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R&D Market Pulse: Electronics Demand Growing Beyond Capacities

By R&D Editors | September 24, 2018

The R&D Index for the week ending September 21, 2018 closed at 4,753.74 for the 25 companies in the R&D Index. The Index was down -0.83% (or 39.55 basis points) from the week ending September 14, 2018. The stock of nineteen R&D Index companies gained value last week from 0.28% (Novartis) to 10.19% (Volkswagen AG). The stock of six R&D Index companies lost value last week from -0.42% (Roche Pharm) to -2.80% (Amazon).

While the R&D Index closed lower last week, the DJIA and S&P 500 set new record highs, their first record high since January 26, 2018. The DJIA is up 7.8% for the year, while the S&P 500 is up 9.6%. The DJIA rose for eight of the last ten sessions. Surprisingly, the top three R&D Index leaders in terms of R&D spending, Amazon, Google/Alphabet and Apple, were all down for the week. The continued strength of the U.S. economy, despite the trade war issues, implies that the Fed’s planned meeting on September 25-26 will result in 2018’s third short-term interest rate hike to a range between 2.00% and 2.25%, the highest in nearly ten years.

R&D Index member Intel’s dominance in the production and sale of microprocessors is causing turmoil among other electronics suppliers and users. Demand for microprocessors in PCs, cell phones and cloud-based servers continues to exceed Intel’s ability to supply chips. Memory-chip manufacturer Micron Technology last week lowered its 3Q forecast to its slowest rate in two years due to a shortage of microprocessors for the newly revived market for PCs– memory chips and microprocessors are closely linked in electronic assemblies. Analysts also predict that capital spending for cloud-server growth for companies like Google, Amazon, Microsoft and Facebook may also have to be scaled back due to microprocessor shortages. Intel has about 90% share of the microprocessor market with production increases severely limited by the high cost, long lead and extreme complexities of new production fabs.

The above noted chip shortage may become even more severe as other microprocessor firms see their production demands increase as well. R&D Index member Amazon last week unveiled a new AI-enabled microprocessor chip (manufactured by Texas Instruments) that would allow its customers to control all aspects of their homes from kitchen appliances to environmental control and security systems.

      R&D Index Week Ending September 21, 2018      
    Ticker Exchange 2018 R&D millions U.S. $ 09/14/18 09/21/18 9/21/18 to 9/14/18 9/21/18 to 12/29/17
1 Amazon AMZN NASDAQ 26,750 1,970.19 1,915.01 -2.80% 63.75%
2 Alphabet/Google GOOGL NASDAQ 18,796 1,177.98 1,172.12 -0.50% 11.27%
3 Apple AAPL NASDAQ 14,037 223.84 217.66 -2.76% 28.62%
4 Intel INTC NASDAQ 13,702 45.54 46.66 2.46% 1.08%
5 Microsoft MSFT NASDAQ 13,558 113.37 114.26 0.78% 33.57%
6 Roche Pharm RHHBY OTC 12,284 30.75 30.62 -0.42% -3.04%
7 Johnson & Johnson JNJ NYSE 11,493 139.49 142.88 2.43% 2.26%
8 Merck & Co. MRK NYSE 11,323 69.98 71.10 1.60% 26.36%
9 Volkswagen AG VWAGY OTC 10,915 16.29 17.95 10.19% -55.61%
10 Toyota TM NYSE 10,848 122.28 124.72 2.00% -1.93%
11 Novartis NVS NYSE 8,934 85.22 85.46 0.28% 1.79%
12 Honda HMC NYSE 8,180 28.90 30.87 6.82% -9.42%
13 Pfizer PFE NYSE 7,942 42.96 44.06 2.56% 21.65%
14 Daimler DDAIY OTC 7,615 64.18 67.73 5.53% -19.90%
15 General Motors GM NYSE 7,278 34.63 35.32 1.99% -13.83%
16 Oracle ORCL NYSE 7,001 49.25 51.10 3.76% 8.93%
17 Bristol-Myers Squibb BMY NYSE 6,981 60.69 62.25 2.74% 1.58%
18 Eli Lilly Co LLY NYSE 6,769 105.77 106.33 0.53% 25.89%
19 GlaxoSmithKline GSK NYSE 6,394 39.01 40.30 3.31% 13.62%
20 Cisco CSCO NASDAQ 6,009 47.40 48.56 2.45% 26.79%
21 IBM IBM NYSE 5,842 148.33 151.35 2.04% -1.35%
22 Bayer AG BAYN OTC 5,743 20.89 22.50 7.71% -27.63%
23 Astra Zeneca PLC AZN NYSE 5,483 37.45 37.68 0.61% 8.59%
24 Qualcomm QCOM NASDAQ 5,183 75.09 73.70 -1.85% 15.12%
25 Sanofi SA SNY NYSE 4,694 43.81 43.55 -0.59% 1.28%
  Total     243,754 4,793.29 4,753.74 -0.83% 25.37%
                 
      Biopharmaceutical 676.02 686.73 1.58% 7.68%
      Automotive 266.28 276.59 3.87% -15.48%
      ICT   1,880.80 1,875.41 -0.29% 13.16%

About the R&D Index

R&D Magazine’s R&D Index is a weekly stock market summary of the top international companies involved in research and development. The top 25 industrial spenders of R&D in 2017 were selected based on the latest listings from Schonfeld & Associates’ June 2018 R&D Ratios & Budgets. These 25 companies include pharmaceutical (11 companies), automotive (5), ICT (8) and conglomerate (1) organizations who invested a cumulative total of more than $209 billion in R&D in 2017, or approximately 10% of all the R&D spent in the world by government, industries and academia combined, according to R&D Magazine’s 2018 Global R&D Funding Forecast. The stock prices used in the R&D Index are tabulated from NASDAQ, NYSE, XETRA and OTC common stock prices (in U.S. dollars) for the companies selected at the close of stock trading business on the Friday preceding the publication of the R&D Index in R&D Magazine’s R&D Daily eNewsletter.

The companies used in the R&D Index include Amazon, Alphabet/Google, Microsoft, Intel, Apple, Volkswagen AG, Roche Pharma, Toyota, Johnson & Johnson, Novartis, General Motors, Pfizer, Bristol-Myers Squibb, Cisco, Qualcomm, Oracle, Honda Motor Company, Astra Zeneca plc, Merck & Company, Daimler, Bayer AG, Sanofi SA, IBM, GlaxoSmithKline and Eli Lilly Co. Stock prices are based on those stocks traded on the U.S. exchanges. R&D Index trends (in the stock prices) are just one indicator of the amount of capital available to these high-technology companies to invest in R&D and should not be implied to indicate the absolute value of R&D investments made by these organizations. The companies chosen for the R&D Index have very large sophisticated internal and global R&D organizations with each company investing between $4.5 and $17 billion annually on their R&D efforts.

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