Chip Sector Rides New-Order Push
(11/03/97; 10:25 a.m. EST)
By Ismini Scouras, Electronic Buyers' News
A blast of new-orders activity in October sent the rate of growth in the
electronics industry to a new high for the year, according to EBN's latest
Quest index.
For the 15th straight month, the Quest composite index climbed above 50,
the line that marks growth and contraction in the electronics industry. The
index registered 57.8 in October, compared with 56.7 in September.
A three-month mean of the index averaged 57.27; it has been rising steadily
during the past five months, reflecting the vigor in the electronics market.
Industry watchers pointed to strength in the PC market, with the increasing
popularity of the sub-$1,500 PC driving double-digit growth rates.
Worldwide PC unit shipments are expected to grow between 15 percent
and 20 percent this year, according to Vladi Catto, chief economist at
Texas Instruments, in Dallas.
"Other segments are actually stronger than computers," Catto said, citing
healthy cell phone sales in the United States and abroad. Demand for
networking equipment is also strong, he added.
The Quest production index dropped one point to 59.5 in October from
60.5 in September. Meanwhile, the new-orders index soared to its highest
reading in more than two years, climbing to 60.8 from 57.6 last month. The
last new-orders high was in March 1995, when the index measured 61.6.
"If there's an end-of-year push for the holidays, then you'll see the bulk of
that strength reflected in September and October," said Tad LaFountain, an
analyst at Dominick & Dominick, in New York. "There's certainly no
obvious areas of shortage anywhere in the chain, which says end demand is
probably going to be as good as it can get."
La Fountain added that he sees no reason for OEMs or distributors to build
inventory.
The inventories index, which has been hovering around 50 for at least a
year, climbed to 50.7 in October, compared with 47.4 in September.
Semiconductor raw-material inventories at the level of electronic equipment
manufacturers are at 2.2 weeks, according to Catto. "October represents a
record low for inventories," he said, adding that inventory levels in July were
2.4 weeks. In July 1996, OEMs were carrying four weeks of inventory. In
1987, the inventory level was 10 weeks.
"OEMs are very careful in controlling their inventories," Catto said. U.S.
manufacturers predict that continued consumer demand and low interest
rates will keep production, new orders, and employment levels healthy
through December, according to Dun & Bradstreet's September survey of
1,000 manufacturing executives.
"The currency crisis in Southeast Asia and the prolonged slowdown in
Japan have not affected the overall outlook for manufacturing demand,
according to the survey," said Joseph W. Duncan, chief economic advisor at
Dun & Bradstreet. "The industrial sentiment index has been stable,
suggesting moderate economic growth in the coming quarter."
The communications index dropped 7.1 points to 58.5 in October, while the
military index fell to 51.2 from 53.6 in September.
The computers index increased to 55.1 last month from 51.7 in September.
The industrial controls index remained above 60 for the second consecutive
month, at 62. And the components index jumped three points to 60.2 in
October.
"The semiconductor market is growing again, as expected -- that is, in
double digits on the nonmemory side," Catto said. "The memory portion of
the semiconductor market is still struggling because memory prices are very
low."
The pricing index remained unchanged in October at 50.8.
The employment index in October jumped 3.6 points, to 57.7 from 54.1 in
September. |
