3Q/4Q 2005 Individual Sector Results

ChangeWave Research: 3Q/4Q 2012 Corporate Quarterly Sector Analysis

ChangeWave Research Report:

3Q / 4Q 2012Sector Findings

Semiconductors Still Under Pressure This Quarter

Andy Golub and Paul Carton

Overview: ChangeWave's latest business trends survey shows the U.S. economy stuck in slow growth mode – with softer 3rd Quarter sales, a tight job market, and slower capital spending. Moreover, the looming Fiscal Cliff issue appears to be a key contributing factor.

ChangeWave Research is a service of 451 Research.

At the sector level, the September survey of 3,052 corporate respondents showsSemiconductors continues to remain under pressure this quarter. The Manufacturing and Transportation sectors are also underperforming.

Table Onebelow presents a brief summary of thesethree lagging sectors in comparison to the overall survey results for all respondents. (Note that the numbers in parentheses represent the change from the previous quarter’s survey).

By clicking on any of thesectors below, you’ll immediately jump to a series of charts highlighting that sector’s survey results.

Table 1:Lagging Sectors –Corporate Quarterly Survey

Lagging Sectors / Current
Quarter (3Q)
Sales / Current
Quarter (3Q)
Hiring
Trends / Current
Quarter (3Q)
Ability To
Borrow Money / Current
Quarter (3Q)
Green Light for
Customer
Spending / Next
Quarter (4Q)
Sales
Pipeline / Next
Quarter (4Q)
Capital
Budgets
Above Minus
Below Plan / Net
Change / More Minus
Less Hires / Net
Change / Easier Minus
Harder / Net
Change / Green
Light / Net
Change / Above Minus
Below
Plan / Net
Change / Increase Minus
Decrease / Net
Change
Total For All
Sectors Surveyed / -15% / (-5) / 0% / (-4) / -6% / (+1) / 33% / (-4) / -2% / (-3) / -10% / (-4)
Semiconductors / -36% / (-1) / -22% / (-13) / 3% / (+3) / 20% / (-19) / -29% / (-15) / -32% / (-14)
Manufacturing / -19% / (-18) / 3% / (-8) / -4% / (-4) / 38% / (-5) / -6% / (-12) / -15% / (-10)
Transportation / 5% / (-9) / 0% / (-21) / 3% / (+5) / 42% / (-6) / 3% / (-13) / -9% / (-17)

On a brighter note, the Healthcare and Telecom sectors are performing somewhat better than the rest this quarter. Again, by clicking on the sector namesbelow, you’ll immediately jump to a series of charts highlighting that sector’s results.

Table 2: Sectors PerformingSomewhat Better Than Rest – Corporate Quarterly Survey

SectorsPerforming Somewhat Better Than the Rest / Current
Quarter (3Q)
Sales / Current
Quarter (3Q)
Hiring
Trends / Current
Quarter (3Q)
Ability To
Borrow Money / Current
Quarter (3Q)
Green Light for
Customer
Spending / Next
Quarter (4Q)
Sales
Pipeline / Next
Quarter (4Q)
Capital
Budgets
Above Minus
Below Plan / Net
Change / More Minus
Less Hires / Net
Change / Easier Minus
Harder / Net
Change / Green
Light / Net
Change / Above Minus
Below
Plan / Net
Change / Increase Minus
Decrease / Net
Change
Total For All
Sectors Surveyed / -15% / (-5) / 0% / (-4) / -6% / (+1) / 33% / (-4) / -2% / (-3) / -10% / (-4)
Healthcare / -13% / (+8) / 3% / (+2) / -5% / (+2) / 32% / (+1) / -3% / (0) / -7% / (+1)
Telecom / -8% / (+10) / 8% / (-6) / -1% / (+2) / 31% / (-4) / 12% / (+8) / -14% / (-3)

You can also simply scroll down to review the highlightedsectors below, where you’ll find a complete set of charts for each– including:

Current Results – 3rd Quarter 2012

Sales Results
Hiring Trends
Ability of Companies to Borrow Money
Customer Willingness to Spend
Product Inventories
Price Pressures in the Marketplace

Looking Ahead to 4th Quarter 2012

Projected Sales Pipeline
Capital Budget Projections

The ChangeWave Research Networkis a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Table of Contents

Lagging Sectors...... 4

Semiconductors...... 4

Manufacturing...... 12

Transportation...... 16

Sectors Performing Somewhat Better Than the Rest...... 20

Healthcare...... 20

Telecom...... 24

Other Sectors...... 28

ChangeWave Research Methodology...... 29

About ChangeWave ...... 29

About 451 Research...... 29

I.Lagging Sectors

1. Semiconductors

(A) Sales – Current Quarter (3Q)

(B) Hiring – Current Quarter (3Q)

(D) Customer Willingness to Spend – Current Quarter (3Q)

(E) Product Inventories – Current Quarter (3Q)

(F) Price Pressures – Current Quarter (3Q)

(G) Sales Pipeline Visibility – Next Quarter (4Q)

(H) Capital Budget Projections – Next Quarter (4Q)

We also asked Semiconductor Industry members a series of questions on the semi sector:

(1A) Which of the following semiconductor sub-segments do you think will perform the best in 4Q 2012? (Choose No More Than Two)

Current Survey
Sep ‘12 / Previous Survey
Jun ‘12 / Previous Survey
Mar ‘12 / Previous Survey
Dec ‘11 / Previous Survey
Sep ‘11 / Previous
Survey
Jun ‘11 / Previous
Survey
Mar ‘11
Communications Chips for Cell Phones / 68% / 57% / 71% / 63% / 61% / 60% / 56%
Communications Chips for Telecom and Data Networking Gear / 21% / 23% / 23% / 21% / 28% / 21% / 23%
Graphics/Video Chips / 5% / 15% / 7% / 7% / 9% / 10% / 20%
Logic/Programmable Chips / 7% / 7% / 9% / 9% / 5% / 7% / 2%
Memory Chips / 0% / 3% / 1% / 1% / 4% / 4% / 5%
Analog Chips / 12% / 16% / 9% / 11% / 16% / 11% / 12%
Microprocessor Chips / 20% / 11% / 16% / 14% / 10% / 15% / 16%
RFID Chips / 2% / 2% / 3% / 3% / 5% / 6% / 7%
MRAM / 0% / 0% / 0% / 0% / 0% / 0% / 0%
NAND Flash Memory / 16% / 13% / 23% / 16% / 14% / 18% / 13%
NOR Flash Memory / 0% / 2% / 0% / 1% / 0% / 0% / 0%
Power Management / 7% / 18% / 16% / 21% / 20% / 19% / 17%
Other / 0% / 0% / 0% / 1% / 4% / 1% / 2%

(1B) And which of the following semiconductor sub-segments do you think will perform the worst in 4Q 2012? (Choose No More Than Two)

Current Survey
Sep ‘12 / Previous Survey
Jun ‘12 / Previous Survey
Mar ‘12 / Previous Survey
Dec ‘11 / Previous Survey
Sep ‘11 / Previous
Survey
Jun ‘11 / Previous
Survey
Mar ‘11
Communications Chips for Cell Phones / 5% / 7% / 0% / 3% / 5% / 1% / 2%
Communications Chips for Telecom and Data Networking Gear / 5% / 3% / 1% / 11% / 8% / 6% / 10%
Graphics/Video Chips / 12% / 8% / 11% / 3% / 11% / 11% / 6%
Logic/Programmable Chips / 14% / 10% / 14% / 6% / 3% / 10% / 12%
Memory Chips / 34% / 31% / 40% / 40% / 33% / 19% / 27%
Analog Chips / 7% / 10% / 6% / 10% / 11% / 4% / 7%
Microprocessor Chips / 16% / 10% / 6% / 6% / 16% / 10% / 13%
RFID Chips / 9% / 11% / 14% / 17% / 14% / 19% / 17%
MRAM / 11% / 20% / 20% / 17% / 14% / 14% / 20%
NAND Flash Memory / 4% / 8% / 7% / 7% / 8% / 6% / 7%
NOR Flash Memory / 7% / 20% / 16% / 16% / 18% / 19% / 13%
Power Management / 2% / 3% / 7% / 6% / 3% / 3% / 5%
Other / 0% / 2% / 1% / 1% / 1% / 3% / 2%

Change in Net Difference Score-Current Survey (Sep ‘12) vs. Previous Survey (Jun ‘12)

Net
Difference
Score
Current
Survey
Sep ‘12 / Net
Difference
Score
Current
Survey
Jun ‘12 / Change in Net Difference Score
Communications Chips for Cell Phones / +63 / +50 / +13
NOR Flash Memory / -7 / -18 / +11
MRAM / -11 / -20 / +9
NAND Flash Memory / +12 / +5 / +7
Microprocessor Chips / +4 / +1 / +3
RFID Chips / -7 / -9 / +2
Analog Chips / +5 / +6 / -1
Power Management / +5 / +9 / -4
Logic/Programmable Chips / -7 / -3 / -4
Communications Chips for Telecom and Data Networking Gear / +16 / +20 / -4
Memory Chips / -34 / -28 / -6
Graphics/Video Chips / -7 / +7 / -14

Communications Chips for Cell Phones(Change in Net Difference Score = +13) is the semi sub-segment showing the most improvement since the previous survey.

Meanwhile, Graphics/Video Chips (-14) has fallen the most since June 2012.

(2) For each of the following semiconductor sub-segments, which would you say are currently exhibiting signs of an inventory buildup (i.e. a surplus), an inventory shortage (i.e. in short supply), or are having no inventory problems at all?

Inventory Buildup (i.e. a Surplus) / Inventory Shortage (i.e. in Short Supply) / Net
Difference
Score:
Current Survey / Change in Net
Difference
Score
Graphics/Video Chips / 9% / 4% / -5 / +13
NAND Flash Memory / 14% / 12% / -2 / +12
Communications Chips for Cell Phones / 4% / 18% / +14 / +8
MRAM / 5% / 0% / -5 / +5
Logic/Programmable Chips / 9% / 4% / -5 / +3
Analog Chips / 5% / 7% / +2 / +2
Memory Chips / 27% / 2% / -25 / +1
Microprocessor Chips / 21% / 3% / -18 / 0
NOR Flash Memory / 16% / 2% / -14 / -1
Power Management / 4% / 5% / +1 / -2
RFID Chips / 11% / 2% / -9 / -4
Communications Chips for Telecom and Data Networking Gear / 9% / 5% / -4 / -4

Looking at inventory, Graphics/Video Chips (+13) and NAND Flash Memory areshowing signs of shorter supply compared to June, while RFID Chips (-4) and Communications Chips for Telecom and Data Networking Gear(-4) are movingmore toward an inventory oversupply.

(3) What will be the key driver of the semiconductor industry for the next six months?

Current Survey
Sep ‘12 / Previous Survey
Jun ‘12 / Previous Survey
Mar ‘12 / Previous Survey
Dec ‘11
Consumer Marketplace (Electronics) / 43% / 39% / 34% / 40%
Communications Marketplace (Telecom and Data Networking) / 30% / 26% / 34% / 19%
Business Marketplace (Computer and Storage Hardware) / 4% / 7% / 4% / 14%
All of the Above / 12% / 20% / 21% / 23%
Don't Know / 11% / 8% / 6% / 4%

Industry respondents believe the Consumer Marketplace (43%) will be the key driver for the semi industry over the next 6 months.

(4) Focusing on the semi manufacturing supply chain, which one of the following segments do you think will perform best in 4Q 2012?

Current Survey
Sep ‘12 / Previous Survey
Jun ‘12 / Previous Survey
Mar ‘12 / Previous Survey
Dec ‘11
Emerging Markets (LEDs, MEMS, Printed Electronics, Nanotechnology) / 18% / 26% / 27% / 27%
Enabling Products (systems, components, parts, etc.) / 18% / 13% / 11% / 13%
Assembly and Packaging / 18% / 10% / 9% / 17%
Wafer Processing / 12% / 25% / 31% / 13%
Flat Panel Display / 7% / 7% / 3% / 10%
Test / 5% / 10% / 6% / 0%
Materials / 4% / 3% / 3% / 10%
Photovoltaics-Energy / 4% / 0% / 1% / 1%
Other / 0% / 0% / 1% / 0%
NA / 14% / 7% / 7% / 9%

(5) Looking at the overall semiconductor industry, when do you think business will improve the most for semiconductor companies?

Current Survey
Sep ‘12
Second Half of 2012 / 9%
First Half of 2013 / 23%
Second Half of 2013 / 46%
First Half of 2014 / 7%
Second Half of 2014 or Later / 4%
Don't Know / 9%

2. Manufacturing

(A) Sales – Current Quarter (3Q)

(B) Hiring – Current Quarter (3Q)

(D) Customer Willingness to Spend – Current Quarter (3Q)

(E) Product Inventories – Current Quarter (3Q)

(F) Price Pressures – Current Quarter (3Q)

(G) Sales Pipeline Visibility – Next Quarter (4Q)

(H) Capital Budget Projections – Next Quarter (4Q)

3. Transportation

(A) Sales – Current Quarter (3Q)

(B) Hiring – Current Quarter (3Q)

(D) Customer Willingness to Spend – Current Quarter (3Q)

(E) Product Inventories – Current Quarter (3Q)

(F) Price Pressures – Current Quarter (3Q)

(G) Sales Pipeline Visibility – Next Quarter (4Q)

(H) Capital Budget Projections – Next Quarter (4Q)

II.Sectors Performing SomewhatBetter Than the Rest

1. Healthcare

(A) Sales – Current Quarter (3Q)

(B) Hiring – Current Quarter (3Q)

(D) Customer Willingness to Spend – Current Quarter (3Q)

(E) Product Inventories – Current Quarter (3Q)

(F) Price Pressures – Current Quarter (3Q)

(G) Sales Pipeline Visibility – Next Quarter (4Q)

(H) Capital Budget Projections – Next Quarter (4Q)

2. Telecom

(A) Sales – Current Quarter (3Q)

(B) Hiring – Current Quarter (3Q)

(D) Customer Willingness to Spend – Current Quarter (3Q)

(E) Product Inventories – Current Quarter (3Q)

(F) Price Pressures – Current Quarter (3Q)

(G) Sales Pipeline Visibility – Next Quarter (4Q)

(H) Capital Budget Projections – Next Quarter (4Q)

III.Other Sectors from 3Q / 4Q Corporate Quarterly Survey

Other Sectors / Current
Quarter (3Q)
Sales / Current
Quarter (3Q)
Hiring
Trends / Current
Quarter (3Q)
Ability To
Borrow Money / Current
Quarter (3Q)
Green Light for
Customer
Spending / Next
Quarter (4Q)
Sales
Pipeline / Next
Quarter (4Q)
Capital
Budgets
Above Minus
Below Plan / Net
Change / More Minus
Less Hires / Net
Change / Easier Minus
Harder / Net
Change / Green
Light / Net
Change / Above Minus
Below
Plan / Net
Change / Increase Minus
Decrease / Net
Change
Total For All
Sectors Surveyed / -15% / (-5) / 0% / (-4) / -6% / (+1) / 33% / (-4) / -2% / (-3) / -10% / (-4)
Natural Gas & Oil / -3% / (-7) / 5% / (-2) / -5% / (-5) / 61% / (+1) / 9% / (-3) / -4% / (+2)
IT Software and Services / -20% / (-6) / 3% / (-5) / -10% / (-2) / 29% / (-4) / 0% / (+4) / -5% / (+3)
Consumer Retail / -14% / (-8) / -2% / (-2) / -7% / (+7) / 35% / (-3) / -3% / (-4) / -10% / (-6)
Energy Utilities / -21% / (+12) / -2% / (-11) / -8% / (0) / 40% / (-11) / -8% / (-10) / -8% / (-13)
Technology/ Networking Hardware / -20% / (-20) / 3% / (-10) / 1% / (+8) / 20% / (-8) / -1% / (+4) / -3% / (0)
Engineering/ Construction Services / -14% / (-4) / 7% / (-5) / -7% / (-4) / 27% / (-3) / -2% / (-2) / -6% / (-4)
Wireless / -16% / (-16) / -19% / (-10) / 0% / (+9) / 29% / (-21) / 7% / (-2) / -32% / (-16)
Defense/Aerospace / -17% / (-8) / -8% / (+7) / -1% / (+7) / 22% / (-2) / -9% / (+2) / -18% / (+3)
Chemical / -4% / (-24) / -9% / (-16) / -7% / (0) / 57% / (+14) / -16% / (-34) / -13% / (-7)

*Note that the numbers in parentheses represent the change from the previous quarter’s survey.

IV. ChangeWave Research Methodology

This report is based on a survey of ChangeWave Alliance members conducted online between August 27 – September 10, 2012. The goal of the survey was to get an up-to-date picture of the health of the U.S. Economy and its sectors, including any changes during the 3rd Quarter of 2012. A total of 3,052 accredited ChangeWave members participated in the survey.

ChangeWave's proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members of its research network.

The business and investment intelligence provided by ChangeWave provides a real-time view of companies, technologies, and consumer and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

About ChangeWave Research

ChangeWave Research, a service of 451 Research, is a survey research firm that identifies and quantifies change in corporate buying & business trends, telecom trends, and consumer spending & electronics trends.

The ChangeWave Research Network is a group of 25,000 highly qualified business, technology, and medical professionals – as well as early adopter consumers – who work in leading companies of select industries. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

ChangeWave delivers its products and services on the Web at

451 Research, LLC, including its ChangeWave Research service, does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

About 451 Research

451 Research, a division of The 451 Group, is a leading global analyst and data company focused on the business of enterprise IT innovation. Clients of 451 Research – at end-user, service-provider, vendor, and investor organizations – rely on 451 Research’s insight through a range of syndicated research and advisory services to support both strategic and tactical decision-making. For additional information on 451 Research, go to: 451research.com.

For More Information:

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This information is from ChangeWave Research, a service of 451 Research,LLC, and contains confidential business information.