By Walt Custer, Custer Consulting Group
World semiconductor equipment shipment growth was a very robust +26 percent (3-month basis) in October but down from its +63 percent peak in February. By comparison, October global semiconductor shipments were up 22 percent, while November Taiwan chip foundry sales (a leading indicator) were up only 3 percent. Based on Chart 1 it appears the SEMI equipment growth will ease considerably in early 2018.
Comparing global SEMI equipment shipments to the Global Purchasing Managers Index (another leading indicator) also suggests that SEMI Equipment shipment growth will ease but still remain positive into the New Year (Chart 2). SEMI equipment demand remains strong, but the “bubble” growth like we experienced in 2017 is typically followed by a downward “correction,” especially since the current buildup in memory chip capacity will likely ebb in 2018.
The current world electronic equipment business cycle appears to have peaked on a growth basis (Chart 3). It is still solidly in expansion territory but has likely plateaued.
Electronic equipment growth is both organic and also for consumer-driven products highly seasonal. Chart 4 shows monthly sales for a large group of Taiwan-listed OEMs, many of which manufacture in China. Their sales peak seasonally in late autumn in preparation for winter holiday demand and then plunge in the first quarter.
The Taiwan-based ODM companies (Foxconn and all) behave similarly. This November Apple’s iPhone X introduction helped to drive component sales to record highs but recent reports are that iPhone X component demand has now softened. Expect the November peak in Chart 4 to be followed by a sharp drop this winter.
We are in an electronic age but peaks and valleys in demand are the norm!
December 19, 2017