Weekly Global Update for January 21, 2014
01.21.2014 // Walt D. Custer // Industry Conditions
European Update – Rebound in November
Based upon the latest Eurostat data:
Chart 11 summarizes the annualized (12/12) and 3-month (3/12) growth of the European electronic supply chain. A value of 100 equals zero growth vs. the same period a year earlier. The 3/12 "leads" the 12/12.
World Semiconductor Industry will grow 5% this year, the Fabless Industry will grow 8% and the Foundry Industry will grow 10%
The worldwide semiconductor industry will grow 5% this year, the fabless industry will grow 8% and the foundry industry will grow 10%, says Morris Chang, Chairman of TSMC.
TSMC sales will grow by a double digit percentage in 2014, says Chang.
Q1 will see revenues dip 6% but this will be followed by a Q2 surge driven by mobile ICs.
28nm accounted for 34% of revenues in Q4 and 20nm moves into volume production in Q1.
Capex will be $9.5 billion to $10 billion.
North American PCB Shipments increased 4.0% in November 2013 from November 2012; Bookings fell 6.7% year over year (Charts 12-14)
Performance over last year is mixed:
"While sales continued to strengthen in the North American PCB industry compared to last year, orders declined," said Sharon Starr, IPC's director of market research. "This disparity between sales and order growth pushed the book-to-bill ratio to its lowest point since March 2009," she added, "indicating a slow and possibly bumpy recovery going into 2014."
Taiwanese PCB Suppliers Face Slow First Quarter
PCB suppliers face weak 1Q’14 smartphone and tablet shipments due to inventory adjustments.
Taiwanese suppliers of printed circuit boards are likely to see the low-season effect continue this quarter from last quarter, with signs of recovery in this industry likely emerging in late next quarter, KGI Securities Company analyst Bonny Weng said.
Weng said that PCB orders for flat panel display and PC products look steady this quarter because of lower inventories. However, shipments for smartphone and tablet products would see a negative impact this quarter from U.S. clients’ inventory adjustments, she said, without identifying the U.S. companies.
"Taiwanese PCB suppliers are expected to see a substantial recovery in their business at the end of next quarter," she added.
European EMS Industry decreased 0.5% y/y to Euro 25.5 billion in 2013 (Chart 15)
As the European and Global economies slowly recover from the downturn of the last few years, the European Electronic Manufacturing Services (EMS) Industry in 2013 likely decreased by 0.5% compared with 2012. Total 2013 European EMS revenues were estimated at Euro 25.5 billion. The Western Europe portion grew in 2013 to 11.08 billion from 11.00 billion in 2012 and this growth will slowly increase to 27.8 billion by the end of 2017.
Microprocessor Sales Forecast to Rise 9% in 2014 to Record-high $66.7 billion (Chart 16)
Cellphone and tablet MPUs are expected to hit new record highs while the rest of the market ends a two-year slump.
A modest recovery in personal computers this year is expected to slightly strengthen overall sales growth of microprocessors, which are forecast to rise 9% in 2014 to a record-high $66.7 billion compared to $61.0 billion in 2013, when revenues grew 8%, according to IC Insights. Its new report shows mobile processors in cellphones and tablet computers continuing to provide most of the lift in overall microprocessor sales, but other MPUs used in PCs, servers, and embedded applications are forecast to pull out of a two-year slump and increase 3% in 2014 to $42.5 billion from $41.2 billion in 2013.
Cellphone application processor sales are forecast to grow 19% in 2014 to a record-high $19.3 billion, while tablet processors are projected to climb 35% to a new all-time peak of $4.9 billion, says IC Insights’ 2014 McClean Report. Cellphone application processors are forecast to account for 29% of worldwide microprocessor sales in 2014, while tablet MPUs will reach 7% of the total. Microprocessors used in standard PCs, servers, large computers, and embedded applications are expected to represent 64% of total MPU sales in 2014. By 2018, cellphone application processors are expected to represent 33% of the total microprocessor sales, while tablet MPUs will be 9% and the large PC/server/embedded segment will shrink to 58%, based on the five-year forecast in the new McClean Report.
Revenues for microprocessors in PCs, servers, large computers, and embedded systems fell 2% in 2013 after dropping 6% in 2012. These back-to-back declines were partly a result of PCs being superseded by tablet computer and smartphone sales, but also due to cutbacks in information technology spending by businesses while economic growth waffled in the past two years. In 2013, shipments of PCs (desktops and notebooks) built with x86 MPUs from Intel and AMD suffered the worst decline ever, falling by about 9% to 315 million units worldwide, according to IC Insights’ market data.
A projected 2% increase in PC unit sales in 2014, along with improved IT spending by businesses and stronger growth in embedded-processor applications, will enable the PC/server/embedded MPU market segment to grow again this year, but it will not set a new record high until 2015, when revenues are forecast to grow 6% to $45.2 billion. The new McClean Report shows this large MPU market segment growing by a CAGR of 4.0% between 2013 and 2018, reaching $50.1 billion in the final year of the forecast.
Meanwhile, sales of cellphone application MPUs (which exclude baseband processors used in wireless modems) are expected to grow by a CAGR of 12.5% in the five-year forecast period, climbing to $29.1 billion in 2018. Tablet processor sales are forecast to rise by a CAGR of 16.1%, reaching $7.7 billion in 2018. Total microprocessor sales are projected to rise by an annual rate of 7.4% in the forecast period to $87.0 billion in 2018, according to the 2014 McClean Report.
Global NAND Flash Output to top US$27 billion in 2014 after growing 22% y/y to US$24.6 billion in 2013 (Chart 17)
Output value for the global NAND flash industry is forecast to exceed US$27 billion in 2014, up from about US$24.6 billion in 2013, as solid-state drives (SSD) are poised for widespread enterprise adoption, according to DRAMeXchange.
The industry output value for 2013 represented a 22% increase from the 2012, according to DRAMeXchange. Growth was driven by brisk demand for smartphone, tablet and SSD applications.
NAND flash bit demand is expected to rise 36% in 2014 compared to a larger 46% increase in 2013, said DRAMeXchange.
On the supply side, major chipmakers have begun migrating to 10nm-class production since the third quarter of 2013, while chips built using their 20nm-class process nodes are being widely adopted in SSDs, eMMC and eMCP modules for use in mobile devices, DRAMeXchange indicated. Advanced 20nm-and 10nm-class technologies accounted for more than 90% of total NAND flash shipments in the fourth quarter of 2013, DRAMeXchange said.
In addition, chip suppliers including Samsung Electronics, Toshiba, SK Hynix, Micron Technology and Intel have stepped up the development of their 3D NAND products, DRAMeXchange noted. Chips built using 3D production technology will account for more than 20% of the overall NAND flash market in 2015.
Semiconductor Plastic Packaging Materials Market to Approach $21 Billion by 2017 (Chart 18)
Supplier Base Undergoing Consolidation in Key Segments
The market for semiconductor packaging materials, including thermal interface materials, is expected to maintain its $20 billion value through 2017, despite shifts away from the use of precious metals such as gold in wire bonding, according to a new study by SEMI and TechSearch International. Despite continued price pressure, organic substrates remain the largest segment of the market, worth an estimated $7.4 billion globally in 2013 growing to more than $8.7 billion by 2017. Most packaging material segments are encountering low revenue growth as end users seek lower cost solutions for packaging and downward pricing pressures are severe. In addition, the transition to copper and silver bonding wire has significantly reduced impact of gold metal pricing in wire bond packages.
The SEMI report, titled "Global Semiconductor Packaging Materials Outlook—2013/2014 Edition," covers laminate substrates, flex circuit/tape substrates, leadframes, bonding wire, mold compounds, underfill materials, liquid encapsulants, die attach materials, solder balls, wafer level package dielectrics and thermal interface materials.
Several areas are experiencing stronger growth. The expansion of CSPs with laminate substrates is driven by explosive growth in mobile computing and communications devices such as smartphones and tablets. The same products are driving growth in wafer level packages (WLPs), which are in turn driving use of dielectric materials used for redistribution. The growth in flip chip adoption continues to expand the market for underfill materials. A number of key segments are seeing a consolidation of the supplier base, though new entrants in Asia are entering some segments. The findings in the report are based on more than 150 in-depth interviews conducted with packaging subcontractors, semiconductor manufacturers and materials suppliers. It includes previously unpublished data on revenue, unit shipments and market shares for each packaging material segment; a five-year forecast of revenue and units (2012-2017); supplier rankings (for key segments) and listing (including new players); and an analysis of regional market trends and size.
The report also identifies important technology and business trends affecting the packaging materials market, as well as opportunities for suppliers. Some of the key opportunities include:
Shift in Semiconductor Capacity and Equipment Spending Trends (Chart 19)
Based on SEMI World Fab Forecast data, SEMI suggests that spending trends for the semiconductor industry have changed. Before 2009, capacity expansion corresponded closely to fab equipment spending. Now more money is spent on upgrading existing facilities, while new capacity additions are occurring at a lower pace, to levels previously seen only during an economic or industry-wide slowdown.
While the 2013 installed capacity growth mimics economic crisis behavior, according to the SEMI World Fab Forecast Report, the data support improvement in overall capacity expansion in both 2014 and 2015.
Most fab equipment spending before the 2009 crisis focused on adding new capacity. In the five years between 2003 and 2007, the annual growth rate of new capacity increased from 6% in 2003 to 20% growth in 2007 (almost doubling the fab capacity in five years), according to the SEMI World Fab Forecast Report. This was driven mainly by DRAM and NAND companies in Korea, Taiwan and China. After 2009, while fab equipment spending recovered, new capacity additions trended below pre-2009 growth rates: growth of new capacity dropped from 7% in 2010 to about 4% in 2014, with the expected capacity addition of only 17% in the five years from 2009 to 2014.
Since the 2009 crisis, expenditures on upgrading existing equipment have grown sharply. Expansion projects, such as new fabs, still account for the majority of fab equipment spending, but in lower proportions than in the past. Costs for adding new equipment to a new facility are typically higher than upgrading some of the existing equipment.
According to SEMI, the two industry segments predicted to add the most capacity in 2013 and 2014, based on demand, are foundries and NAND. Dedicated foundries grew at a steady 10% in 2013, and will add another 8 to 10% in 2014. For the second largest segment, NAND, which lost about 4% of capacity in 2012, capacity rose 10% in 2013 and will add another 5 to 8% in 2014. Other segments, such as DRAM, Analog, and Logic, are not expected to add new capacity in 2013 and 2014. MPU may add some new capacity by 2014. For more information, visit www.semi.org/MarketInfo/FabDatabase.
Worldwide Notebook Shipments to Grow 4.1% Sequentially, but Dropped 5.9% on year in 4Q’13
Because of Intel's low-price processor solutions and increased demand from both the consumer and enterprise markets, global notebook shipments in 4Q’13 rose 4.1% sequentially, but dropped 5.9% on year, better than Digitimes Research's original forecast.
However, worldwide notebook shipments in 2013 dropped 10.6% on year.
Global Smartphone Shipments to Top 1.24 billion units in 2014
Global smartphone shipments are expected to top 1.24 billion units in 2014, with Samsung Electronics, Apple, LG Electronics, Sony Mobile Communications and Lenovo serving as the top-5 vendors, according to Digitimes Research.
U.S. Industrial Production Increased at Fastest Rate in 3 1/2 years in 4Q’13 (Chart 20)
For 4Q’13 U.S. industrial production grew 6.8%, the largest quarterly increase since the second quarter of 2010.
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