Weekly Global Update for July 9, 2014
07.09.2014 // Walt D. Custer // Industry Conditions
U.S. May “Factory Orders”
Shipments, orders and inventories for the domestic supply chain were just released by the U.S. Department of Commerce:
June PMI Leading Indicators
Market Economics, JP Morgan and ISM just released their June PMI Leading Indicators:
330 Million Smartwatches by 2018
ON World’s survey with 1,000 U.S. online consumers found that smartwatches are the most likely wearable technology product they will purchase and 55% prefer a wristband over other form factors. Fitness is the most preferred wearable application and 38% of likely adopters would like to use their wearable technology for health applications.
ON World’s consumer survey found that Apple’s iWatch is the most preferred smartwatch offering even though it is not yet available. The top five smartwatch market leaders in 2013 were Samsung, Nike, Pebble, Sony and Garmin with numerous new entrants in 2014 including LG, Motorola and Nissan who are joining dozens of existing competitors.
Price will be the deciding factor for many consumers. ON World’s survey found that 40% would be willing to pay $99 or more for a smartwatch that had integrated blood pressure, heart rate and activity tracking sensors and 8% would be willing to spend $299 or more.
Although smartwatches only make up 3% of the 70,000 product reviews on wearable technologies that ON World evaluated, the growth rate increased by 763% in 2013 from 2012. By the end of 2018, 330 million smartwatches will have been shipped worldwide, up from less than four million in 2013.
Global Tablet Shipment Growth to Weaken to +5% y/y in 2014
Global tablet shipments are expected to reach 205.5 million in 2014, up less than 5% year-on-year, according to WitsView, a research division of TrendForce. The tablet market is sandwiched between internal and external threats that are affecting market performance.
Internally, tablets have lost their novelty to attract consumers, and cutthroat price competition is creating a desperate atmosphere in the market. External factors at work, though, include competition from phablets and low-priced notebooks that are further increasing market shares.
WitsView Research Manager Eric Chiou noted, "Leading vendor Apple's tablet shipments remained low in Q2 2014, estimated at only 13 million. Although the company will release new models in H2 2014, the impact will be limited. Moreover, iPad might experience its first decline since entering the market in 2010, with volume expected to drop from 74.3 million in 2013 to 68.4 million in 2014, mainly because Apple is unlikely to hold any major promotional or sales events."
Meanwhile, the second largest tablet vendor Samsung Electronics is endeavoring to meet tablet shipment quotas, but growth may not meet expectations, up only 14% year-on-year to 48 million in 2014 because of poor performance in both entry- and high-end markets. The limited increase comes as the company's GalaxyTabPro has seen fewer-than-expected sales due to high costs and because tablet products with similar specifications to the company's GalaxyTabLite are being offered by many other tablet vendors.
Additionally, Amazon and Google, which typically release high Cost/Performance ratio (C/P) products in the third quarter of each year, are expected to cool off in 2014. PC vendors such as Asus meanwhile are cooperating with partners like Intel in order to drive down costs, which will result in an expected increase in orders.
White-box tablets are also in the doldrums in emerging economies. Chiou added, "4G development in China as well as lacking interest for simply Wi-Fi units mean white-box shipments will take a hit. Wearable devices are also emerging, which will result in flat shipment growth for white-box units this year."
Worldwide Ultra HD TV Shipments Reaching 68 Million Units in 2017 (Chart 15)
Worldwide Ultra HD TV shipments will see a compound annual growth rate (CAGR) of 160% from 2013 to 2017, soaring from 1.5 million units to 68.2 million, according to Digitimes Research.
Digitimes Research's freshly published Special Report, "The transition to 4K TV - UHD TV market forecast, 2014-2017," estimates that 26.6% of all TVs shipped in 2017 will be UHD models, and in the 55-inch segment, more than 90% of the LCD TVs to be shipped in 2017 will deliver UHD or higher resolutions.
As with other new types of video services, UHD adoption will rely on compatible content and TVs to drive the market, according to Digitimes Research. While the current video industry environment in not ideal for UHD TV, Digitimes Research argues that the expected support of Blu-ray Disc (BD) for UHD content and increased user-created content will help demand take off in 2015. However, it will be active engagement from TV manufacturers that will be the primary driving force of UHD TV growth.
Traditionally, new TV technologies, such as 3D and OLED, have been driven from the top end of the market, in terms of both vendor support and pricing. UHD technology, on the other hand, is being driven by panel makers in mainstream markets by a multitude of vendors, with the China market taking the lead. Based on this, leading global vendors such as Samsung and Sony may be forced to engage in UHD TV price competition earlier than they would like, meaning there is a chance for UHD TV to quickly become widespread in the overall TV market. Digitimes Research forecasts that in 2015 the penetration rate of UHD TVs in the overall TV market will exceed 10% for the first time, with shipments reaching 30 million units.
The Digitimes Research Special Report also looks at opportunities in the UHD TV market from various perspectives, including developing trends in supply chain dynamics and technology trends in the TV SoC and LCD panel industries. In addition, the report provides analysis of the competitive strategies for UHD TV deployment for vendors from South Korea, Japan, China, as well as regional TV vendors.
Source: Digitimes Research, July 2014
Digital Still Camera Decline - IC Suppliers Shift Strategies
Embedded camera apps for automotive, tablets and PCs, phones, security and surveillance keep chip sales alive.
Almost as quickly as they took over, stand-alone digital cameras are now being displaced by camera-equipped cellphones, which have improved significantly in picture-taking quality and, more importantly, can immediately send copies of electronic photos by e-mail or post them on the Internet.
The decline in compact digital still camera shipments accelerated in 2013, causing most suppliers to reduce the number of models being sold to consumers and to focus more efforts on higher-priced digital single-lens reflex (D-SLR) cameras. Sales of D-SLR models are still growing but not by enough to keep the camera business from shrinking. Total digital still camera shipments peaked in 2011 at 143 million units (Figure 1). Worldwide DSC shipments are expected to fall by a CAGR of -10% between 2012 and 2017 compared to an annual average growth rate of just 1% in the 2007-2012 period and nearly 31% per year in the 2002-2007 time frame.
For many years, stand-alone DSC products drove advancements in digital imaging systems—including greater picture resolution in image sensors, more powerful camera processors, and higher density nonvolatile NAND flash memory. But the decline in stand-alone DSC shipments has caused a number of IC suppliers to shift strategies and seek out other expanding markets.
Cellular phones continue to be a major growth application for digital cameras and imaging, but IC Insights predicts high growth rates for several other embedded applications this decade including automotive, tablets and PCs, security and surveillance, and medical/scientific/industrial, which will open high-volume market opportunities for image sensor suppliers and IC makers in the near future.
Chart 16 breaks out IC sales by type of camera application. IC sales for stand-alone digital cameras are projected to decline at an annual average rate of -10.5% in the forecast period, while revenues for integrated circuits used in automotive camera systems are expected to surge by a CAGR of 113.3% between 2012 and 2017. Sales of ICs for tablet and PC cameras are forecast to rise by a CAGR of 20.2% while cellphone camera integrated circuits are expected to rise by an annual rate of 9.0% in the 2012 2017 period.
Semiconductor suppliers stand to benefit from the migration of camera technology into a greater range of applications. The total IC market for all digital camera systems (embedded and stand-alone systems) is expected to reach $29.2 billion in 2017 compared to $23.0 billion in 2012, which represents a CAGR of 4.9%. When stand-alone cameras are excluded from these totals, IC sales for embedded cameras and imaging systems are forecast to grow by a CAGR of 11.9%, reaching $23.9 billion in 2017 compared to $13.6 billion in 2012.
Worldwide IT Spending to Grow 2.1% in 2014 (Chart 17)
Worldwide IT spending is on pace to total $3.7 trillion in 2014, a 2.1% increase from last year, however, this grow rate is down from earlier projections of 3.2% growth, according to the latest forecast by Gartner, Inc. The slower outlook for 2014 is attributed to a reduction in growth expectations for devices, data center systems and to some extent IT services.
“Price pressure based on increased competition, lack of product differentiation and the increased availability of viable alternative solutions has had a dampening effect on the short term IT spending outlook,” said Richard Gordon, managing vice president at Gartner. “However, 2015 through 2018 will see a return to ‘normal’ spending growth levels as pricing and purchasing styles reach a new equilibrium. IT is entering its third phase of development, moving from a focus on technology and processes in the past to a focus in the future on new business models enabled by digitalization.”
Bosch is World's Top Auto MEMS Supplier; Top 10 Account for 90% of Industry Total (Chart 18)
Bosch of Germany was the number one supplier in the world last year of automotive microelectromechanical system (MEMS) sensors, a market in which shipments continue to expand strongly but where revenue was being squeezed by marked price erosion, according to IHS Technology.
With revenue of $740 million, Bosch’s total amounted to more than three times the sales of its nearest competitor, Denso of Japan, which remained in second place, as in 2012. Together the Top 10 accounted for $2.18 billion worth of revenue, as shown in the figure below, equivalent to 88% of the industry total of $2.47 billion. In 2012, the top 10 also had an 88% share in light of combined revenue of $2.12 billion, out of an industry aggregate of $2.40 billion.
“While Bosch was out front and even increasing its lead, other suppliers were much closer together last year in a tightly knit pack,” said Richard Dixon, Ph.D., principal analyst for MEMS and sensors at IHS. “The tighter competition among Bosch’s other rivals is due to Denso and Panasonic declining in dollar terms—while others like Sensata, Analog Devices and Infineon not facing this drawback took advantage of the situation to close the gap.”
Specifically, the decline suffered by Denso and fellow Japanese maker Panasonic was a result of an overall 22% drop in the value of the yen in 2013, which wiped out a large part of their revenue. Similarly affected were other Japanese-based auto MEMS suppliers not in the top 10, such as Epson Toyocom and Fuji Electric.
Overall for the industry, shipments continued to climb in 2013, growing 13%, up from 11% in 2012. Revenue growth, however, was much slower at 3%, pulled down by price erosion for components in safety applications like electronic stability control (ESC) and tire pressure monitoring systems (TPMS). Price erosion is particularly pronounced for multisensors—or so-called combo sensors—used in ESC and now for roll-detection systems, contributing to slower revenue growth.
Worldwide Production Print Market Units Grew 32.1% and Shipment Value Increased 14.4% in 1Q’14 (Charts 19 & 20)
The worldwide production print market enjoyed double-digit year-over-year growth in both units and shipment value during the first quarter of 2014 (1Q14). Units grew 32.1% to approximately 9,300 units (printers and MFPs) and shipment value increased 14.4% to more than $1.1 billion during the quarter, according to the International Data Corporation (IDC).
On a geographic basis, all of IDC's regional markets experienced positive year-over-year unit growth in 1Q14. Key contributors to the production print market's overall growth were Western Europe, where shipments grew 43.6% year over year, Asia/Pacific (excluding Japan) (29.7%), and the United States (18%). Similarly, all of the production print market segments recorded year-over-year gains in 1Q14, including the Mid-Production segment, where shipments were up 37.6% year over year. The Production segment grew 10.9% in the quarter and the label and packaging segment gained 28.4% year-over-year.
"The worldwide production market is on an upswing, as devices targeted at different segments of the market are finding good traction. The Mid-Production space is performing well in both color and monochrome, while Production devices, both toner and inkjet, are selling well as they continue along the offset transfer path and create brand new applications within digital. 2014 is shaping up to be an exciting year, falling in the mid-drupa cycle, and we expect to see lots of new technology introductions come to market that will drive investment," said Amy Machado, Senior Research Analyst, Hardcopy Peripheral Solutions.
Totals include mid-production, production (full production) and label and packaging segments.
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