July U.S. Electronics Shipments, Orders and Inventories
The U.S. Department of Commerce released its July "Durable Goods" report with its preliminary estimates of shipments, orders and inventories.
- Electronic equipment book/bill rose slightly to 1.032 (Chart 1).
- Electronic equipment order and shipment growth remained in low single digits (Chart 2) however orders improved in July (Chart 3).
- Inventories relative to shipments declined (Chart 4).
- Communication equipment orders increased (Chart 5) but computer orders declined (Chart 6).
- Total aircraft and parts shipments held steady as a decline in non-defense was offset by an increase in defense aircraft shipments (Chart 7). Orders weakened slightly (Chart 8).
- Semiconductor shipment growth to North America is almost in balance with U.S. electronic equipment growth however based on their current trajectory North American semiconductor shipments appear headed for a negative correction (Chart 9).
IC Orders for Notebooks Picking up in 3Q’15
IC orders for notebooks are picking up in the third quarter, and the outlook is more positive for notebook replacement demand in the second half of 2015.
European Semiconductor Distribution Market (DMASS) Continues on Double-Digit Growth Path (Charts 10 & 11)
Dollar swing against euro drives growth across Europe. Germany trails. Russian market loses due to sanctions. Commodities weak, design products up.
2015 proves to be a very dynamic year for the European semiconductor distribution industry. After a strong double-digit start in Q1, the second quarter continued the upward trend. According to DMASS (Distributors’ and Manufacturers’ Association of Semiconductor Specialists), semiconductor distribution sales in Q2/CY15 grew by 16% to 1.86 billion euro, another record quarter in the history of DMASS.
A significant part of the increase is again coming from a euro/US-dollar swing – a 20% lower Euro drove price increases, accumulated exchange rate effect of other currencies versus the Euro and a higher valuation of transaction performed in US dollars.
Georg Steinberger, chairman of DMASS, commented: "Although 16% sounds like a healthy increase, we have to keep in mind that not all of it comes from higher demand or organic growth opportunities, but from financial effects. We will see this effect weaken over the course of the year. Halfway through 2015, it seems clear that European distribution will enjoy a double-digit growth across the entire year, provided no massive macro effect will drive the second half into the corner. It remains to be seen how the European export is affected by the weakening of the Chinese expansion."
Regionally, all countries or major regions except Germany and Russia enjoyed the continued upswing, led by Israel (48%), Turkey (33%) the Nordic Region (31%) and Eastern Europe (29.5%) The major regions meandered around the average growth: UK grew by 17% to 153 million euro, France by 18.3% to 145 million euro, Italy by 13.6% to 183 million euro, Nordic by 31% to 185 million and Eastern Europe by over 29% to 238 million euro. Germany, by far the largest region, only reported a 5.9% growth to 546 million euro. Russia was the only country to report negative numbers, all due to embargo situation.
Georg Steinberger, "We have seen the currency effects playing out differently throughout the regions, with Italy and Germany obviously affected most by the weaker euro. This will most probably balance out toward the end of 2015, when the difference between euro and dollar will become less of an issue."
On the product side, there was a clear trend toward more complex components and lower growth of many commodity products (although also distorted by the currency swing): With 41%, Other Logic grew fastest to nearly 100 million euro, followed by Programmable Logic (26% to 150 million euro). Memories grew 16.3% to 143 million euro, Discretes by 17.1% to 105 million euro, Sensors by 17.6% to 41 million euro, Analog by 15.3% to 543 million euro and Optoelectronics by 15% to 191 million euro. Below the quarter average: MOS Micro (13.9% to 384 million euro), Standard Logic (8.7% to 32 million euro) and Power (5.3% to 171 million euro).
Georg Steinberger, "In a nutshell, there is a clear difference between high end products and most of the commodities. While standard products lacked in dynamics, the higher end logic, programmable products and MOS Micro products certainly thrived. When the currency effects subside towards the end of 2015, we may again see meaningful organic growth numbers at product level."
Worldwide Wearables Market Grew 223.2% y/y to 18.1 Million Units in 2Q’15 (Charts 12 & 13)
Apple Debuts at the Number Two Spot
In its first appearance in the wearables market, Apple finds itself within striking distance of the established market leader, Fitbit. According to IDC, Apple shipped a total of 3.6 million units in 2Q’15, just 0.8 million units behind Fitbit's 4.4 million units. Total shipment volume for the quarter came to 18.1 million units, up 223.2% from the 5.6 million units shipped in 2Q’14.
U.S. 2Q’15 GDP growth Revised Up to 3.7% (Chart 14)
U.S. Gross domestic product expanded at a 3.7% annual rate instead of the 2.3% rate reported last month, the Commerce Department stated.
Smartphone Growth Expected to Slow to 10.4% in 2015; Down From 27.5% Growth in 2014 (Charts 15-18)
According to a new mobile phone forecast from the International Data Corporation, smartphone shipments are expected to grow 10.4% in 2015 to 1.44 billion units. This is lower than IDC’s previous smartphone forecast of 11.3% year-over-year growth in 2015. IDC expects to see a noticeable slowdown in smartphone shipments in 2015 as China joins North America and Western Europe in a more mature growth pattern. However, steadily falling average selling prices (ASPs) will fuel steady growth through the end of the forecast period, with global shipments reaching 1.9 billion units in 2019.
"China clearly remains a very important market. However, the focus will be more on exports than consumption as domestic growth slows significantly."
China remains the focal point of the global smartphone market in 2015, although the results haven't been as positive as in previous years. As the largest market for smartphones – China consumed 32.3% of all new smartphone shipments in 2014 – its importance remains great even if its growth has begun to slow. Shipments are forecast to grow just 1.2% year-over-year in 2015, which is down from 19.7% in 2014. China will remain the largest market for smartphone volumes throughout the forecast period. However, its share of the overall market is expected to drop to 23.1% in 2019 as high-growth markets like India continue to expand.
On the device front, phablets (smartphones with 5.5"-7" screens) will continue to drive shipment volumes in both emerging and developed markets. "Since Apple finally delivered a larger screen smartphone with the iPhone 6+, the demand for large screened devices among consumers has been at a record high," said Anthony Scarsella, Research Manager with IDC’s Mobile Phones team.
Worldwide WLAN Market Segments Decreased 5.3% y/y in 2Q’15 (Charts 19-21)
Enterprise WLAN Market Grew 1.4% Year-over-Year in Second Quarter of 2015
The combined consumer and enterprise worldwide wireless local area network (WLAN) market segments decreased 5.3% year-over-year in the second quarter of 2015 (2Q’15). According to the preliminary results published by International Data Corporation (IDC), the enterprise segment's growth continued to slow compared to preceding quarters, increasing just 1.4% over the same period last year. After several quarters of high single-digit growth rates, the enterprise WLAN market growth rate has fallen to the lowest level seen in years due to the confluence of two factors: a hold on new WLAN projects due to the uncertain short-term trajectory of the global economy and market anticipation of Wave 2 802.11ac.
Meanwhile, the consumer WLAN market decreased 12.9% year over year in 2Q’15. This marks two consecutive quarters of year-over-year decline for this segment of the market. While the transition to the 802.11ac standard had been a driver for consumer WLAN, it was not enough to counter overall softness in the segment. Worldwide consumer 802.11ac WLAN revenues grew 67.6% year-over-year in 2Q’15, which is less than half of the growth rate seen in 1Q’15.
Key Enterprise WLAN Vendor Updates
- Cisco's 2Q’15 worldwide enterprise WLAN revenue grew 2.8% year over year, similar to the previous quarter. Cisco saw its revenue increase 11.7% sequentially. Cisco’s worldwide market share came in at 47.4% in 2Q’15, down from the 47.8% seen in 1Q’15, but up from 46.8% in 2Q’14. IDC believes that the Meraki cloud-managed WLAN portfolio remains one of the primary growth drivers for Cisco.
- Aruba (excluding its OEM business) had a healthy 2Q’15, increasing 15.4% year-over-year and 8.0% sequentially. Aruba’s market share came in at 13.4% in 2Q’15 compared to 13.9% in 1Q’15 and 11.7% in 2Q’14.
- Ruckus again performed better than the overall market in 2Q’15, growing 12.7% year-over-year and 12.9% quarter over quarter. Ruckus currently accounts for 6.9% of the overall market, up from 6.2% in 2Q’14.
- HP Networking (excluding Aruba) continues to struggle as it declined -15.3% year-over-year, while growing 15.7% sequentially. Customer uncertainty around HP WLAN given the Aruba acquisition may be playing into this decline. HP’s market share stands at 3.7% compared to 4.5% for 2Q’14.
Worldwide Ethernet Switch Market Increased 1.0% Year-over-Year in Second Quarter of 2015
The worldwide Ethernet switch market (Layer 2/3) produced revenues of $5.8 billion in the second quarter of 2015 (2Q’15), an increase of 1.0% year over year and an increase of 7.6% quarter over quarter. Meanwhile, the worldwide total enterprise and service provider router market continued to rebound from recent year-over-year declines, growing revenues 11.5% year-over-year in 2Q’15 and also growing 11.5% sequentially. These growth rates are according to preliminary results published in the International Data Corporation.
PC Shipments Expected to Shrink Through 2016 as Currency Devaluations and Inventory Constraints Worsens Outlook (Chart 22)
Worldwide PC shipments are expected to fall by 8.7% in 2015 and not stabilize until 2017, according to the International Data Corporation. The latest forecast has growth declining through 2016 – which will make five years of declining shipments. Growth should resume in 2017, led by the commercial market, while consumer volume continues a small decline through the end of the forecast in 2019.
Although IDC had expected the second quarter of 2015 to be a transition period as vendors prepare for Windows 10 systems in the second half of the year, final results nonetheless shrank even more than expected due to a stubbornly large inventory of notebooks from prior quarters and severe constraints posed by the decline of major currencies relative to the US dollar.
In addition to economic issues, free upgrades of Windows 10, a relative dearth of newer models in the short term, and channels that are reluctant to take stock also makes the prospect of growth unlikely through 2016. Perhaps as a further sign of a broader pullback, mobile devices can no longer be the sole culprit for PCs demise. Except for smartphones, which are still growing, the combined volume of PCs, tablets, and smartphones is expected to grow only in the single digits from 2015 through 2019 as saturation and "good enough computing" sentiments spread even into tablets, which are expected to see further volume decline in 2015.
Looking beyond the near term, IDC remains optimistic a modest recovery should come in 2017, when the prospect of the next refresh cycle and the cessation of a free Windows 10 upgrade should provide opportunities in notebooks and commercial segments. In emerging regions, where consumer budgets have been divided across a myriad of devices, PC purchases are also expected to regain some interest.
Worldwide Server Shipments Grew 8% in 2Q’05, While Revenue Increased 7.2% (Charts 23-26)
In the second quarter of 2015, worldwide server shipments grew 8.0% year-over-year, while revenue increased 7.2% from the second quarter of 2014, according to Gartner, Inc.
"The second quarter year-over-year growth for 2015 slowed compared with the annual growth of the first quarter of the year," said Jeffrey Hewitt, research vice president at Gartner. "Currency exchange rate changes have started to show their impact by reducing relative spending power in regions like Western Europe. It is likely that in anticipation of further currency rate shifts that some organizations utilized their budgets earlier in the year rather than waiting until the third or fourth quarters when their purchasing power may be further reduced by these relative currency."
Worldwide Tablet Shipments, inclusive of 2-in-1 Devices to Decline 8.0% y/y to 212 Million Units in 2015; while 2-in-1 Devices will grow 86.5% y/y to 14.7 Million Units (Chart 27)
According to a new forecast from IDC, tablet shipments, inclusive of 2-in-1 devices, are expected to decline 8.0% in 2015, representing a notable slowdown from IDC’s previous forecast of -3.8%. Shipments are now expected to reach 212 million with the vast majority being pure slate tablets.
The overall trajectory of the tablet market has not changed significantly over the past year and a half, but the 2-in-1 segment, also referred to as detachables, is starting to gain traction. While the 2-in-1 form factor is not new, OEMs are getting more serious about this market and as a result IDC expects the 2-in-1 segment to grow 86.5% year-over-year in 2015 with 14.7 million units shipped. Although this volume is far below that of the more affordable slate tablet segment, IDC believes these devices appeal to an audience seeking an alternative to pure tablets with smaller screens.
Worldwide Large Format Printer Shipments Show a Small Increase in the Second Quarter of 2015 (Charts 28 & 29)
According to IDC large format printer shipments increased 1.3% from 2Q’14 to 2Q’15 while revenue was flat.
"The second quarter is often the slowest quarter of the calendar year for wide format printer shipments overall, but shipments are still ahead of pace in 2015 versus 2014. The market in North America was very strong in Q2, which offset declines in the EMEA region," said Phuong Hang, Program Director, Worldwide Large Format Printer Tracker.
"We're seeing the continued shift toward UV-curable inkjet, toward dye-sublimation, and toward Latex, with nice growth across all three technologies," added Tim Greene, Research Director, Hardcopy Solutions at IDC. "These technologies are where more print service providers are investing based on the new and enhanced capabilities they offer to customers."