Markit Economics and ISM released their March Purchasing Managers (PMI) Indices:
- Global PMI remained in modest growth territory (PMI>50), declining 0.1 points from February to March (Chart 1).
- In general Europe improved but the U.S. and Asia saw weaker PMIs (Chart 2).
- Most Asian countries with the exception of India reported PMI declines with China, S. Korea and Indonesia reporting actual manufacturing contractions (PMI<50) (Chart 3).
- Most European countries except Russia had improved PMIs in March (Chart 4).
Taiwan/China March Electronics Revenues
March revenues were just reported for Taiwan-listed companies, many of which manufacture in China.
- Electronic equipment shipments rebounded (predictable seasonality) following their normal February low point. March 2015 sales were up 6.5% compared to March 2014 and up 27% compared to February 2014 (Chart 5).
- ODM company sales also recovered from their February low, rising 9% vs. a year ago in March and also up 27% sequentially from February (Chart 6). Their q/q growth has been positive for the last six quarters (Chart 7).
- Wafer foundries (Chart 8), package & test companies (Chart 9) and passive component producers (Chart 10) reported seasonal increases but memory chip producers had flat sequential monthly revenues (Chart 11).
- Suppliers to the solar/photovoltaic industry reported a March upturn (Chart 12).
- Printed circuit board (Chart 13) and CCL (rigid laminate) producers (Chart 14) experienced sequentially improved sales in March. CCL parallels PCB sales (Chart 15).
Source: Company financial reports consolidated by Custer Consulting Group
U.S. February Electronic Supply Chain Results
The U.S. Department of Commerce released its February “Factory Orders” report detailing shipments, orders and inventories for the domestic electronic supply chain.
- Chart 16 summarizes the annualized (12/12) and 3-month (3/12) growth of key members of this supply chain. The 3/12 “leads” the 12/12.
- February electronic equipment 3-month order growth improved relative to same period in 2014 (Chart 17) but in real terms both electronic equipment February orders and shipments declined from January (Chart 18).
- Defense capital goods (Chart 19) and military electronics (Chart 20) orders weakened.
- Electromedical, measurement and control equipment demand has dropped from its December 2014 high (Chart 21).
- Passive component orders and shipments have been rising (Chart 22) but the U.S. PMI leading indicator points to a near term slowing of demand (Chart 23).
Worldwide Semiconductors Sales Increased 6.7% y/y to $27.8 billion in February 2015 (Charts 24-29)
February marked global market’s 22nd straight month of year-to-year growth; Americas posted strongest growth among regional markets.
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $27.8 billion for the month of February 2015, an increase of 6.7% from February 2014 when sales were $26.0 billion. Global sales from February 2015 were 2.7% lower than the January 2015 total of $28.5 billion, reflecting seasonal trends. Regionally, sales in the Americas increased by 17.1% compared to last February to lead all regional markets. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.
“The global semiconductor industry maintained momentum in February, posting its 22nd straight month of year-to-year growth despite macroeconomic headwinds,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Sales of DRAM and Analog products were particularly strong, notching double-digit growth over last February, and the Americas market achieved its largest year-to-year sales increase in 12 months.”
“While we are encouraged by the semiconductor market’s sustained growth over the last two years, a key driver of our industry’s continued success is free trade,” Neuffer continued. “A legislative initiative called Trade Promotion Authority (TPA) has paved the way for opening markets to American goods and services for decades, helping to give life to nearly every U.S. free trade agreement in existence, but it expired in 2007. With several important free trade agreements currently under negotiation, Congress should swiftly re-enact TPA.”
Worldwide Semiconductor Revenue Grew 7.9% to $340.3 Billion in 2014 (Chart 30)
Booming DRAM Market Sees Revenue Increase 32% During 2014
Worldwide semiconductor revenue totaled $340.3 billion in 2014, a 7.9% increase from 2013 revenue of $315.4 billion, according to final results by Gartner, Inc. The top 25 semiconductor vendors' combined revenue increased 11.7%, which was more than the overall industry's growth. The top 25 vendors accounted for 72.4% of total market revenue, up from 69.9% in 2013.
"2014 saw all device categories post positive growth, unlike in 2013, when application-specific integrated circuits (ASIC), discretes and microcomponents all declined. The memory market was the best performer for the second year in a row, growing 16.6%, meaning the rest of the market only achieved 4.9% growth," said Andrew Norwood, research vice president at Gartner. "As a group, DRAM vendors performed best, lifted by the booming DRAM market, which saw revenue increase 32% to $46.1 billion, surpassing the all-time high of $41.8 billion set in 1995."
Intel saw a return to growth after two years of revenue decline, as PC production recovered, with sales up 7.7%. The company retained the No. 1 market share position for the 23rd consecutive year by capturing 15.4% of the market, which was down slightly on the previous year.
2014 saw significantly more merger and acquisition (M&A) activity among the major semiconductor vendors than the previous year, with some announced deals still to close in 2015. Among the most significant deals was Avago Technologies' acquisition of LSI, propelling the company into the top 25 semiconductor vendors for the first time. MStar Semiconductor was merged with MediaTek after a prolonged merger, and ON Semiconductor acquired Aptina Imaging. After adjusting for closed M&A activity, the top 25 semiconductor vendors grew at 9.1%.
North American total PCB shipments decreased 1.1% y/y in February 2015, bringing year-to-date shipment growth to -1.6% (Charts 31-33)
IPC — Association Connecting Electronics Industries® announced the February findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Although sales remained sluggish, bookings increased over last year, strengthening the book-to-bill ratio.
Total North American PCB shipments decreased 1.1% in February 2015 from February 2014, bringing year-to-date shipment growth to -1.6%. Compared to the previous month, PCB shipments were up 1.2%.
PCB bookings increased by 5.1% compared to February 2014, improving the year-to-date order growth rate to 0.9%. Orders declined 0.7% in February compared to the previous month.
The North American PCB book-to-bill ratio increased to 1.05 in February.
"Although North American PCB sales continued slightly below last year's levels in February, bookings strengthened," said Sharon Starr, IPC's director of market research, "This increased the book-to-bill ratio," she added. "The ratio has been in positive territory for the past five months, which is a positive indicator for sales growth in the first half of 2015."
North American Semiconductor Equipment Industry Posts February 2015 Book/Bill of 1.02 (Charts 34 & 35)
North America-based manufacturers of semiconductor equipment posted $1.31 billion in orders worldwide in February 2015 (3-month average basis) and a book-to-bill ratio of 1.02, according to SEMI.
The 3-month average of worldwide bookings in February 2015 was $1.31 billion, 1.3% lower than January 2015 and 1.0% higher than the February 2014.
The 3-month average of worldwide billings in February 2015 was $1.28 billion, 0.2% lower than January 2015 and 0.9% lower than the February 2014.
"Year-to-date bookings and billings for North American semiconductor equipment are higher than last year for the same time period," said SEMI president and CEO Denny McGuirk. "The year is off to a good start, with growth in bookings from the back-end sector.”
Worldwide PC shipments Declined 5.2% y/y to 71.7 Million Units in 1Q’15 (Charts 36-38)
Worldwide PC shipments totaled 71.7 million units in the first quarter of 2015, a 5.2% decline from the first quarter of 2014, according to preliminary results by Gartner, Inc.
"The PC industry received a boost in 2014 as many companies replaced their PCs due to the end of Windows XP support, but that replacement cycle faded in the first quarter of 2015," said Mikako Kitagawa, principal analyst at Gartner. "However, this decline is not necessarily a sign of sluggish overall PC sales long term. Mobile PCs, including notebooks, hybrid and Windows tablets, grew compared with a year ago. The first quarter results support our projection of a moderate decline of PC shipments in 2015, which will lead to a slow, consistent growth stage for the next five years.
"Desk-based PC shipments declined rapidly, with business desk-based PCs being impacted the most. Mobile PCs are being driven by a separate underlying replacement cycle, which led mobile growth in the first quarter. PC replacements will be driven by thin and light notebooks with tablet functionality. Our early study suggests strong growth of hybrid notebooks, especially in mature markets, in 1Q ’15."
Medical Semiconductors Will Grow at a 12% CAGR from $5.3 Billion in 2014 to $8.2 Billion in 2018 (Chart 39)
The annual market for medical semiconductors was $5.3 billion in 2014 and will rise to $8.2 billion in 2018, a CAGR of 12%.
IC Insights is predicting strong annual sales growth in 2015 (17%) that will fall back in 2017 coinciding with the next global economic slowdown in 2017.
Lower-cost wearable medical systems and fitness monitors, which can wirelessly transmit vital signs and other readings to doctors or be used as "activity trackers" for health-conscious individuals, are seeing tremendous growth.
The second major trend in medical equipment is the development of more powerful and integrated systems, which are expensive but promise to lower healthcare costs by detecting cancer and diseases sooner and supporting less invasive surgery for quick recovery times and shorter stays in hospitals. Computer-assisted surgery systems, surgical robots, and operating-room automation are among new technologies being pursued by some hospitals in developed markets.
High growth in lower-cost systems along with the rising price tag of more sophisticated hospital equipment in developed country markets is expected to increase total medical electronics systems sales by a CAGR of 8.2% between 2013 and 2018, to $70.1 billion in the final year of the forecast.
Worldwide Wearables Market Shipments to Grow at 45.1% CAGR from 45.7 Million in 2015 to 126.1 Million in 2019 (Chart 40)
A combination of new vendors, new devices, and greater end-user awareness will drive the worldwide wearables market higher in 2015. According to the most recent forecast data from International Data Corporation, vendors will ship a total of 45.7 million units in 2015, up a strong 133.4% from the 19.6 million units shipped in 2014. By 2019, total shipment volumes are forecast to reach 126.1 million units, resulting in a five-year compound annual growth rate (CAGR) of 45.1%.
“Smart wearables are about to take a major step forward with the launch of the Apple Watch this year”
Propelling the market higher in 2015 is an increased focus on smart wearables, or those devices capable of running third-party applications. These include devices like the Apple Watch, Motorola's Moto 360, and Samsung's Gear watches. The total volume of smart wearables will reach 25.7 million units in 2015, up a whopping 510.9% from the 4.2 million units shipped in 2014. Basic wearables, or those devices that do not run third party applications, will grow from 15.4 million units in 2014 to 20.0 million units in 2015, resulting in 30.0% year-over-year growth.
"Smart wearables are about to take a major step forward with the launch of the Apple Watch this year," said Ramon Llamas, Research Manager with IDC's Wearables team. "The Apple Watch raises the profile of wearables in general and there are many vendors and devices that are eager to share the spotlight. Basic wearables, meanwhile, will not disappear. In fact, we anticipate continued growth here as many segments of the market seek out simple, single-use wearable devices."
Wrist-worn wearables, including bands, bracelets, and watches, will account for more than 80% of all wearable device shipments throughout the forecast. Most vendors have concentrated their efforts on these products and IDC expects this trend to continue. Behind wrist-worn products are modular wearable devices, or those devices that can be worn on any part of the body with a clip or a strap. Modular devices are traditionally much simpler to produce than other wearable devices and function well as use-specific devices. Clothing is the third category and is expected to grow the fastest as companies embed items like shirts, socks, hats, and other products with computing power. Eyewear is a smaller category, which IDC expects to first catch on among enterprise users within select vertical markets. Finally, earwear will comprise a small part of the overall market as earphones expand from audio to include health and fitness features.
"The explosion of wearable devices was clearly led by fitness bands, which until recently commanded prices that provided comfortable margins, but those days are changing," said Ryan Reith, Program Director with IDC's Worldwide Quarterly Device Trackers. "The price of these fitness bands have come down so significantly in some markets that smartphone OEMs are now bundling them with smartphones at little cost. Meanwhile, the market is quickly shifting toward higher-priced devices that offer greater functionality. While Apple's entry into the market is symbolic, the key to success will be to create compelling use cases for the average consumer.
Many users will need a good reason to replace a traditional watch or accessory with a wrist-worn device or some other form of wearable that will likely require daily charging and occasional software upgrades."