Business Climate

Using the Global Purchasing Mangers' Index as a measure of world business conditions, manufacturing has been expanding (PMI>50) since early-2013 and continues to do so at a mildly accelerating pace (Chart 1).

"Flash" PMIs for January show accelerating expansion in Europe (led by Germany), a contraction in China and slightly slower (probably bad weather related) growth in the U.S. (Chart 2). See more in last topic below.

Industrial production growth is now positive for the U.S. and Canada, Japan and most of Europe. However is varies country-by-country in SE Asia (Chart 3).

Printed circuit board shipments reached a seasonal peak in October (Chart 4) but electronic equipment shipments continued to grow into December (Chart 5). Although the recent monthly expansion will likely shift to a normal season decline in 1Q'14, year-on-year end market growth is now positive in all regions (Chart 6).


Japan's business conditions continue to improve as a weaker yen has favored exports.

Electronic equipment production increased modestly from October to November (Charts 7 & 8) although printed circuit shipments declined slightly (Chart 9).

Semiconductor shipments to Japan are in balance with electronic equipment growth suggesting that there is no building up of chip inventories (Chart 10).


North America-based Semiconductor Equipment Manufacturers had $1.38 billion in orders worldwide in December 2013 and a Book/Bill of 1.02 (Charts 11 & 12)

North America-based manufacturers of semiconductor equipment posted $1.38 billion in orders worldwide in December 2013 (3-month average basis) and a book-to-bill ratio of 1.02, according to SEMI. December bookings were 11.1% higher than November 2013 and 48.3% higher than December 2012. The 3-month average of worldwide billings in December 2013 was $1.35 billion, 20.8% higher than November 2013 and 33.8% higher than December 2012.

"Through the final quarter of 2013, both bookings and billings continually improved," said Denny McGuirk, president and CEO of SEMI. "The December 3-month average bookings were at the highest level since June 2012, a positive sign for the 2014 spending outlook."


Apple & Samsung Remained World's Largest Buyers of Semiconductor Chips in 2013 (Chart 13)

Total served available market (SAM) for semiconductor spending reached $237.2 billion in 2013, up nearly 5%.

Apple and Samsung remained the world's largest buyers of semiconductor chips in 2013, but the intensifying battle between the two for the hearts and minds of consumers in their product offerings could presage another mighty showdown this year for the top ranking.

"As in 2012, Apple and Samsung were the top semiconductor spenders in 2013 among original equipment manufacturers (OEM) making more than $1 billion in revenue," said Myson Robles-Bruce, senior analyst for semiconductor spend and design analysis at IHS. "Apple was in first place with chip spending in 2013 of $30.3 billion, outspending runner-up Samsung's $22.2 billion by more than $8 billion. However, the South Korean electronics titan attained the largest spending increase on chips of any Top 10 OEM last year, up almost 30% from 2012 levels, compared to a smaller expansion of 17% on the part of Apple."

Combined, the two claimed about 14% of total spending in 2013, well ahead of other prominent chip buyers. Rounding out the Top 5 are Hewlett-Packard in third place, with $10.1 billion in spending; Lenovo in fourth, with $9.2 billion; and Dell in fifth, with $7.7 billion. The rest of the Top 10 includes Cisco Systems, Sony, Huawei Technologies, Panasonic and Toshiba.

All told, the served available market (SAM) for semiconductor spending reached $237.2 billion in 2013, up nearly 5% after spending dipped from $231.7 billion in 2011 to $226.7 billion in 2012.


Global Tablet Shipments Reached 78.45 million Units in 4Q'13 (Charts 14 & 15)

There were an estimated 78.45 million tablets shipped globally in the fourth quarter of 2013, increasing 25% on quarter and by 29.8% on year, according to Digitimes Research.

iPads accounted for 29.7% of shipments, brand models launched by vendors other than Apple for 36.6%, and models launched by white-box vendors for 33.8%.

Among vendors, Apple had the largest global market share at 29.7%, followed by Samsung Electronics with 17.4%, Amazon 5.4%, Lenovo 4.2%, Asustek Computer 2.8%, Google 1.4%, Acer 1%, Dell 0.8% and Hewlett-Packard 0.5%.

Taiwan-based ODMs/OEMs shipped 32.8 million tablets in the fourth quarter, with Foxconn Electronics accounting for 52.7%, Pegatron 24.4%, Compal Electronics 12%, Quanta Computer 6.6% and Wistron 4.2%.


Eurozone Flash Composite Purchasing Managers' Index 53.2 in January from 52.1 in December (Charts 16 & 17)

China's manufacturing industry shrank for the first time in six months and U.S. factory growth slowed a bit this month, but Europe's private sector got the New Year off to a strong start.

The mixed results suggested global growth would remain uneven in early 2014, particularly as China's economy, the world's second largest, settles into a slower rate of growth.

Weaker domestic and overseas demand in January hurt Chinese factory output. The Chinese PMI is consistent with the idea that China has shifted to a lower growth path, which is exactly in line with what the government is calling for.

In most of the 18 countries that use the euro, surveys showed stronger growth. Markit's Flash Eurozone Composite Purchasing Managers' Index (PMI), which gauges business activity across thousands of companies, jumped to 53.2 in January from 52.1 last month. That was its highest since mid-2011.

Only France bucked the overall euro zone trend. The French composite PMI showed business activity contracted this month.

"The euro zone economy started 2014 on a positive footing, which is encouraging news and will reinforce hopes of a sustained recovery this year," said Martin van Vliet at ING.

U.S. manufacturing, which had picked up steam in the second half of 2013, lost a bit of momentum this month. Financial data firm Markit said weaker output and new orders were the main drivers behind the decline in its preliminary U.S. Manufacturing PMI to 53.7 from 55.0.

Even so, the rate of overall growth remained "reassuringly robust," according to Markit chief economist Chris Williamson, who added that output growth of around 2% per quarter was generating about 10,000 new manufacturing jobs a month.


Walt D. Custer

Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.

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