Weekly Global Update for January 16, 2013

Global Forecasts

Charts 1-3 summarize recent forecasts for world annual growth of GDP, electronic equipment, printed circuit boards, semiconductors and semiconductor capital equipment.

Regional forecasts by product type are available from the same forecasters.

At this point 2013 growth looks much better than 2012 with further improvements expected in 2014. However optimism normally prevails at the beginning of each year!

Taiwan/China Rebounds Late in 2012

December sales were just released for Taiwan-listed companies (many with production in China):

• Electronic equipment OEM sales rose 3% in December 2012 versus December 2011 with only a modest seasonal drop from November (Chart 4).
• Large ODM companies returned to growth in 4Q'12 (Chart 5) however this growth varied significantly company-to-company with Foxconn driving the ODM industry (Chart 6). On a monthly basis ODM sales reached a record high in November and had only a slight sequential decline in December (Chart 7).
• Taiwan-listed motherboard vendors have seen a recent sales surge. December dipped slightly (Chart 8) but 2012 was strong.
• Display sales grew 5% in 2012 (Chart 9).
• Semiconductor shipments to SE Asia are very much "in sync" with electronic equipment shipments on a 3/12 growth basis suggesting that there is little inventory building or over-ordering of chips (Chart 10).
• Strangely, chip foundry sales plunged in December (Chart 11). They are often a leading indicator for global semiconductor shipments (which appear to be strong).
• Memory (Chart 12) and passive component (Chart 13) shipments remained weak while sales of Taiwan-listed solar/photovoltaic companies MAY have reached bottom (Chart 14).
• Rigid printed circuit board sales remain below their trend line (Chart 15) but flex circuit sales were strong in 2012 (Chart 16). However a composite of 46 Taiwan-listed rigid and flex PCB makers saw sales decline 5% in 2012 versus 2011 (Chart 17).
• Rigid (CCL) laminate sales are tracking rigid PCB sales on a monthly basis (Chart 18).

Source: Company financial reports with analysis by Custer Consulting Group

World Electronic Equipment Shipments

With the release of the Taiwan/China numbers for December we have updated our model for regional (Chart 19) and total (Chart 20) electronic equipment sales by month.

Source: Company financial reports with analysis by Custer Consulting Group

Worldwide PC shipments down 6.4% in 4Q'12 versus 4Q'11 (Charts 21-24)

Worldwide PC shipments totaled 89.8 million units in 4Q'12, down 6.4% compared to the same quarter in 2011 and worse than the forecasted decline of 4.4%, according to International Data Corporation (IDC). Although the quarter marked the beginning of a new stage in the PC industry with the launch of Windows 8, its impact did not quickly change recently sluggish PC demand, and the PC market continued to take a back seat to competing devices and sustained economic woes. As a result, the fourth quarter of 2012 marked the first time in more than five years that the PC market has seen a year-on-year decline during the holiday season.

The lackluster fourth quarter results were not entirely surprising given the spate of challenges the PC market faced over the course of 2012. IDC had expected the second half of 2012 to be difficult. Consumers as well as PC vendors and distribution channels continued to be diverted from PC sales by ongoing demand for tablets and smartphones. In addition, questions about the use of touch on Windows PCs versus tablets slowed commercial spending on PCs.

"Although the third quarter was focused on the clearing of Windows 7 inventory, preliminary research indicates the clearance did not significantly boost the uptake of Windows 8 systems in Q4," said Jay Chou, senior research analyst with IDC's Worldwide Quarterly PC Tracker. "Lost in the shuffle to promote a touch-centric PC, vendors have not forcefully stressed other features that promote a more secure, reliable and efficient user experience. As Windows 8 matures, and other corresponding variables such as Ultrabook pricing continue to drop, hopefully the PC market can see a reset in both messaging and demand in 2013."

"As anticipated, the U.S. market had a rough ending, dropping 4.5% in the fourth quarter and contributing to a decline of 7% for the full year 2012," said David Daoud, research director, IDC U.S. Quarterly PC Tracker. "Consumers expected all sorts of cool PCs with tablet and touch capabilities. Instead, they mostly saw traditional PCs that feature a new OS (Windows 8) optimized for touch and tablet with applications and hardware that are not yet able to fully utilize these capabilities. Despite a generally weak performance, some leading brands managed to do well relative to the market. HP, Lenovo, Asus, and Samsung were among the top performers, taking advantage of some consumer interest in Windows 8, and a push to build up their presence ahead of 2013."

Source: www.idc.com

SEMI Equipment Quarterly Shipments by Country

3Q'12 SEMI equipment shipments by area were recently released (Chart 25). Growth is still negative (3/12 < 1) and of course much more volatile compared to semiconductor shipments (Chart 26)

Source: www.seaj.or.jp and www.sia-online.org

LED Fab Manufacturing Equipment will Decline 9.2% y/y to $1.68 Billion in 2013

Spending on LED fab manufacturing equipment will decline 9.2% in 2013 as the industry faces weak long-term demand and consolidates manufacturing capacity. According to the SEMI LED/Opto Fab Forecast, spending on LED fab manufacturing equipment will drop to $1.68 billion in 2013, down from $1.85 billion in 2012. Global LED manufacturing capacity will continue to grow this year, reaching an estimated 2.57 million 4" inch wafer equivalents, a 24% increase over 2012. The outlook for equipment spending in 2014 is currently projected at less than $1 billion, as manufacturers assess an uncertain competitive environment and potential alternative manufacturing strategies.

Underlying the softening in manufacturing investment is weak long-term demand for package LED components. Despite growing demand for solid state lighting systems, total demand for packaged LEDs is at or nearing its peak. Last year, Strategies Unlimited forecasted that demand for LEDs would peak in 2012 or 2013 at approximately $13.3 billion, declining to less than $13.0 billion in 2014. Recently, IMS Research forecasted that LED demand would peak in 2015 at nearly $14 billion before declining through the remainder of the decade.

Among the reasons for weak long-term demand is the LED count per device is dropping fast and the long-life of LED-based lighting systems radically reduces the replacement lamp market.

For LED manufacturers, average selling prices continue to drop, especially in high-growth mid- and low-power segments serving the lighting industry.

Source: www.semi.org

Tablet PC Shipments to Exceed 240 Million Units Worldwide in 2013, Easily Exceeding 207 Million Notebook PCs

Tablet PC shipments are expected to reach more than 240 million units worldwide in 2013, easily exceeding the 207 million notebook PCs that are projected to ship, according to NPD DisplaySearch. In a market that has been dominated by one major player, Apple, shifting market dynamics are creating the opportunity for a greater variety of choices, which will drive shipment growth in 2013 to 64% year-over-year.

The rapid development and adoption of new screen sizes is allowing both large and small brands to gain market traction in all regions and create new demand for tablet PCs. The tablet market has been led by Apple's 9.7" iPad, but in 2013 a new class of small tablets will take over the market. Tablet PCs with 7-8" screen sizes are expected to account for 45%, or 108 million units of the market in 2013, overtaking the 9.7" size which will account for 17% share or about 41 million units.

As the variety and demand for new screen sizes increases, so will market growth in emerging markets. Having passed EMEA in 2012 to become the second-largest market for tablet PC shipments, China will have 27% of the global tablet market in 2013 with shipments of 65 million units, driven by small local brands. However, North America will remain the largest market with a 35% share (85 million units) in 2013. In both China and North America, tablet PC shipments surpassed notebook PC shipments in 2012.

Notebook PC shipments have been slowed by declining demand worldwide, reaching even emerging markets where low penetration rates could have stimulated demand. However, increasing tablet PC adoption is stymieing notebook PC growth. The second half of 2013 may provide a respite as new processors aim to bring more tablet PC-like features, such as instant on, all-day battery life, and sleek form factors, to notebook PCs.

"The tablet PC market saw increasing investments in North America in the second half of 2012, from major brands that tested not only new screen sizes and price points, but also unconventional business models to support their efforts. The subsequent increase in shipments and demand underscored the benefits of segmentation in the market as it drove rapid market expansion," said Richard Shim, senior analyst with NPD DisplaySearch. "In 2013, further investments are expected worldwide, stoking demand to the point that tablet PC shipments will exceed those of notebook PCs."

Source: www.displaysearch.com

Metal Prices

Metal prices have been rising for copper (Chart 27) and tin (Chart 28) but declining for silver (Chart 29) and gold (Chart 30).

Currency Exchange Rates versus US Dollar

Historical monthly currency exchange rates versus the US dollar are given for the Trade-weighted value of the US dollar (Chart 31), Euro (Chart 32), Canadian dollar (Chart 33), Japanese Yen (Chart 34), Chinese Yuan (Chart 35), Taiwanese NT$ (Chart 36), S. Korean Won (Chart 37), Indian Rupee (Chart 38) and Brazilian Real (Chart 39).