Weekly Global Update for January 9, 2013

U.S. Electronics Demand Edged Up in November

U.S. “Factory Orders” data for November were released last week. They include shipments, orders and inventories for domestically made electronic equipment and components:

• Electronic equipment orders and shipments increase slightly (Chart 1) driven by communication gear and the electromedical, instruments and control equipment sectors (Chart 2).
• Electronic equipment inventories held steady except for an increase in the instrument and control sector (Chart 3).
• Vehicle shipments rebounded in November (Chart 4).
• Military electronics orders declined (Chart 5) but as noted earlier electromedical, instruments and control equipment orders and shipments have been recovering from their August 2012 low (Chart 6).
• Passive component’s book-to-bill ratio rose to 1.03 on a 3-month average basis (Chart 7) but, on examination of actual orders and shipments (Chart 8), demand is pretty flat and 3/12 growth rates for both component orders and shipments are below 1.0 (Chart 9) indicating still declining “growth.”
• Although component orders and shipments are relatively static, inventories continue to creep up (Chart 10).

Chart 11 summarizes the annualized (12/12) and 3-month (3/12) growth of the U.S. electronics supply chain. In this chart 100=zero growth.

Source: www.census.gov/indicator/www/m3/

Global Semiconductors Sales were $25.73 billion in November 2012, up 2% from September (Charts 12-15)

The Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors reached $25.73 billion for the month of November 2012, the largest monthly total of 2012 and a 2% increase from the prior month when sales were $25.22 billion. Sales from November 2012 also topped the November 2011 total of $25.22 billion by 2%, marking the global industry’s first year-over-year gain of 2012. Regionally, the Americas posted its largest year-over-year increase (9.7%) since April 2011. All monthly sales numbers represent a 3-month moving average.

“The global semiconductor industry navigated difficult macroeconomic conditions in 2012, but encouraging growth led by the Americas in recent months has the industry pointed in the right direction heading into 2013,” said Brian Toohey, president and CEO, Semiconductor Industry Association. “To ensure that the industry’s momentum continues, Congress should remove ongoing economic uncertainty by enacting long-term, reliable fiscal policies that boost America’s economic strength and global competitiveness.”

Regionally, sequential monthly sales increased in the Americas (5.1%), Asia Pacific (2.7%) and Europe (0.4%), but decreased in Japan (-3.4%). In the Americas, combined sales from September through November grew sharply (20.2%) compared to sales from June through August, marking the region’s largest increase on a 3-month moving average in the last decade.

Source: www.sia-online.org

Custer comment: Chart 16 compares the growth of world semiconductor shipments to Custer Consulting Group’s semiconductor leading indicator. It appears that semiconductor shipments are now showing real growth (recent 3 months vs. same 3 months a year earlier) as we enter 2013.

Global PMI Leading Indicator 50.2 in December versus 49.6 in November (Charts 17 & 18)

Global manufacturing holds steady at end of 2012

The global manufacturing sector continued to stabilize in December. At 50.2, from 49.6 in November, the JPMorgan Global Manufacturing PMI - a composite index produced by JPMorgan and Markit in association with ISM and IFPSM - lifted back above the no-change mark of 50.0 for the first time since May 2012.

Global manufacturing output, new orders and employment were all broadly unchanged over the month in December. PMI indices tracking trends in each of these variables also rose further from lows seen during mid-2012.

Among the largest industrial nations covered by the survey, solid gains in output were recorded in the U.S., China and the UK. Emerging markets also fared well, with expansions continuing in Mexico, India, Brazil, Turkey and Indonesia. Although growth in Russia and Vietnam slowed to near stagnation, trends in output stabilized in South Korea and Taiwan following six-month periods of contraction.

The Eurozone and Japan remained the main drags on global manufacturing production and employment in December. The euro area saw output contract for the tenth month running, while jobs were cut for the eleventh straight month. The downturn in Japan gathered pace, with production falling at the sharpest pace since early 2011 and payroll numbers declining for the third consecutive month.

Employment rose in the U.S., Canada, Mexico, India, Taiwan, Turkey, Ireland and Vietnam, and was broadly unchanged in China, the UK, South Korea and Brazil.

Global manufacturing new export orders declined for the ninth successive month in December. However, the rate of contraction eased to its weakest since May 2012.

December data signaled that manufacturers maintained a preference for leaner inventory holdings, with stocks of purchases and finished products both declining further during the latest survey period. Meanwhile, average input prices rose for the fourth month running and at a similar pace to that signaled in November. Cost inflation was steepest (on average) in developed markets.

Global Manufacturing PMIT Summary
50 = no change on previous month.

Commenting on the survey, David Hensley, Director of Global Economics Coordination at JPMorgan, said: "PMI survey indices for output, new orders and employment continued to lift at the end of 2012, as the global manufacturing sector stabilizes following a softer patch in the middle of the year. With the rate of inventory accumulation also remaining low, the sector should, barring any disruptions, advance further into expansion territory at the start of 2013."

U.S. December 2012 Manufacturing ISM Report on Business, PMI at 50.7 (Chart 19)

• New Orders, Production and Employment Growing
• Inventories Contracting
• Supplier Deliveries Slowing

Economic activity in the U.S. manufacturing sector expanded in December, following one month of contraction, and the overall economy grew for the 43rd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

Bradley J. Holcomb, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee stated. "The PMI™ registered 50.7%, an increase of 1.2% percentage points from November's reading of 49.5, indicating expansion in manufacturing for only the third time in the last seven months. This month's PMI™ reading moved manufacturing off its low point for 2012 in November. The New Orders Index remained at 50.3%, the same rate as in November, indicating growth in new orders for the fourth consecutive month. The Production Index registered 52.6%, a decrease of 1.1 percentage points, indicating growth in production for the third consecutive month. The Employment Index registered 52.7%, an increase of 4.3 percentage points, indicating a resumption of growth in employment following only one month of contraction since September 2009. Both the Exports and Imports Indexes registered 51.5%, returning both indexes to growth territory following consecutive periods of contraction of six and four months, respectively. Comments from the panel this month are mixed, with some indicating a strengthening of demand and others indicating a continuing softness in demand. Additionally, many respondents express uncertainty about government regulations, taxes and global economics in general as we approach 2013."

Source: www.markiteconomics.com

Worldwide IT Spending Projected to Total $3.7 Trillion in 2013, up 4.2% from 2012 (Chart 20)

Worldwide IT spending is projected to total $3.7 trillion in 2013, a 4.2% increase from 2012 spending of $3.6 trillion, according to the latest forecast by Gartner, Inc. The 2013 outlook for IT spending growth in U.S. dollars has been revised upward from 3.8% in the 3Q’12 forecast.

Gartner analysts said much of this spending increase is the result from projected gains in the value of foreign currencies versus the dollar. When measured in constant dollars, 2013 spending growth is forecast to be 3.9%.

The Gartner Worldwide IT Spending Forecast is the leading indicator of major technology trends across the hardware, software, IT services and telecom markets. For more than a decade, global IT and business executives have been using these highly anticipated quarterly reports to recognize market opportunities and challenges, and base their critical business decisions on proven methodologies rather than guesswork.

"Uncertainties surrounding prospects for an upturn in global economic growth are the major retardants to IT growth," said Richard Gordon, managing vice president at Gartner. "This uncertainty has caused the pessimistic business and consumer sentiment throughout the world. However, much of this uncertainty is nearing resolution, and as it does, we look for accelerated spending growth in 2013 compared to 2012."

Worldwide devices spending which includes PCs, tablets, mobile phones and printers, is forecast to reach $666 billion in 2013, up 6.3% from 2012. However, this is a significant reduction in the outlook for 2013 compared with Gartner's previous forecast of $706 billion in worldwide devices and 7.9% growth. The long-term forecast for worldwide spending on devices has been reduced as well, with growth from 2012 through 2016 now expected to average 4.5% annually in current U.S. dollars (down from 6.4%) and 5.1% annually in constant dollars (down from 7.4%). These reductions reflect a sharp reduction in the forecast growth in spending on PCs and tablets that is only partially offset by marginal increases in forecast growth in spending on mobile phones and printers.

"The tablet market has seen greater price competition from android devices as well as smaller, low-priced devices in emerging markets," Gordon said. "It is ultimately this shift toward relatively lower-priced tablets that lowers our average selling prices forecast for 2012 through 2016, which in turn is responsible for slowing device spending growth in general, and PC and tablet spending growth in particular."

Worldwide enterprise software spending is forecast to total $296 billion in 2013, a 6.4% increase from 2012. This segment will be driven by key markets such as security, storage management and customer relationship management; however, beginning in 2014, markets aligned to big data and other information management initiatives, such as enterprise content management, data integration tools, and data quality tools will begin to see increased levels of investment.

The global telecom services market continues to be the largest IT spending market. Gartner analysts predict that growth will be predominately flat over the next several years as revenue from mobile data services compensates for the declines in total spending for both the fixed and mobile voice services markets. By 2016, Gartner forecasts that mobile data will represent 33% of the total telecom services market, up from 22% in 2012.

Source: www.gartner.com

Global Electronic Chemicals and Materials to Reach Nearly $28.8n in 2017 (Chart 21)

According to BCC Research the global market for electronic chemicals and materials was valued at $21.2 billion in 2011 and should reach $22 billion in 2012. Total market value is expected to reach nearly $28.8 billion in 2017 after increasing at a five-year compound annual growth rate (CAGR) of 5.5%.

The electronic chemicals and materials market can be broken down into several segments, including: wafers, gases, and polymers (including conductive polymers).
The wafers segment is expected to reach nearly $12.1 billion in 2012 and $16 billion in 2017, a CAGR of 5.7%.

As a segment, gases should total $3.3 billion in 2012 and nearly $3.9 billion in 2017, a CAGR of 3.2%.

The segment for polymers including conductive polymers should have a value of nearly $2.1 billion in 2012 and nearly $2.9 billion in 2017, a CAGR of 6.9%.

Source: http://www.bccresearch.com