Weekly Global Update for October 16, 2013

Taiwan/China Electronics Sales Rebound in September

Taiwan-listed companies, many with manufacturing in China, reported a sharp increase in September sales:

• A composite of 101 OEMs reported their combined September 2013 revenues being 3.5% above September 2012 and up 14% sequentially from August to September of this year (Chart 1).
• Because Taiwan/China dominates global electronic equipment production, world sales rose 8.4% sequentially despite being down 0.8% versus September 2012. Declines in Japan, Europe and the U.S. offset Taiwan/China’s gains (Chart 2).
• ODM sales rose 4.7% compared to last September and 15% sequentially (Chart 3). However due to a poor July and August, ODM quarterly revenues were down slightly in Q3’13 versus Q3’12 (Chart 4).
• Traditional motherboard makers’ sales surged (Chart 5), perhaps because they have diversified?
• Semiconductor shipments to SE Asia are now in closer balance with electronic equipment production on a 3/12 growth basis (Chart 6).
• Wafer foundry sales also surged (Chart 7) suggesting that global semiconductor shipments will continue to increase (Chart 8).
• Package and test (Chart 9) and memory (Chart 10) sales rose sequentially however passives (Chart 11) and solar/photovoltaic (Chart 12) suppliers’ revenues were flat from August to September.
• Rigid and flex PCB vendors’ sales grew (Chart 13) and our SE Asian PCB leading indicator points to continue growth (Chart 14).
• CCL (rigid laminate sales) weakened slightly as did rigid PCBs (Chart 15) as flex circuits drove the increase in Chart 13.

Source: Custer Consulting Group based on company financials

Worldwide Shipments of 3D Printers to Grow 49% in 2013 (Chart 16)

Worldwide shipments of 3D printers priced less than $100,000 will grow 49% in 2013 to reach a total of 56,507 units, according to Gartner, Inc.'s first forecast of the less than $100,000 consumer and enterprise 3D printer market. Rapid quality and performance innovations across all 3DP technologies will drive enterprise and consumer demand. Gartner said that shipments will increase further in 2014, growing 75% to 98,065 units, followed by a near doubling of unit shipments in 2015.

"The 3D printer market has reached its inflection point," said Pete Basiliere, research director at Gartner. "While still a nascent market, with hype outpacing the technical realities, the speed of development and rise in buyer interest are pressing hardware, software and service providers to offer easier-to-use tools and materials that produce consistently high-quality results."

In 2013, combined end-user spending on 3DPs will reach $412 million, up 43% from spending of $288 million in 2012. Enterprise spending will total more than $325 million in 2013, while the consumer segment will reach nearly $87 million. In 2014, spending will increase 62%, reaching $669 million, with enterprise spending of $536 million and consumer spending of $133 million. "As the products rapidly mature, organizations will increasingly exploit 3D printing's potential in their laboratory, product development and manufacturing operations," continued Basiliere. "In the next 18 months, we foresee consumers moving from being curious about the technology to finding reasons to justify purchases as price points, applications and functionality become more attractive."

Source: www.gartner.com

Tumbling Indonesian Tin Exports Threaten Electronics Industry (Chart 17)

• Tin buyers unable to agree 2014 term shipments
• Indonesia usually supplies more than a quarter of world exports
• Tin supplies critical for Japanese and Korean electronics firms
• Risk if supply problems persist beyond a few months

Tin buyers are becoming increasingly nervous about securing enough of the metal in coming months to supply industries such as electronics, after new Indonesian trading rules cut shipments by the world's biggest exporter nearly 90% last month.

More than half of global tin goes into solder used in electronics, to make circuit boards. Tin is also widely used in food packaging as a protective coating to line containers.

Fearing disruption, tin suppliers snapped up record Indonesian stocks in the first half of the year, and have ample metal on hand for the next one to two months, traders said.

Further out, however, there could be a threat to the operations of electronics makers if export problems persist.

"The biggest issue is for the consumers in Asia, where Indonesia is two thirds of supply in some cases," said Peter Kettle of global industry group ITRI.

"For somewhere like Japan or Korea, Indonesia is absolutely critical and there is just not enough tin around from other sources to replace it," he added.

Indonesia brought in new rules on August 30 to force tin ingot shipments to trade via a local exchange before export. The new policy aimed at giving Jakarta greater influence over prices has slashed trade and meant that the long-established process of buyers and sellers agreeing term deals has stalled.

In July, Indonesia also issued rules also issued rules on new purity levels to lower lead content in tin exports with the aim of boosting the value of exports.

But under the new trading rules, buyers can no longer choose the specific brand of metal they get, meaning some traders said there is a risk the tin they get via the exchange may have impurities that make it useless for consumers.

Source: www.reuters.com

Note: Custer Consulting Group is an authorized Reuters news distributor.

Total CAPEX by Big 4 Pure-play Foundries Forecast to be $16.6 Billion in 2013, Representing 53% of their Combined Sales (Chart 18)

Capex as a percent of sales much higher than industry average. Overcapacity on horizon?

Semiconductor capital spending has increased significantly among pure-play foundries as more IDMs shift to a fabless/fab-lite business model and as new foundry participants intensify competition among the old guard. The total capital outlays by the Big 4 pure-play foundries are forecast to be $16.6 billion in 2013, which would represent 53% of their combined sales and far exceeds the industry average of 18% capital-spending-to-sales ratio. The Big 4’s capital spending as a percent of “final sales” is forecast to be 24% in 2013, still well above industry average.

A few years ago, TSMC stated that it planned to keep its capital spending at about 20% of its sales, but that was before GlobalFoundries and Samsung brought competitive pressure to the market and started chipping away at TSMC’s business. TSMC spent $5.9 billion in capital spending in 2010 (a budget that was increased twice in the first half of the year), an all-time record amount of capital spending for the company at that time. TSMC spent $8.3 billion in capital expenditures in 2012 and plans to further increase its capex spending to $10.0 billion in 2013. It appears that TSMC will be aggressive in its market share fight with GlobalFoundries and Samsung and is likely to greatly exceed its 20% of sales goal for capital spending outlays over the next few years.

The question with regard to the expected combined 2011-2013 IC foundry spending by the Big 4 pure-play suppliers ($46.3 billion) is whether it is too much. As shown in Figure 1, the “final sales” capital-spending-to-sales ratio of the major foundries was a relatively low 14-15% in 2005-2007 before falling to only 9% in 2008 and 12% in 2009. In 2010, this figure rose to 23%, a level not seen since the boom year of 2004. Spurred by the surge in capital spending by TSMC and GlobalFoundries, this figure rose to 30% in 2011. For 2012, the capital spending as a percent of sales figure for the Big 4 foundries dropped back to a more “reasonable” 24%, with the same percentage expected for 2013. Given the major foundries high capacity utilization levels for leading-edge device production, it appears that current spending levels are warranted and should not lead to significant overcapacity issues.

Source: www.ICInsights.com

Worldwide PC shipments Declined 8.6% Y/Y to 80.3 Million Units in 3Q’13 (Charts 19-22)

The 'Back-to-School' Sales Quarter Experienced Its Lowest PC Volume Since 2008
Worldwide PC shipments totaled 80.3 million units in the third quarter of 2013, an 8.6% decline from the same period last year, according to preliminary results by Gartner, Inc. This marks the sixth consecutive quarter of declining worldwide shipments.

"The third quarter is often referred to as the 'back-to-school' quarter for PC sales, and sales this quarter dropped to their lowest volume since 2008," said Mikako Kitagawa, principal analyst at Gartner. "Consumers' shift from PCs to tablets for daily content consumption continued to decrease the installed base of PCs both in mature as well as in emerging markets. A greater availability of inexpensive Android tablets attracted first-time consumers in emerging markets, and as supplementary devices in mature markets."

In the U.S. market, PC shipments totaled 16.1 million units in the third quarter of 2013, a 3.5% increase from the same period last year, registering the second consecutive quarter of shipment growth after six quarters of decline (see Table 2). Low inventory from the first half of 2013, and the introduction of new models with Intel's Haswell and new form factors brought the sell-in shipment up compared with a year ago.

"The positive U.S. results could mean that seasonal strength and channel fill for new product launches in 3Q’13 finally overcame the structural decline." Kitagawa said. "Even though 3Q’13 shipments were compared with artificially weak 2Q’13 because of inventory control for the Windows 8 launch at the time, the 3Q’13 results imply the U.S. market may have passed the worst declining stage, which started in 2010. The shrinking installed base of PCs also has passed the steepest decline phase because the structural change has progressed fairly quickly. Tablets will continue to impact the PC market, but the U.S. PC market will see a more moderate decrease rather than a steep decline in the next two years."

PC shipments in EMEA totaled 22.4 million units in the third quarter of 2013, a 13.7% decline from the same period last year. The EMEA region suffered its sixth consecutive quarter of declining PC shipments. All areas of the region — Western Europe, Eastern Europe and the Middle East and Africa — showed a shipment decline. PC shipments across all of Eastern Europe remained weak due to the ongoing popularity of tablets and some weakening of the Russian Ruble versus the euro and U.S. dollar, which led to a PC price increase.

In Asia/Pacific, PC shipments were at 28.1 million units in the third quarter of 2013, an 11.2% decline from the third quarter of 2012. The region was hampered by the currency volatilities, especially in India and Indonesia, where currencies plunged to record lows. Vendors were also mindful of Windows 8.1, new models based on Intel's Bay Trail that will start shipping the following quarter. Therefore, they were careful in managing inventory.

Source: www.gartner.com