General Business Conditions
4Q’13 finished strongly with electronic equipment sales up 5.6% over the same quarter in 2012. The expansion slowed in the first quarter of 2014 with equipment growth dropping to an estimated 2.5% (Chart 1). Although global industrial production growth was generally positive through February (Chart 2), many of the country specific PMI leading indicators softened in March. Most country PMIs are still positive (>50), but their growth rates have plateaued or declined (Chart 3). This suggests a subdued expansion near term.
Based on the March financial results of a large group of Taiwan-listed companies (many of which manufacture in China):
- Electronic equipment sales rebounded seasonally in March (Chart 4) following a normal post-Christmas downturn made worse in February by Lunar New Year shutdowns. Please note that we have revised January and February sales downward following a correction of a spreadsheet error.
- Regional electronic equipment growth rates (Chart 5) have declined to near zero (3/12=1) for all world areas except Japan.
- SE Asia dominates electronic equipment production (Chart 6). World total monthly equipment shipments (Chart 7) were up 3.5% in March 2014 versus March 2013 and up 14.4% sequentially from February 2014.
- Motherboard shipments rebounded slightly in March (Chart 8) while display sales improved more (Chart 9).
- Electronic equipment’s growth slowing suggests that semiconductor shipment to Asia growth will soon soften on a 3/12 basis (Chart 10).
- Foundry sales were relatively flat (Chart 11) and the PMI leading indicator predicts their slower growth short-term (Chart 12).
- Package and test rebounded seasonally (Chart 13) but memory sales were sequentially flat (Chart 14).
- Passive components (Chart 15) and solar/photovoltaic sales (Chart 16) improved.
- ODM sales rose modestly (Chart 17) but their 1Q’14 growth declined compared to the last quarter of 2013 (Chart 18).
- PCB sales improved (Chart 19) but rigid laminate demand was flat (Chart 20).
- The PMI leading indicator points to slower growth for SE Asian PCB sales short-term (Chart 21).
Worldwide PC Shipments Declined 1.7% y/y in 1Q’14; End of Windows XP Support Provides a Boost in PC Replacements (Charts 22-25)
Worldwide PC shipments totaled 76.6 million units in the first quarter of 2014, a 1.7% decline from the first quarter of 2013, according to preliminary results by Gartner. The severity of the decline eased compared with the past seven quarters.
“The end of XP support by Microsoft on April 8 has played a role in the easing decline of PC shipments,” said Mikako Kitagawa, principal analyst at Gartner. “All regions indicated a positive effect since the end of XP support stimulated the PC refresh of XP systems. Professional desktops, in particular, showed strength in the quarter. Among key countries, Japan was greatly affected by the end of XP support, registering a 35% year-over-year increase in PC shipments. The growth was also boosted by sales tax change. We expect the impact of XP migration worldwide to continue throughout 2014.”
“While the PC market remains weak, it is showing signs of improvement compared to last year. The PC professional market generally improved in regions such as EMEA. The U.S. saw the gradual recovery of PC spending as the impact of tablets faded.” Kitagawa said.
Global semiconductor materials market sales decreased 3% year-over-year to $43.5 Billion in 2013 - SEMI
2013 Global Semiconductor Materials Sales of $43.5 Billion (Charts 26 & 27)
The global semiconductor materials market decreased 3% in 2013 compared to 2012 while worldwide semiconductor revenues increased 5%. Revenues of $43.5 mark the second consecutive year of contraction for the semiconductor materials market.
Total wafer fabrication materials and packaging materials were $22.76 billion and $20.70 billion, respectively. Comparable revenues for these segments in 2012 were $23.44 billion for wafer fabrication materials and $21.36 billion for packaging materials. For the second year in a row, substantial declines in silicon revenue, advanced substrates, and bonding wire contributed to the year-over-year decrease to the total semiconductor materials market.
For the fourth consecutive year, Taiwan was the largest consumer of semiconductor materials due to its large foundry and advanced packaging base, despite not experiencing any annual growth. The materials market in North America also remained flat year-over-year. The materials markets in China and Europe increased in 2013, benefiting from strength in wafer fab materials. The materials market in Japan contracted 12%, with markets also contracting in South Korea and Rest of World. (The ROW region is defined as Singapore, Malaysia, Philippines, other areas of Southeast Asia and smaller global markets.)
Worldwide Semiconductor Manufacturing Equipment Spending Declined 11.5% to $33.8 billion in 2013 (Chart 28)
Worldwide semiconductor capital equipment spending totaled $33.8 billion in 2013, an 11.5% decline from 2012, according to final results by Gartner, Inc. Wafer-level manufacturing equipment demand performed above the market with strength in lithography and associated processes, while back-end manufacturing segments fared significantly worse than average.
"With this as a backdrop, capital spending was muted and dominated by a few top players," said Klaus-Dieter Rinnen, managing vice president at Gartner. "A revival of memory-related spending during the year was not enough to stem the decline in equipment sales. Despite increased foundry investments, logic-related spending was a dampening force. Consequently, manufacturing equipment sales saw slow, sequential quarterly growth, and a fourth-quarter sales explosion was not enough to stop the second straight year of decline."
Wafer-level manufacturing outperformed the market in 2013, on relative strength in dry etch, lithography, manufacturing automation and deposition. Spending was selective, focused on upgrades and latest-technology buys with little addition of capacity. Logic spending focused on preparing for 20nm/14nm (nanometer) production. Only a few subsegments managed to expand — most notably, steppers in lithography, nontube chemical vapor deposition, conductor etch, rapid thermal processing and furnaces, and select process control segments (such as patterned wafer inspection, defect review and classification).
In the back-end segments, all major categories experience significant declines. The fourth quarter of 2013 was particularly slow as major semiconductor assembly and test services (SATS) vendors pushed out orders due to market uncertainty.
Note additional recent data from JEITA (Charts 29-31)
Global Economic Output Should Expand 3.6% in 2014, IMF Sees Rich Nations Propelling Global Growth, but Risks Linger
The International Monetary Fund on predicted the global recovery would strengthen this year as output in richer nations picked up, but it warned of rising risks in emerging economies.
Global output should expand 3.6% this year, slightly lower than forecast in January, and grow 3.9% next year, the IMF said in its twice-yearly "World Economic Outlook."
But the number masks an increasing divergence among countries. While less fiscal austerity should help unshackle growth in the United States and Europe, emerging markets are likely to grow more slowly than thought just a few months ago due to tighter financial conditions, the IMF said.
Geopolitical risks have also entered the picture because of the conflict between Russia and Western countries over Ukraine.
Sensors/Actuators Will Break Out of Doldrums in 2014 (Chart 32)
Acceleration/yaw and magnetic sensors are forecast to reach record sales after slumping in 2013, while pressure sensors barrel ahead.
For 10 years, sensors and actuators have been the semiconductor industry’s fastest growing market segment, driven by higher levels of embedded control, new wireless sensing applications, and intelligent portable systems—such as smartphones—that can respond to changes in their environment and locations. However, in 2013, this normally vibrant category lost momentum and showed nearly no sales increase in the year, according to IC Insights’. The sensors/actuators market was flattened last year by slow unit growth and price erosion in its two largest sensor product categories—accelerometers/gyroscopes and magnetic-field sensors—as well as ongoing weakness in actuators.
The slowdown in sensors and actuators had been brewing for a couple years with sales in this market plateauing in the 2011-2013 timeframe after surging to record-high levels from the 2009 downturn. Inventory corrections in some cellphone segments, falling average selling prices (ASPs), and delays of purchases by cautious system makers caused the sensors/actuators business to stall out in 2013 with total revenues increasing just 0.3% to slightly more than $8.7 billion, but a new wave of stronger growth is expected to begin in 2014 as the global economy improves and new systems applications rejuvenate sales.