD DisplaySearch Quarterly LED Supply/Demand Market Forecast Report, the glut will be 19% in Q1’12 and will drop to 16% in Q2’12.
Key players such as Samsung LED, LGIT and Lextar rapidly increased their capacity for metal organic chemical vapor deposition in 2010, but found that they had overestimated market demand. In reaction to the oversupply, LED makers began to adjust utilization rates in late 2011, and the average utilization rate has dropped to 50%.
Two applications are forecast to drive LED demand in 2012. The first, the low-cost direct LED TV backlight, is likely to trigger LED demand because of its pricing. There is only a slight price difference between CCFL-backlit LCD TVs and low-cost direct LED-backlit TVs (approximately 5% for a 32” set).
The second, LED lighting will also continue to gradually grow due to efficacy enhancements and cost reductions. For LED lighting products, the lumen per dollar is becoming closer to traditional light sources every day. Following the March 2011 Japan earthquake, LED lighting products saw sales increases in Japan due to electrical power shortages as well as a government incentive program. NPD DisplaySearch forecasts that sales will continue to rapidly increase in Japan in 2012. Other regions such as China, the US and Korea have aggressively promoted LED lighting.
Currently, LED backlights are used in all small/medium LCDs, and LED penetration in mobile PCs is nearly 100%. Penetration of LEDs in LCD monitors and LCD TVs continues to grow, while the number of LED packages per set is decreasing. Also, high growth is expected for low-cost direct LED TVs in 2012.
Tablet Shipments 4Q’11: Amazon shipped 3.9 million Kindle Fires in 4Q’11 compared to Apple's 15.4 million iPads (Chart 19)
Amazon had a 14% global media tablet share last quarter according to IHS's iSuppli. Although the iPad managed to hold on to a 57% share, that was down from 64% in Q3 and less than IHS had projected.
IHS senior manager Rhoda Alexander noted that "The long-term viability of the [Amazon Fire] will hinge on the success of Amazon's business gamble, which depends on tablet sales driving substantial new online merchandise sales at Amazon.com in order to attain profitability."
Meanwhile Apple had more than $9 billion in iPad revenue while the introduction of so-called "value-priced tablets" (i.e. the Fire and Nook) created what iSuppli called "chaos across the Android tablet marketplace," forcing competitors to clear inventory at fire-sale prices.
And with the anticipated launch of the iPad 3 in the next few weeks, iSuppli expects Apple to take back in Q1 2012 whatever market share it lost in Q4 2011.
Global LTE Equipment Sales to Reach US$13.0 Billion in 2015
Global demand for LTE (Long Term Evolution) equipment is on the rise along with the growing establishment of LTE networks, and the global sales value of LTE equipment in 2015 is projected to reach US$13.0 billion, with Ericsson and Alcatel-Lucent to take a share of 35% and 27% respectively, according to Mind Commerce.
Worldwide Smartphone Sales Soared in the Fourth Quarter of 2011 With 47% Growth (Charts 20-23)
Worldwide smartphone sales to end users soared to 149 million units in Q4 2011, a 47.3% increase from the fourth quarter of 2010, according to Gartner, Inc. Total smartphone sales in 2011 reached 472 million units and accounted for 31% of all mobile devices sales, up 58% from 2010.
Smartphone volumes during the quarter rose due to record sales of Apple iPhones. As a result, Apple became the third-largest mobile phone vendor in the world, overtaking LG. Apple also became the world's top smartphone vendor, with a market share of 23.8% in the fourth quarter of 2011, and the top smartphone vendor for 2011 as a whole, with a 19% market share. "Western Europe and North America led most of the smartphone growth for Apple during the fourth quarter of 2011," said Roberta Cozza, principal research analyst at Gartner. "In Western Europe the spike in iPhone sales in the fourth quarter saved the overall smartphone market after two consecutive quarters of slow sales."
Worldwide mobile device sales to end users totaled 476.5 million units in Q4 2011, a 5.4% increase from the same period in 2010. In 2011 as a whole, end users bought 1.8 billion units, an 11.1% increase from 2010. "Expectations for 2012 are for the overall market to grow by about 7%, while smartphone growth is expected to slow to around 39%," said Annette Zimmermann, principal research analyst at Gartner.