The worldwide manufacturing sector is being impacted by China’s economic downturn, as evidenced by the decline in semiconductors, smartphones, and other electronics. Weak capital investment has also resulted in a slow demand for machinery.
According to a Nikkei analysis of QUICK-FactSet data, the net incomes of about 13,000 major listed companies in the U.S., China, Europe, Japan, and other economies for the July\u2013September period totaled about $1.1 trillion, up 3% from the same period last year.
On the other hand, manufacturing profits dropped 9% for the fourth straight quarter. The hardest hit sector was the chemical industry, where profits fell by 43%.
The machinery sector saw its first profit decline in five quarters, while the electronics sector saw a decline of 12%. Although the nonmanufacturing sector saw a 16% increase in profits, the slowdown in China had a negative impact on manufacturers. Approximately 240 non-Chinese manufacturers, whose proportion of Chinese sales to total sales is estimated to be 30% or higher, saw a 30% decrease in net income.
Numerous industries are being affected; Taiwan Semiconductor Manufacturing Co. (TSMC) and Texas Instruments, two of the largest semiconductor companies in the United States, have reported profit declines exceeding 20%. Numerical control device sales and other factory automation equipment fell along with a slowdown in capital investment in China.
Japan was hit hard by the shock wave, as Fanuc reported a 20% drop in profit. In China, orders, a key measure of the industrial robot manufacturer’s profitability, dropped by 35%.
Consumption in the area is also declining, despite expectations that the Chinese government will implement economic stimulus plans. For instance, the collapse in the Chinese market resulted in a profit decline of more than 90% for the American cosmetics company Estee Lauder.
On the other hand, the financial industry is booming, as evidenced by the impressive net income growth of 61% and 35% reported by Wells Fargo and JPMorgan Chase, respectively. The performance of the major American tech companies is improving; the combined profits of six businesses\u2014including Apple and Microsoft\u2014have increased by 41%. Toyota Motor and other automakers reported a 55% increase in profits, indicating their success as well.
The outlook for the October-December period is a 7% increase in the manufacturing sector and a 21% increase overall.
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