China/Taiwan Update; 3Q’16 Electronic Supply Chain Update; European Business Outlook

October monthly sales have just been released for Taiwan-listed companies, many of which manufacture in China:

  • Electronic equipment (OEM) sales peaked in September and dipped slightly in October before beginning their likely normal winter downturn. October 2016 OEM revenues were down 5.7% compared to October 2015 and down sequentially 2.6% compared to September 2016. The October 2016/2015 comparison shows that the “recovery” is still weak (Chart 1).
  • October ODM sales showed a similar pattern, declining 6.2% compared to last October (Chart 2).
  • Display demand is strong (Chart 3).
  • Semiconductor shipments to Asia/Pacific are outgrowing end market demand suggesting that over buying and/or inventory building is occurring (Chart 4).
  • Wafer foundry revenues remain strong although they may be peaking as part of the seasonal downturn (Chart 5). Note the correlation between wave foundry and global semiconductor sales (Chart 6).
  • Package & Test (Chart 7), memory (Chart 8) and passive component (Chart 9) sales appear to have peaked for this season.
  • Solar/photovoltaic revenues for Taiwan-listed companies have been declining all year (Chart 10).
  • Printed circuit board sales also appear to have peaked seasonally (Chart 11) and rigid (CCL) laminate is mirroring PCB revenues (Chart 12).
  • The Asia/Pacific leading indicator is still pointing up suggesting that stronger demand (when corrected for the imminent seasonal downturn) is ahead (Chart 13).

Source: Company financials analyzed by Custer Consulting Group

3Q’16 Electronic Supply Chain Update

As more companies in our survey have reported their 3Q’16 financials we have updated our third quarter sector growth estimates:

  • Global electronic equipment growth is now estimated at +1.5% in 3Q’16 vs 3Q’15 (Charts 14-16).
  • Chart 17 summarizes growth by sector in the third quarter. Note the strength of automotive (Chart 18), semiconductor capital equipment (Chart 19), medical equipment (Chart 20) and passive components (Chart 21).
  • By comparison weaker demand for military/aerospace (Chart 22) and data storage equipment (Chart 23) is notable.

Note that all the companies in our survey have still not reported. Firms whose calendar quarter ends in October rather than September will report in the next few weeks. Large companies such as Applied Materials, Cisco, HP and Medtronic are among this group.

Therefore still treat the growth estimates above as estimates until all reporting is finished later this month.

Source: Company financials analyzed by Custer Consulting Group

European Business Outlook

Custer spoke at the Electronica tradeshow in Munich last week. His topic was “Business Outlook for the Global Electronics Industry (with emphasis on Europe).” Walt’s charts for this presentation are attached. They have been updated with the recent Taiwan/China and 3Q’16 global supply chain growth estimates.

Walt D. Custer

Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.

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