Weekly Global Update for December 17, 2014

Taiwan/China – a Strong November for Electronic Equipment Shipments

2014 is finishing strongly for the China/Taiwan electronics producers:

• Despite weak PMI leading indicators for China (Chart 1) and Taiwan (Chart 2) electronic equipment shipments (Chart 3) reached an all-time high in November, up 6.7% versus November 2013.
• ODM (Chart 4) and motherboard (Chart 5) producers also had record sales.

Electronic equipment production typically reaches its seasonal peak in November but component production peaks a month earlier (in October):

• Display shipments dipped in November (Chart 6).
• Wafer foundry sales declined suggesting that global semiconductor shipments will soon also drop on a seasonal basis (Chart 7).
• Package and Test (Chart 8), memory (Chart 9) and passive component (Chart 10) shipments also began their seasonal downturn.
• Rigid and Flex printed circuit board sales dropped (Chart 11) and rigid (CCL) laminate shipments mirrored the November decline in rigid PCBs (Chart 12).
• Looking forward Custer Consulting Group’s Asia/Pacific PCB leading indicator (Chart 13) predicts slower growth ahead (beyond the normal winter seasonal decline).

Solar/Photovoltaic sales of Taiwan listed companies have rebounded since their August 2014 low (Chart 14)

Custer Comments: Although a winter consumer electronics driven seasonal slowdown is inevitable, this year’s almost 7% electronic equipment expansion in Taiwan/China was impressive. Strong electronic equipment growth in the second half of 2014 supported robust (10 %+) semiconductor shipment demand (Chart 15). However based on today’s fragile economic landscape and the weak PMI leading indicators our outlook for 2015 is cautious.

Sources: Company financial reports and Markit Economics PMI indicators

European Update

Europe’s PMI leading indicator continued to weaken in November (Chart 16) as industrial production growth remained nearly flat (Chart 17).

Based upon recent Eurostat data:

• October electronic equipment production weakened (Chart 18).
• European automotive production remained below its peak (Chart 19) but aerospace sales improved (Chart 20).
• Instrument and control equipment demand appears to have peaked (Chart 21) and medical electronics sales remain erratic (Chart 22).
• Loaded electronic boards (electronic assembly) also appears to be peaking (Chart 23) as do wiring devices (Chart 24).
• Europe’s PMI leading indicator points to slower growth ahead in printed circuits (Chart 25).

Chart 26 summarizes the annualized (12/12) and 3-month (3/12) growth of the European electronics supply chain. A value of 100 indicates no change from the same period a year earlier. The 3/12 “leads” the 12/12.

Sources: Eurostat & Markit Economics PMI Indicators

Global PCB Growth 0.7% in 2014 vs 2013

Based upon the latest global/regional data Custer Consulting Group’s world PCB model (Chart 27) now points to 0.7% growth this year as the seasonal downturn begins. We will update this model for 2015 soon but our global PCB leading indicator (Chart 28) suggests slower growth (beyond normal seasonality) will prevail in earlier 2015.

Source: Custer Consulting Group

3Q’14 SEMI Equipment Shipments

The SEMI and SEAJ trade organizations just released SEMI equipment shipments by major country for 3Q’14.

Global shipments were up 15% in 3Q’14 vs. 3Q’13 (Chart 29) but clearly SEMI equipment growth has peaked for this current business cycle (Chart 30).

SEMI Equipment Forecast; Cautious Optimism Drives Equipment Spending into 2015 (Chart 31)

Worldwide semiconductor capital expenditure growth for this year is expected to be 11% and will increase another 8% in 2015.

In August 2014, SEMI predicted fab equipment spending to rise by 21% for this year, however, push out in spending by some companies resulted in a slight downward revision. Now SEMI expects growth for 2014 to be a bit more modest, but still very healthy in the 16-18% range.

Looking back, the beginning of 2014 appeared euphoric, with high capital expenditure expected by major players: TSMC had announced plans to spend in the $10 billion range, Samsung Electronics was at 14.5 Trillion Won, and Intel planned around $11 billion (+/-$500 million).

However, equipment spending for some of the key fab projects slowed down around the middle of the year, and some spending has pushed more into 2015. For example, capital expenditures by Samsung Electronics though the end September 2014 was only at 58% of their announced capex. SEMI also sees TSMC equipment spending for Front End facilities to be somewhat lower than originally expected. One reason for these push outs is that the adoption of 14/16nm nodes and 3D NAND began slow in 2014 but is expected to accelerate in 2015.

Fab equipment spending for next year, 2015, looks robust, and, compared to 2014, even more companies will join the billion dollar club, spending $1 billion or more for the year. Inotera will more than double its capex, from $730 million in 2014 to $1.66 billion in 2015. TSMC has indicated that its 2015 capex will exceed $10 billion; and Intel will spend less in 2015 than in 2014, but still plans about $10 billion. As detailed in SEMI’s World Fab Forecast report there are ten fab projects with major investments for equipment spending ranging between $1 billion and $2 billion in 2015 compared to 7 fab projects in 2014.

Source: www.semi.org