Weekly Global Update for December 10, 2014

Global Leading Indicators Slump in November

Markit Economics PMI Leading indicators declined for most key countries in November:

• The Global PMI remained in expansion territory (PMI>50) but its rate of expansion declined (Chart 1).
• PMI values for most key countries also declined (Chart 2).
• On a 3/12 growth basis PMI growth declined globally (Chart 3) and for the key Asian countries (Chart 4).

Source: www.markiteconomics.com

U.S. Electronic Equipment and Component Data for October

The October U.S. "Factory Orders report was released last week:

• Although the electronic equipment 3-month average book/bill ratio rose to 1.065 (Chart 5) both orders and shipments weakened sequentially from September (Chart 6) as did their 3/12 growth rates (Chart 7).
• Vehicles shipments edged up slightly (Chart 8).
• Military electronics orders remained above shipments but both declined sequentially (Chart 9).
• Electromedical, Measurement and Control Equipment orders and shipments also dipped (Chart 10).
• Passive component orders and shipments edged up (Chart 11).

Chart 12 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronics supply chain. A value of 100 indicates no growth versus the same period a year earlier. The 3/12 "leads" the 12/12.

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

Global Semiconductor Sales Increase in October; Substantial Growth Projected for 2014

The Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors reached $29.7 billion for the month of October 2014, an increase of 9.6% from the October 2013 total of $27.1 billion and an uptick of 1.5% compared to last month’s total of $29.2 billion. Sales in the Americas increased 12.2% year-over-year in October, leading all regions.

"Year-over-year global semiconductor sales increased for the eighteenth straight month in October, and the industry is well-positioned for a strong close to 2014," said Brian Toohey, president and CEO, Semiconductor Industry Association. "Sales continue to be strong across the board, with nearly all regions and product categories exhibiting increases. We expect nearly double-digit growth in 2014, followed by moderate growth in 2015 and 2016."

Regionally, sequential monthly sales increased in the Americas (5.8%) and remained roughly flat in Asia Pacific (up 0.7%), Europe (down 0.1%), and Japan (down 0.6%). Compared to October 2013, sales increased in the Americas (12.2%) as noted above, Asia Pacific (12.1%), and Europe (5.2%), but decreased in Japan (-3%).

Source: www.sia-online.org

Custer Comments:

• October global semiconductor shipments reached an all-time high in October on a 3-month average basis (Chart 13) although Custer Consulting Group’s semiconductor leading indicator points to much slower growth ahead (Chart 14).
• The Americas led global chip growth in October with only Japan declining (Chart 15).
• On a 1-month basis shipments declined sequentially from September in all regions (Chart 16).
• Americas’ growth has been unusually strong (Chart 17).

WSTS FORECASTS SEMICONDUCTOR MARKET TO KEEP STEADY GROWTH UNTIL 2015 (Charts 18 & 19)

Worldwide Semiconductor Market is forecasted to be US$333 billion in 2014, up 9.0% from 2013.

The World Semiconductor Trade Statistics (WSTS) has released its updated semiconductor market forecast. WSTS anticipates the world semiconductor market to show a solid growth of 9% up to US$333 billion in 2014, driven mainly by double digit growth of Memory product category. All other major product categories are also forecast to have positive growth rates. The highest growth rates are shown for the Memory (17.3%), Discretes (12.3%) and Analog (10.3%) categories. By geography, all regions will grow from 2013. The semiconductor market growth will be largely driven by smartphones and automotive.

Worldwide Semiconductor Market is expected to grow further in both 2015 and 2016.

All product categories and regions are forecasted to grow steadily but moderately, under the assumption of a further macro economy recovery throughout the entire forecast period and maturing historically strong markets. Worldwide semiconductor market is forecast to be up 3.4% to US$345 billion in 2015. For 2016, the market is forecast to be US$355 billion, up 3.1%.

By end market, automotive and communications are expected to grow stronger than the total market, whereas consumer and computer are assumed to remain almost flat.

Regionally, Asia-Pacific will continue to be the fastest growing region and is expected to reach US$209 billion in 2016, which is already a share of almost 60% of the total semiconductor market.

Source: www.wsts.org

Worldwide Server Shipments Grew 1% in the Third Quarter of 2014 While Revenue Increased 1.7% (Charts 20-23)

In the third quarter of 2014, worldwide server shipments grew 1% year-over-year, while revenue moved upward 1.7% from the third quarter of 2013, according to Gartner, Inc.

"The third quarter of 2014 produced modest growth on a global level, highlighting positive but constrained demand," said Errol Rasit, research director at Gartner. "Only North America and Asia Pacific exhibited shipments growth, largely driven by demand from hyperscale organizations located there. These results support the continued bifurcation of enterprise and consumer services server demand."

Source: www.gardner.com