Electronics Industry Update
Staff -- Semiconductor International, 4/1/2002
| Worldwide Sales of Semiconductor Devices | Production Trends
& Forecasts of Computers |
 |  |
| Historical Data: World
Semiconductor Trade Statistics (WSTS) Forecast: Semiconductor International | Historical Data: Federal
Reserve Board Forecast: Semiconductor International |
| Production Trends
& Forecasts of Communications Equipment | Production Trends
& Forecasts of Electronic Components |
 |  |
| Historical Data: U.S. Department of Commerce Forecast: Semiconductor International | Historical Data: U.S. Department of Commerce Forecast: Semiconductor International |
Semiconductors
The dollar value of chip sales to the Americas this past December was 56.5% below its December 2000 level -- a much steeper contraction than the 43.8% over-the-year decrease in worldwide sales. Preliminary totals for full-year 2001 show that chip sales to the region trailed the 2000 total by 44.2% (vs. the 32% global decline).
Sales to Europe during the final month of last year were 38.9% below the December 2000 total. And the preliminary numbers for all 12 months of 2001 show dollar-valued sales to the region down 28.6% from the total for full-year 2000 -- a decline not nearly as severe as that experienced in the Americas or for the world as a whole.
After recording much stronger growth than in other parts of the world through the first half of 2001, Japan saw chip sales to the country plunge during the final months of last year, even as the market began to bottom out throughout the rest of the world. The estimated dollar value of sales to Japan was 52.2% lower this past December than during December 2000. Through the 12 months of 2001, dollar sales to the country were estimated to be worth 29.1% less than during 2000. But sales over the final six months of 2001 were about 47% lower than they had been over the second half of 2000.
December 2001 chip sales to the Asia/Pacific market (all nations of the region, excluding Japan) were 22.8% below their December 2000 total. Preliminary totals for full-year 2001 show chip sales to the region coming up 22.3% short of the total for the 12 months of 2000. This was a smaller decline than that recorded by the Americas, Europe or Japan. But it nevertheless represented a significant deterioration in market conditions following growth of about 38% between 1999 and 2000.
Last year's estimated 32% decline in global sales volume represented the sharpest annual contraction in the 50-year history of the semiconductor industry. And the decline in unit sales showed that the problem was more one of weak aggregate demand than of industry overcapacity and low average prices -- although the inventory glut did play an important role in aggravating the situation. However, we're still expecting for most of the considerable inventory overhang to be worked through or written off by the middle of this year, leading to gradual market recovery -- and some marginal growth of a couple of percentage points -- during 2002. And by 2003, solid growth on the order of 25-30% is likely -- although this would still leave 2003's dollar value of semiconductor chip sales about 11% below the enviously robust $204.4B level achieved during 2000.
End-Market Demand
Data compiled and published by the U.S. Commerce Department shows that the dollar value of shipments from U.S. manufacturers of computers (inclusive of PCs, servers, laptops, etc.) totaled an estimated $5.38B during December 2001, 1% below November's level. This followed solid increases during each of the previous three months. The value of December 2001 computer industry shipments was a disheartening 35.2% below the total for the final month of 2000.
The value of new orders received by U.S. manufacturers showed even greater weakness as 2001 came to a close. New orders to U.S. computer equipment manufacturers fell 5.7% during December on top of a 1.3% decline recorded between October and November.
The preliminary cumulative totals for the 12 months of 2001 showed the depth of the industry's problems. The value of shipments from U.S. computer manufacturers came up 23.6% short of the final 2000 total, while new orders to the industry were off 24.7%.
Inventory levels at computer manufacturing firms fell another 2.6% during December, following cumulative declines totaling more than 17% over the previous six months. And the estimated value of inventory in the computer industry (including all materials/supplies, finished goods, and work still in process) was 21.8% less during the final month of last year than during December 2000.
This steady draw-down/write-off of excess inventory sets the industry up for a healthy bounceback once business investment spending recovers and consumer spending growth accelerates. This won't come to pass for several more months, however. Consequently, following 2001's precipitous decline, we think that the value of computer industry shipments will grow by only about 7% during 2002, before double-digit growth returns in what is shaping up to be a solid period of recovery during 2003.
The value of shipments from U.S.-based manufacturers of non-defense communications equipment was 3.1% higher in December than in November 2001. But last December's level was still 39.5% below the total for December 2000.
And after a couple months of encouraging numbers, the value of new orders received by U.S. communications equipment manufacturers resumed its downward trend during the final month of last year. The value of new orders received by the industry fell by 5.7% between November and December, following just a slight 1.3% drop during November -- and an encouraging 32% surge during October. The absolute dollar value of orders this past December was an extraordinary 34.6% below the level recorded during the final month of 2000.
Preliminary totals for the year as a whole show that the total value of new orders received by non-defense communications equipment manufacturers was worth 40.2% less than the final total for 2000. Shipments during the same period of comparison were off a less-precipitous 29%. Given the "leading indicator" value of the orders total, it's likely that shipments will continue to decline throughout most -- if not all -- quarters of 2002.
Manufacturers have taken drastic steps to get bloated inventories under control. Inventory levels in the non-defense communications equipment industry fell by a whopping 10.7% during September, and by another 5% over the next two months. And the value of total inventories at U.S. communications equipment manufacturers were pruned another 8.3% during the final month of 2001. During December 2001, industry inventories were worth 35.8% less than at the close of 2000. This drawing-down/writing-off of inventories will put equipment makers in much better shape to aggressively respond to future demand recovery.
But this recovery will most likely be very slow in developing. And, given the lack of any underlying and fundamental forward momentum in the industry as we enter the new year, shipments will probably fall about another 7% this year -- although by the final months of 2002, both shipments and orders should be running well ahead of their depressed levels for the same months of 2001.
