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Subdued Seasonal Upturn . . . But Better Times Ahead

3Q’19 Sales by Electronic Equipment Sector – Modest Improvement

Global electronic equipment sales increased an estimated 0.3% in 3Q’19 versus 3Q’18 – based on a combination of third-quarter actual company financial reports, individual company projections and Custer estimates (Chart 1).

Growth of the world electronic supply chain varied considerably by sector (Chart 2).  For electronic equipment, military (primarily U.S. suppliers) and medical electronics were the strongest growth end markets. By contrast, the recently reliable automotive and instruments and control sectors have now contracted.

 

Custer 1

 

Custer 2

 

Note that these 3Q’19 growth rates are still estimates as many large electronics suppliers (Applied Materials, Cisco, HP, Dell, Medtronic, etc.) have not yet reported their calendar third-quarter financial results. However, at this point in a quarter, these aggregate estimates are typically close to final values.

Semiconductor-related markets are more volatile. In this year’s third quarter (SEMI.org data), semiconductor capital equipment shipments rebounded to only show a 1% decline while semiconductor chip sales dropped 15% and passive components declined 18% (comparing 3Q’19 vs. 3Q’18).

Fourth Quarter – Muted Seasonal Upturn

Driven by typical seasonal consumer buying patterns, global electronic sales normally show a late summer to early winter growth spurt. This autumn the global electronics industry upturn appears somewhat muted (Chart 3).

 

Custer 3

 

Based on combined U.S., Europe, Japan, China/Taiwan and South Korea regional data (from government, trade association and company composites), converted to U.S. dollars at fluctuating exchange, October 2019 electronic equipment shipments were down 5.6% vs. October 2018. This year’s pre-winter holiday growth spurt is definitely in progress but it is subdued compared to earlier years. Winter holiday seasonality does not normally have a significant impact on short-term SEMI equipment demand.

This year’s fall upturn will soon be behind us and a first quarter 2020 post-holiday sales slowdown can be expected for consumer-related electronics (including PCs and mobile phones). 

Looking Forward

What will the New Year bring? Purchasing Managers Indices (PMIs) are a good leading indicator of present and near-term manufacturing activity by country.

The Global PMI was 50 in October (Chart 4), indicating minimal present world manufacturing growth, but the world PMI’s trajectory is positive and trending upwards to PMI=50. Currently manufacturing growth varies significantly by country (Chart 5). The USA is near break even while Asia’s performance is country dependent. Notably China has moved back into expansion (Chart 6). By contrast Europe continues to struggle (Chart 7). 

 

Custer 4

 

Custer 5

Custer 6

Custer 7

 

Semiconductor Industry Outlook Improving

In the semiconductor industry, Taiwan chip foundry growth has resumed (barely) and semiconductors and SEMI capital equipment are pointing north to growth territory – probably reaching the (3/12 >1) break even line late this year or in early 2020 (Chart 8).

 

Custer 8

 

We are headed to better times but this year has been challenging!

Walt Custer of Custer Consulting Group is an analyst focused on the global electronics industry.

walt@custerconsulting.com

Topics: China , Taiwan , Europe , South Korea , Japan , United States , U.S. , semiconductor capital equipment , semiconductor industry , electronic equipment sales , PMI , Purchasing Managers Indices , global electronic supply chain

 

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