February 18, 2020 - Data through December showed a steady recovery in the global electronic supply chain with SEMI equipment leading the way in 3/12 growth (Chart 1). The global purchasing managers index moved into expansion territory (PMI>50) in January indicating accelerating growth in world manufacturing activity (Chart 2).
But in late January the Coronavirus (COVID-19) began to make its negative impact felt, snarling supply chains and shutting down factories near Wuhan, China before branching out to other electronics manufacturing centers.
The results of this pandemic are disruptions in global electronics growth with the entire supply chain scrambling to provide the needed components and finished goods to support ongoing consumer demand.
China Economy Hit Hard
Early financial results from China/Taiwan show its electronic equipment output in January 2020 was down 12% compared to January 2019 and down 27% sequentially compared to December 2019 (Chart 3). The normal winter seasonal downturn was made worse by extended, health scare-related factory shutdowns. This plunge will likely continue in February and beyond until workers return, plants reopen and the supply chains recover. I hope I am wrong but it looks like the electronics sector will see a tough first quarter.
Some Recent Historical Data
Here are some recent (pre-Coronavirus) industry data.
- Electronic equipment shipments grew an estimated 1-2% in 4Q’19 vs 4Q’18 (Chart 4).
- Growth varied by sector with SEMI equipment leading the rebound (Chart 5).
- Taiwan wafer foundry sales held relatively steady in January (Chart 6).
As noted, the full impact of the Coronavirus has yet to show in the numbers. February and March sales numbers will clarify this impact.
Apologies for the negative tone of this article but the concerns are significant.
Hope for the best and hang on!
Walt Custer of Custer Consulting Group is an analyst focused on the global electronics industry.