IT Supply Chain Developments and Their Impact on Buying Decisions

Al Nagar, Head of Benchmarking, KnowledgeBus, Mercato Solutions, continues his series of advisory pieces sharing recent movements and impactors within key IT product categories, to keep you abreast of the latest developments and help support purchasing decisions. Thank you to Al for his year-long dedicated monthly reporting on Spend Matters. 

There were few bright spots amongst the IT channel gloom in November. The euro continued to fall and is now at its weakest since mid-April. Despite the dollar enjoying an eight-month high, investors remained cautious in November ahead of the European Central Bank meeting earlier this month, followed by the US nonfarm payrolls report.

These currency fluctuations will have knock-on effects for the whole IT supply chain and this can impact the end product price in particular zones or regions.

Exchange Rate

Despite a promising rise early on in the month, the euro continued to fall against the British pound during November. It started the month at 0.7128 before quickly dropping to 0.7087 on Nov 4. This was followed by a promising sharp increase on November 6 where it reached a monthly high of 0.715. From here it was all downhill, bottoming out at 0.7001 on Nov 18. From there we saw minimal movement for several days before it rose to 0.7043 on Nov 25 where it stayed until the end of the month.

The euro experienced similar movements against the US dollar. It started the month at 1.001 before rising to 1.1025 on November 2. It then experienced a dramatic drop on November 7 to 1.0736 before rallying slightly to 1.0771 on Nov 13. From here, it remained fairly static, limping in at 1.0578 by month’s end. This is the weakest it’s been since April 12, 2015.

The Eurozone economy was buoyant during the month of November, with positive purchasing managers’ index (PMI) data. Nonetheless, the euro posted its biggest monthly loss since March as economists anticipate an additional monetary stimulus outcome from the early December ECB meeting.

Phones and tablets

Emerging markets drove worldwide smartphone shipments in Q3 up by 15.5% to 353m units compared to the same period in 2014. Meanwhile, total global shipments increased 3.7% to 478m units for the same period.

The rise in smartphone sales can largely be attributed to the consumer market said Gartner, as more markets upgrade ‘feature phones’ to smartphones due to comparable prices.

Unsurprisingly, November saw Samsung and Apple hold on to their crowns for another month as they led market share in both smartphone and mobile shipment categories; Samsung (23.7% & 21.4%) and Apple (13.1% & 9.6%). Meanwhile, a move to local brands in the emerging markets saw Micromax Informatics cement its place among the top 10 global mobile phone vendors. Chinese brands such as TCL Communication Technology, Oppo, ZTE, Huawei, Xiaomi, and BBK have also become increasingly aggressive in the race for the top.

A report from TrendForce estimated a 9.6% year-on-year decline on tablet panel shipments to 207m in 2015. This seemed to be the sentiment across the board with a second analyst, IDC, reporting that shipments will reach 211.3m units in 2015 - representing a decline of 8.1% on 2014. Both reports highlighted the fact that there have been three consecutive quarters of global decline in tablet shipments, and while tablets are projected to drop again next year to 200m, there is some hope in the form of detachable tablets, which are set to take a bigger increase in the segment’s shipment in the coming years.

Processors, MEMs, semiconductors

The strengthening of the US dollar versus the euro, yen, won and Taiwanese dollar has taken its toll on the semiconductor industry according to IC Insights. This has seen the sales growth fall by 3%, causing a 1% sales decline compared with 2014.

Total sales of the top 20 chip firms are expected to reach $259.15bn this year, representing less than 1% decline compared to the $260bn total of 2014.

The IC Insights report highlights Samsung’s growth in the chip fabrication market as it makes strides to catch up with Intel. Intel’s reliance on the PC market combined with its struggle to break into mobile phones means that its semiconductor sales will shrink 2% to just over $50bn for 2015, while Samsung’s 10% growth in chip revenue now sits just $6bn behind.

 

Stat of the month: The largest number of price increases happened on November 3, with 781 rises in a single day.

 

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