Semiconductor Market Maintains Its Momentum
The semiconductor market maintains its momentum so far in 2014, which is good news given how closely trends in the connector market follow trends in the semiconductor market.
Global semiconductor market performance in early 2014 has continued where 2013 left off – with positive sales growth. As the Semiconductor Industry Association (SIA) reported at the beginning of May, worldwide sales of semiconductors reached $78.47 billion during the first quarter of 2014, marking the industry’s highest-ever first quarter sales.
Comparing monthly year-over-year sales performance for the first three months in 2014, there is a strong indication that the industry is in an upturn. Year-over-year sales growth in January, February, and March was 8.7%, 12.1%, and 11.4%, respectively, on a three-month moving average basis. For example, global sales reached $26.16 billion for the month of March 2014, an increase of 11.4% from March 2013 when sales were $23.48 billion. Through the second half of 2013 and into 2014, the global semiconductor market has demonstrated consistent positive sales momentum, and 2014 global sales are well ahead of last year’s pace through the first quarter by 11.4%.
An important indication of strong overall health of the semiconductor market at the beginning of 2014 is that sales in all major regional semiconductor markets are growing. For the first quarter of 2014, sales in the Americas (16.1%), Europe (8.0%), Japan (0.4%), and Asia Pacific (12.9%) grew compared to first quarter 2013 levels. Also, March year-over-year sales in all four regions grew, marking the first time in more than three years that this has occurred.
Another indication of semiconductor market strength at the beginning of 2014 is the consistent growth across all main semiconductor product segments. While much of the industry growth in 2013 was attributed to memory sales growth, the beginning of 2014 has seen consistent growth from most other product segments including logic and analog, which grew year-over-year in March 2014 by 8.5% and 8.2%, respectively. In fact, total semiconductor sales growth excluding memory grew by 8.1% in March 2014.
Broadly speaking, the growth in semiconductor sales has been driven by two important factors. First, an improved global macroeconomic environment has had a positive effect on semiconductor sales. As semiconductors increasingly pervade virtually all aspects of our lives and our world, semiconductor sales performance has become increasingly tied to changes in global GDP. Therefore, it is good news that the International Monetary Fund predicted in its most recent World Economic Outlook global GDP growth of 3.6% in 2014 and 3.9% in 2015. Global GDP growth in 2013 was 3.0%. This positive GDP growth is an encouraging sign for global semiconductor sales growth.
Second, semiconductor industry capital spending has been constrained over the past couple of years, which has led to increased demand and prices for semiconductors on the whole. Historically, the semiconductor industry has been highly cyclical, characterized by stages of under- and overcapacity, which has led to fluctuations in prices. The industry seems to be in an undercapacity stage currently, which has led to price firming in the industry and increased sales.
One long-term market trend that is influencing the semiconductor industry is the profusion of end markets and specifically the growth of mobile and wireless electronic products. According to the World Semiconductor Trade Statistics (WSTS) program, in 1999, more than half of all semiconductor sales were driven by the PC end market, and even five years ago PCs accounted for more than 40% of semiconductor end market sales. While PCs still represented the largest end market for semiconductor sales in 2013, other end markets, such as communication, automotive, and industrial, have increased their share over the past five years. The communication end market, in particular, has grown rapidly from 20% in 2008 to 33% in 2013.
Looking beyond the first quarter of 2014, according to WSTS, global semiconductor sales are forecast to grow by 4.1% in 2014 ($316.6 billion in total sales) and 3.4% in 2015 ($327.3 billion). Sales performance for the first quarter indicates the semiconductor industry is off to a positive start in 2014.