This week, SEMI released its latest three month moving average (3MMA) book-to-bill data for the North American semiconductor equipment sector. To understand the importance of these data, we consider what they represent. The semiconductor equipment data tell us about the investment being made into the manufacturing of chips, if we see more positive activity, with bookings and billings moving in positive directions together – so that positive ratios are not the result of disjointed data – and we see a sustainably paced, steady climb for both bookings and billings data, then we can begin to point to real growth momentum in the semiconductor equipment sector. If there is positive investment momentum in semi equipment, and other industry forecasts are pointing to growth to come, then this equipment investment and positive data support the forecasts as the first concrete step in ramping up to support a chip and eventual device increase in supply. The fact that SEMI normalizes their data over a three-month moving average means that we are able to smooth any individual or odd cycle dips or spurts that might give us a false impression of the overall market trajectory.
With this being said, the latest SEMI data for June 2014 show a steady, sustainable increase, picking up considerably compared to the previous month, May, and a nice continuation of a generally upward trend since January. As SEMI reported:
North America-based manufacturers of semiconductor equipment posted $1.47 billion in orders worldwide in June 2014 (three-month average basis) and a book-to-bill ratio of 1.09, according to the June EMDS Book-to-Bill Report […]
The three-month average of worldwide bookings in June 2014 was $1.47 billion. The bookings figure is 4.3 percent higher than the final May 2014 level of $1.41 billion, and is 10.0 percent higher than the June 2013 order level of $1.33 billion.
The three-month average of worldwide billings in June 2014 was $1.34 billion. The billings figure is 4.8 percent lower than the final May 2014 level of $1.41 billion, and is 10.4 percent higher than the June 2013 billings level of $1.21 billion.
"Semiconductor equipment bookings are at the highest level since May 2012," said Denny McGuirk, president and CEO of SEMI. "The strength of the June bookings (three-month average) substantiate the outlook for strong double-digit sales growth this year."
These SEMI data build upon the recent SIA data published early this month showcasing the global semiconductor sales data for May. The SIA data reveal a strong growth in May, representing continued upward momentum for the industry – these data are also normalized along a 3MMA:
[…] worldwide sales of semiconductors reached $26.86 billion for the month of May 2014, 8.8 percent higher than the May 2013 total of $24.69 billion and 2.0 percent more than last month's total of $26.34 billion. Sales in the Americas increased 10.6 percent year-over-year in May, marking the region's twelfth consecutive month of double-digit growth.
The continued, sustainable growth for now a 12-month period for global semiconductor sales, leads analysts at SIA, among others in the industry and financial sectors to reinforce the increases in semiconductor and electronics growth outlooks for the remainder of 2014 and into 2015.
Confidence building among consumer tech
One other data point that is adding to the strengthening positive outlook is the recent report by the Consumer Electronics Association (CEA), the producers of the annual CES tradeshow, which show that presently consumer confidence in technology spending is at its highest since December 2012. As CEA reported:
The CEA Index of Consumer Technology Expectations (ICTE), which measures consumer expectations about technology spending, increased by 4.1 points in July to reach 95.3, its highest level since the 2012 holiday season and peak for that year. And the CEA Index of Consumer Expectations (ICE), which measures consumer expectations about the broader economy, increased by 0.6 points from last month to reach 171.3 in July, the highest level so far in 2014.
"As CEA's sentiment indexes have continued to show, consumer confidence is improving steadily following a weak first quarter," said Shawn DuBravac, CEA's chief economist and senior director of research. "The improved sentiment is helping establish a solid foundation for stronger tech spending - especially with the growth of emerging technologies like wearables and Ultra HDTV - to materialize in the back half of 2014."
There is a growing body of strong indicators and variables as well as supply chain data and events to underscore the validity of the positive outlooks for the remainder of 2014 and well into 2015, possibly beyond. As we move toward the important Fall cycle and 3Q14, we will continue to monitor the various data points to offer balanced insight into the health of the global semiconductor and electronics supply chain.
More detailed discussions on key supply chain events are offered in Smith's MarketWatch Quarterly reports which are free to subscribers – the recent summary on 2Q14 was released last week and will be available publically the end of the month.