Updated 2Q’15 Electronic Supply Chain Global Growth
Chart 15 summarizes Custer Consulting Group’s updated estimate of second quarter 2015/2014 growth of key sectors of the electronic supply chain. Non-dollar currencies were converted to U.S. dollars at fluctuating exchange rates. The "currency effect" of the strong dollar was generally to lower growth rates for non-USA and multinational companies with "weaker currency" non-dollar sales.
Source: Company financial reports aggregated by Custer Consulting Group
Markit Economics has released is August PMI data by country. As a general rule Manufacturing PMIs are a good leading indicator for electronic supply chain sales.
- The global PMI dropped to 50.7 (Chart 2). A PMI value of 50 is the divider between growth and contraction. On a world basis the short term growth outlook is minimal. Chart 3 summarizes the August vs. July PMI changes for some key countries.
- U.S. PMIs (Markit & ISM), although still in expansion territory (PMI>50), are at their lowest levels in 2+ years indicating that the rate of domestic expansion has slowed (Chart 4).
- The Eurozone PMI was little changed at 52.3 (Chart 5). Chart 6 shows the July vs. August PMIs for some key European countries.
- Asia/Pacific PMI’s were generally weak. China (Chart 7) was at its lowest level since 2009 and Taiwan was near a 5-year low (Chart 8). S. Korea improved (Chart 9) but still remained in contraction territory (PMI < 50). By contrast Japan is rebounding modestly (Chart 10).
- Chart 11 summarizes Asian PMI performance in August vs. July 2015.
USA July Electronics Shipments, Orders & Inventories
The Department of Commerce released its July "Factory Orders" report, a more detailed version of the "Durable Goods" report released a week earlier.
- Electronic equipment orders remained above shipments as both increased in July (Chart 12).
- Most electronic equipment sectors’ orders grew (Chart 13).
- Vehicle shipments were strong (Chart 14).
- Military electronics orders rebounded (Chart 15).
- Instrument & control equipment bookings dipped in July although in general they have been strong driver of total domestic electronic equipment sales (Chart 16).
- Electronic components (excluding semiconductors) have been outgrowing electronic equipment but their book/bill has now leveled off near 1.0 (Chart 17) as order and shipment growth appears to have peaked on a 3/12 growth basis (Chart 18).
Chart 19 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain. A value of 100 indicates no change versus the same period a year earlier. The 3/12 "leads" the 12/12.
Worldwide Semiconductor Sales Decreased 0.9% y/y to $27.9 Billion in July 2015 (Charts 20-24)
Softening demand, currency devaluation lead to slower sales
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors were $27.9 billion for the month of July 2015, a decrease of 0.9% from July 2014. Global sales from July 2015 were 0.4% lower than the June 2015 total of $28.0 billion. Regionally, sales in the Americas were roughly flat in July compared to last year, while sales in China increased by nearly 6%.
"Global semiconductor sales have slowed somewhat this summer in part due to softening demand, normal market cyclicality, and currency devaluation in some regional markets," said John Neuffer, president and CEO, Semiconductor Industry Association. "Despite these headwinds, year-to-date global sales through July are higher than at the same time last year, which was a record year for semiconductor revenues."
Worldwide Semiconductor Market Forecast Revised to US$343 billion in 2015, up 2.3% from 2014 (Charts 25 & 26)
WSTS has published the Q2 2015 semiconductor market figures and re-calculated the Spring 2015 Forecast using the actual figures of the second quarter 2015.
WSTS anticipates the world semiconductor market to show a moderate growth of 2.3% up to US$343 billion in 2015. All major product categories are forecasted to show positive growth rates. The highest growth rates are expected for the Optoelectronics (14.0%), Sensors (4.3%), and the Analog (4.0%) categories.
By geography, not all regions will grow in 2015. Europe and Japan will show a strong decline in 2015 at the US$ based forecast, which is mainly based on the current FX effect between Euro/USD and Yen/USD.
Semiconductor market growth in 2015 and also the following years is strongly driven by smartphones and automotive applications.
N. American PCB Shipments increased 2.7% in July 2015; Bookings grew 5.8% y/y and Book/Bill Strengthened to 1.09 (Charts 27-29)
IPC announced the July findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Year-over-year sales and order growth continued in July and the book-to-bill ratio strengthened to 1.09.
Total North American PCB shipments increased 2.7% in July 2015 from July 2014. Year-to-date shipment growth remained at -0.3, reflecting the negative growth rates seen earlier this year. Compared to the previous month, PCB shipments were down 14.3%.
PCB bookings grew 5.8% compared to July 2014, increasing year-to-date order growth to 3.9%. Orders were down 20.6% in July compared to the previous month.
"North American PCB sales and orders continued to exceed last year’s levels in July," said Sharon Starr, IPC’s director of market research. "The negative month-to-month growth rates in sales and orders reflect normal seasonal patterns. The best news is the 10-month run of positive book-to-bill ratios," she added, "as this is a good indicator of sales growth in the second half of this year."
Worldwide Semiconductor Equipment Market will grow 3% to US$38.44 billion in 2015 (Charts 30-32)
Semiconductor Equipment and Materials International (SEMI) forecast that the worldwide semiconductor equipment market will grow 3% to US$38.44 billion this year, a downward revision from a mid-July projection of 7.1%.
The association said that Taiwan will remain the world's largest chip equipment spender in 2015, with an estimated spending of US$9.56 billion, lower than an earlier forecast of US$10.89 billion.
SEMI said South Korea will be the world's second-largest chip equipment market, with estimated spending of US$8.13 billion this year, followed by North America's US$6.26 billion, Japan's US$5.29 billion and China's US$4.56 billion.
The association also said it expects the worldwide semiconductor materials market to reach US$46.17 billion in 2015, an increase of 4% from last year.
Despite macroeconomic uncertainties that have affected the near-term outlook for the semiconductor industry, SEMI forecast that the memory chip and foundry sectors will continue to lead semiconductor investment this year and next year.
Worldwide Enterprise Storage Systems Factory Revenue grew 2.1% y/y to $8.8 billion in 2Q’15 (Charts 33-36)
Companies Looking to Cut Cost & Complexity Out of Storage Infrastructure Drive Growth for New Storage Technologies in the Second Quarter,
Total worldwide enterprise storage systems factory revenue grew 2.1% year over year to $8.8 billion during the second quarter of 2015 (2Q’15), according to the International Data Corporation (IDC). Revenue growth was strongest within the group of original design manufacturers that sell directly to hyperscale datacenters. This portion of the market was up 25.8% year over year to $1 billion. Sales of server-based storage were up 10% during the quarter and accounted for $2.1 billion in revenue. External storage systems remained the largest market segment, but the $5.7 billion in sales represented a -3.9% year-over-year decline. Total capacity shipments were up 37% year over year to 30.3 exabytes during the quarter.
"Companies are increasingly using new project initiatives and infrastructure refresh as an opportunity to deploy new storage technologies that are able to drive cost and complexity out of their existing storage resources," said Eric Sheppard, Research Director, IDC Storage. "This is pushing critical investment dollars towards technologies like cloud-based storage, integrated systems, software-defined storage, and flash-optimized storage systems at the expense of traditional external arrays."
South Korea has approximately 1,300 electronics companies in Korea, each with assets of at least 10 billion won (US$8.5 million), combined sales of 328 trillion won (US$278 billion) in 2014
Domestic Electronics Industry Relying on Handful of Manufacturers
Korea's electronics industry is heavily dependent upon a small number of companies, with 10 of them wielding a huge influence, and Samsung Group subsidiaries accounting for more than half of them.
According to the Korea CXO Institute, approximately 1,300 electronics companies in Korea, each with assets of at least 10 billion won (US$8.5 million), recorded combined sales of 328.1104 trillion won (US$278.4739 billion) last year. However, only 10 of them recorded sales of more than 1 trillion won (US$848 million) each during the period. The 10 companies' combined sales were 249 trillion won (US$211 billion), equivalent to 76.2% of the total. They are:
- Samsung Electronics (137.8255 trillion won or US$116.9987 billion)
- LG Electronics (29.5564 trillion won or US$25.0916 billion)
- LG Display (25.3837 trillion won or US$21.5444 billion)
- Samsung Display (24.9806 trillion won or US$21.2015 billion)
- SK Hynix (16.8937 trillion won or US$14.3409 billion)
- LG Innotek (5.8402 trillion won or US$4.9569 billion)
- Samsung Electro-Mechanics (5.1827 trillion won or US$4.3995 billion)
- SKC (1.8992 trillion won or US$1.6122 billion)
- AMCO Technology Korea (1.3465 trillion won or US$1.1428 billion)
- Humax (1.0724 trillion won or US$910.20 million).
Subsidiaries of the Samsung Group took up 56.4% of the total, while those of the LG Group, including LG Siltron and the three mentioned above, accounted for 19% of combined sales. By company size, the number of those with sales of 10 billion won to 50 billion won was 667 (52.2%), and that of those with sales of 50 billion won to 100 billion won was 175 (13.7%), while the number amounted to 1,216 (95.1%) when those with sales of less than 10 billion were taken into account. Still, the 1,216 firms' combined sales were equivalent to merely 9.1% of the total.
The ratios of the companies that recorded 100 billion to 300 billion won, 300 billion to 500 billion won, and 500 billion to 1 trillion won in sales were 10.3%, 2.3%, and 1.7%, respectively.
Flat panel displays accounted for 55.8 trillion won (US$47.4 billion) of the total, and was followed by electronics component manufacturing, which represented 22 trillion won (US$18.7 billion) or so. Broadcasting and wireless equipment manufacturers reached over nine trillion won in combined sales.
SSD Total Capacity Shipped increased 13.3% to 6.4 Exabytes in 2Q’15 (Charts 37 & 38)
SSD shipments continued growth despite shrinking PC market
TRENDFOCUS recently published its updated Quarterly NAND/SSD report covering the NAND & SSD industries’ performance in 2Q’15.
In the SSD market, unit shipments increased, despite that a good portion of the volume is tied to a weak notebook PC market. The two main factors contributing to the slight 2.9% Q-Q rise was the increase in DFF (drive form factor) client SSDs in the channel market, as well as an uptick in datacenter demand for SATA SSDs, driving a total of 23.859 million units. Total SSD capacity shipped increased by 13.3% Q-Q to 6.4 exabytes, with the overall average capacity increasing to 268 GB. Despite the rise in overall unit shipments, client modules declined, reflecting the continued slow demand for notebook PCs.