Weekly Global Update for March 18, 2015

Seasonal Slowdown in February

February 2015 was likely the worst month of this year for the normal seasonal downturn. Both global electronic equipment (Chart 1) and printed circuit board (Chart 2) shipments most likely hit their yearly low this February only to probably rebound in March. The Lunar New Year shutdowns in Asia contributed to this February’s sharp sales plunge.

Source: Custer Consulting Group

Taiwan/China update

February sales were just released for Taiwan-listed companies, many of which manufacture in China.

• Electronic equipment shipments in February 2015 were down 13% sequentially compared to January 2015 but up 2.2% versus February 2014 (Chart 3).
• Motherboard (Chart 4) and ODM (Chart 5) shipments had similar sharp February declines.
• Semiconductor shipments to Asia/Pacific were in balance with electronic equipment shipments on a 3/12 growth rate basis (Chart 6).
• Wafer foundry sales dropped perhaps signaling a global semiconductor shipment slowing (Chart 7).
• Package and test (Chart 8), passive component (Chart 9) and solar photovoltaic (Chart 10) revenues also dropped in February but memory sales were reasonably stable (Chart 11).
• Printed circuit shipments also plunged (Chart 12) as did CCL (PCB laminate) (Chart 13). However, the Asia/Pacific PMI leading indicator points to growth ahead (Chart 14).

Source: Financial disclosures of Taiwan Stock Exchange listed companies

Europe Update

Eurostat just released January data for the electronics supply chain:

• Industrial production grew in the EU 27, Germany and France, was flat in the UK and declined in Italy (Chart 15). Globally most major countries have shown recent industrial production growth compared to the same month a year earlier (Chart 16).
• The Euro value versus the U.S. dollar dropped to its lowest point since 2003 (Chart 17).
• The European PMI leading indicator points to modest growth in the next few months (Chart 18).
• Electronic equipment shipments for the EU 27 have risen both in December and January (Chart 19). Their 3/12 growth rate is hovering near +5% compared to the same 3-month period a year earlier (Chart 20).
• Motor vehicle shipments improved (Chart 21) and so did aerospace sales (Chart 22).
• Instrument and control shipments were flat (Chart 23) but medical electronics sales reached a 3-year high (Chart 24).
• Semiconductor shipments are growing in excess of electronic equipment sales (Chart 25).
• European electronic assembly reached an all-time high (Chart 26).
• Printed circuit board shipment growth was flat but the European PMI leading indicator points to a near term slowing (Chart 27).

Chart 28 summarized the annualized (1/12) and 3-month (3/12) growth of the European electronics supply chain.

Source: Eurostat

Intel Lowers First-Quarter Revenue Outlook (Chart 29)

Intel Corporation announced that first-quarter revenue is expected to be below the company's previous outlook. The company now expects first-quarter revenue to be $12.8 billion, plus or minus $300 million, compared to the previous expectation of $13.7 billion, plus or minus $500 million.

The change in revenue outlook is a result of weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain. The company believes the changes to demand and inventory patterns are caused by lower than expected Windows XP refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe.

The data center business is meeting expectations.

Source: Intel press release

Worldwide Tablet Growth Slows to Low Single Digits (Charts 30 & 31)

Following the first year-over-year decline in worldwide tablet shipments in 4Q’14), IDC has scaled back its 5-year forecast for tablets. Worldwide shipments are expected to reach 234.5 million units in 2015, a modest year-over-year increase of 2.1% from 2014. Although the outlook has been tempered, IDC still expects low but positive growth for the market in the years to come as demand in the commercial sector increases, and as Microsoft slowly gains a foothold.

"Despite the growing popularity of phablets, there still remains a portion of the market that wants to use a larger device so they can tailor their experience to the appropriate screen size," said Jitesh Ubrani, Senior Research Analyst, Worldwide Quarterly Tablet Tracker. "Meanwhile, an increasing number of vendors behind small tablets are reducing prices and adopting features like voice calling to entice consumers to purchase their products over competing phablets, making the dynamics of phablets vs voice-capable tablets an interesting one to watch."

In terms of platforms, Android will remain the leader, with close to two-thirds of the market over the course of the forecast. Once-upon-a-time-leader iOS is likely the weakest link as IDC expects its volume share of the market to decline in 2015, reaching levels below that of the past three years. Windows, despite modest adoption to date, is expected to gain significant share over the course of the forecast, growing from 5.1% in 2014 to 14.1% in 2019.

"Microsoft is doing a lot of good things right now and we believe the launch of Windows 10 later this year will not only have a significant impact on Microsoft's share of the market, but on the industry as a whole," said Jean Philippe Bouchard, Research Director, Tablets. "There is an appetite for a platform that can provide a productivity experience that remains consistent across multiple form factors and device types, and we believe Microsoft is well positioned to capture some of that demand."

Source: www.idc.com

IDC Lowers PC Outlook for 2015, While the Long-Term Outlook Improves Slightly (Chart 32)

Worldwide PC shipments are expected to fall by -4.9% in 2015, a drop from the previous forecast of -3.3%, while growth projections for 2016 and 2017 were raised slightly, according to IDC. 4Q’14 results were 1.7% ahead of forecast, but economic and product changes will create a head wind in the short term. Total 2015 volume is projected at 293.1 million PCs, slipping a little further to 291.4 million in 2019. In value terms, the PC market reached US$201 billion in 2014, a decline of -0.8%, and is expected to fall another -6.9% in 2015 with smaller declines in subsequent years bringing the total to US$175 billion by 2019.

Although portions of the market saw genuine improvements in demand during the second half of 2014, part of the 4Q’14 volume was inflated by an inventory build-up of "Windows 8.1 + Bing" systems in anticipation of Microsoft scaling back subsidies in early 2015. IDC expects the short term impact to hit consumer channels as they work to clear stock. In addition, average prices are likely to rise in the near term with the scaling back of Bing subsidies, the strong US Dollar (which makes systems more expensive abroad), and the continuing shift to slim, convertible, and touch-based systems. Furthermore, while recent processor updates have generated positive reception, more significant product refreshes from the likes of Intel (Skylake platform) and Microsoft (Windows 10) will be released later in the year, shifting OEM product updates and consumer interest toward later in 2015.

"Fortunately for PC makers, tablet growth has slowed," said Jay Chou, Senior Research Analyst, Worldwide PC Trackers. "The PC ecosystem has also begun to see some fruits from efforts to narrow the divide between the PC and mobile devices in terms of both user experience and price points. Nevertheless, much more needs to be done as advances in both hardware and software are expected to benefit an ever wider spectrum of form factors, such as 2-in-1 devices that will further siphon volume from notebooks."