JEITA recently released September production statistics for domestically made electronic equipment and components:
- Based on the Japan Purchasing Managers Index manufacturing activity improved in October (Chart 1).
- Although local production has declined substantially since CY2000 (Chart 2) most of the Japanese domestic electronic supply chain experienced positive growth in 3Q’15 versus 3Q’14 (Chart 3).
- PCB production has been slowly increasing over the last two years (Chart 4).
Eurostat released its September production data by product for the European electronic supply chain:
- Europe’s PMI leading indicator climbed further into growth territory (PMI>50) in October (Chart 5).
- September industrial production declined slightly led by Germany (Chart 6).
- Electronic equipment production rose to its highest level since mid-2008 (Chart 7).
- Motor vehicle production rebounded from August to near an all-time high (Chart 8).
- Aerospace production reached a historical high in September (Chart 9).
- Instruments and Appliances for Measuring, Testing and Navigation also achieved a historical high (Chart 10).
- Electronic assembly activity increased (Chart 11) as did component and board production (Chart 12) while PCB output appears to have flattened (Chart 13).
Chart 14 summarizes 3Q’15 versus 3Q’14 growth for the European electronic supply chain.
3Q’15 Smartphone Market Stronger than Previously Reported
Based on the Gartner article below 3Q’15 smartphone shipments increased over 15% (rather than less than 10% reported by other sources). We have therefore updated Chart 15.
Source: Custer Consulting Group comment
Worldwide Smartphone Sales Increased 15.5% y/y to 353 million units in 3Q’15 (Charts 16-20)
Huawei Recorded Highest Growth in Mobile Phone and Smartphone Sales in Third Quarter of 2015
Continued demand for affordable smartphones in emerging markets drove worldwide sales of smartphones in the third quarter of 2015, according to Gartner, Inc. Global sales of smartphones to end users totaled 353 million units, a 15.5% growth over the same period in 2014.
"The availability of affordable smartphones in emerging markets saw consumers upgrade their 'feature phones' to smartphones more quickly because of the small price gap," said Anshul Gupta, research director at Gartner. "Smartphone sales in emerging markets rose to 259.7 million in the third quarter of 2015 − an 18.4% growth over the third quarter of 2014 − while sales in mature markets saw growth of just 8.2% over the same period."
In the third quarter of 2015, Samsung refreshed its flagship devices just four months after its previous refresh to address slowing demand for its high-end devices, and further compete with Apple's large-screen iPhones. Apple continued its dominance in the premium segment of the smartphone market with its iPhone 6 and 6 Plus models for most of the third quarter of 2015. The global launch of the iPhone 6s and 6s Plus during the last week of September 2015, along with the simultaneous launch in China, further added to its overall sales during the quarter. Huawei continued its growth momentum, driven by smartphone sales in both its home market and global markets, particularly Europe, where sales were driven by its ever-growing brand visibility.
European Semiconductor Distribution Sales in Q3/CY15 grew by 17.9% y/y to 1.86 Billion Euro (Charts 21 & 22)
European Semiconductor Distribution Market (DMASS) Maintains Healthy Growth
Exchange rate plays major role in further upswing. Germany recovery. Design
products win again.
Components distribution seems to be amazingly robust throughout 2015. According to DMASS (Distributors' and Manufacturers' Association of Semiconductor Specialists), semiconductor distribution sales in Q3/CY15 grew by 17.9% to 1.86 billion euro compared to Q3/CY14. This is close to record sales in Q2/CY15, all the more surprising as the summer quarter normally shows a sequential decline, due to seasonality.
Again, exchange rate effects between US dollar and euro had their influence, but a significant portion of the growth remains organic, as at the same time volume sales grew double digit.
Georg Steinberger, chairman of DMASS: "This will become a record year for DMASS, breaking the 7-billion-euro mark for sure. Even though the exchange rate effects will disappear soon, European semiconductor distributors will continue to grow, albeit at a slower pace. We certainly will remain mindful of potential macro-effects like China, the refugee crisis or the shakeup in the automotive industry, which could easily affect further market development."
From a regional view, the massive growth in almost all of Eastern Europe drove a huge portion of DMASS' overall growth in Q3/CY15: Eastern Europe (excluding Russia) grew by a staggering 37.6% to 244 Million Euro. The UK market increased by 17.4% to 158 million euros, the same level as Italy, which grew by 16.8%. While Germany climbed double digit (15.8%) to 593 million euro, the French market grew by 10% to 135 million euro. Demand in Scandinavia seems to have weakened slightly compared to an outstanding first half. Sales grew by 12.5% to 165 million euro, Sweden being by far the largest slice of the pie.
Georg Steinberger: "Same story as in Q2: the numbers are highly influenced by different invoicing trends per region (in Dollars instead of Euros) and like in Scandinavia and Eastern Europe by huge growth in the supply chain sector. As the Euro/Dollar comparison will become less in Q4, growth rates should normalize accordingly."
From a product perspective, the focus was clearly on design products like Analog, MOS Micro and Digital Logic (Other Logic) in general. With 540 Million Euro, Analog components as the major product group came in right at the DMASS average growth of 17.9%; MOS Micro Logic (Microprocessors,
Microcontrollers and DSPs) grew by 21.5% to 394 Million Euro; Other Logic (ASSPs, ASICs and other complex logic devices) increased by 32.1% to 95 Million Euro. Also above average: Sensors (22.4% to 43 Million Euro; Memories 25.1% to 150 Million Euro. Optoelectronics grew slightly below average (16% to 193 Million Euro), however, LEDs as the lion's share of Opto, grew over-proportionally. Discrete, Standard Logic and Programmable Logic all ended the quarter with increases between 10 and 14.5%.
Georg Steinberger: "I can almost repeat my statement from Q2 - the music in distribution plays at the sweet spots like Analog, Micros, Other Logic and high end LEDs, which account for over 60% of the total DMASS sales. A clear sign that demand creation is not just a buzzword, but a viable value proposition. It would be desirable that the market recognizes this with a fairer market value for the design support investments in distribution."
DMASS continues to report to members only on Passive Components, Electromechanical Components and Power Supplies, the latest statistics addition to DMASS Ltd. It is expected to have numbers reportable to the market by 2016.
North American Semiconductor Equipment Industry Posts October 2015 Book-to-Bill Ratio of 0.98 (Charts 23 & 24)
North America-based manufacturers of semiconductor equipment posted $1.33 billion in orders worldwide in October 2015 (three-month average basis) and a book-to-bill ratio of 0.98, according to the October EMDS Book-to-Bill Report published today by SEMI.
SEMI reports that the three-month average of worldwide bookings in October 2015 was $1.33 billion. The bookings figure is 14.7% lower than the final September 2015 level of $1.55 billion, and is 20.3% higher than the October 2014 order level of $1.10 billion.
The three-month average of worldwide billings in October 2015 was $1.36 billion. The billings figure is 9.1% lower than the final September 2015 level of $1.50 billion, and is 14.7% higher than the October 2014 billings level of $1.18 billion.
"Both bookings and billings weakened for the second consecutive month; however, year-to-date bookings and billings levels remain above last year's levels," said Denny McGuirk, president and CEO of SEMI. "SEMI will update its 2016 equipment outlook during SEMICON Japan next month."
Worldwide Silicon Wafer Area Shipments Decreased 4.1% q/q to 2,591 million square inches during 3Q’15 (Chart 25)
Worldwide silicon wafer area shipments decreased during the third quarter 2015 when compared to second quarter area shipments according to the SEMI Silicon Manufacturers Group (SMG) in its quarterly analysis of the silicon wafer industry.
Total silicon wafer area shipments were 2,591 million square inches during the most recent quarter, a 4.1% decrease from the record amount of 2,702 million square inches shipped during the previous quarter. New quarterly total area shipments were flat when compared to third quarter 2014 shipments.
"After two consecutive record breaking quarters, quarterly silicon shipment growth slightly declined,” said Ginji Yada, chairman of SEMI SMG and general manager, International Sales and Marketing Department of SUMCO Corporation. “Quarterly shipments for the most recent quarter are on par with the same quarter as last year, with total silicon shipment volumes for 2015 through the end of the third quarter higher relative to the same period last year.”
Top 20 Semiconductor Supplier Ranking (Chart 26)
Strong U.S. dollar expected to shave four percentage points off of top-20 growth rate in 2015.
IC Insights will release its November Update to the 2015 McClean Report later this month, and its new 2016 edition of The McClean Report in January. The November Update will include the latest IC market forecasts by product type through 2019, a detailed forecast for semiconductor industry capital spending by company for 2016, and a ranking of the top-25 semiconductor suppliers’ forecast for 2015 (the forecasted top-20 2015 semiconductor suppliers are covered in this research bulletin).
Since all of IC Insights’ figures are presented in U.S. dollars, a strengthening U.S. currency deflates foreign sales and market results while a weakening U.S. dollar serves to inflate the sales and market figures. Thus, the rare occurrence of significant strengthening of the U.S. dollar versus the four major currencies shown below are expected to deflate the combined 2015 semiconductor sales growth rate of the top 20 suppliers by four percentage points. Moreover, the strong U.S. dollar is forecast to lower the total worldwide semiconductor market growth rate by three percentage points to -1% this year.
This currency “deflation” effect presents itself in the form of lower semiconductor average selling prices (ASPs), which are forecast to register a 3% decline this year. The continuing strength of the U.S. dollar throughout 2015 is one of the reasons IC Insights lowered its IC market forecast for this year from +1% to its current -1% expectation.
The forecasted top-20 worldwide semiconductor (IC and O S D—optoelectronic, sensor, and discrete) sales ranking for 2015 is depicted in Chart 26. As shown, it is expected to take just over $4.4 billion in sales just to make it into the 2015 top-20 ranking and seven of the top-20 companies are forecast to have 2015 sales of at least $12.0 billion. The ranking includes eight suppliers headquartered in the U.S., three in Japan, three in Taiwan, three in Europe, two in South Korea, and one in Singapore. The top-20 supplier list includes three pure-play foundries (TSMC, GlobalFoundries, and UMC) and five fabless companies. If the three pure-play foundries were excluded from the ranking, Japan-based Sharp would be ranked 18th,
U.S.-based AMD 19th, and China-based fabless supplier HiSilicon 20th.
Worldwide Connected Things will grow 30% y/y to 6.4 billion in 2016 (Charts 27 & 28)
Gartner has said it forecasts that 6.4 billion connected things will be in use worldwide in 2016, up 30% from 2015, and will reach 20.8 billion by 2020. In 2016, 5.5 million new things will get connected every day.
The Internet of Things (IoT) will support total services spending of US$235 billion in 2016, up 22% from 2015. Services are dominated by the professional category (in which businesses contract with external providers in order to design, install and operate IoT systems), however connectivity services (through communications service providers) and consumer services will grow at a faster pace, said Gartner.
"IoT services are the real driver of value in IoT, and increasing attention is being focused on new services by end-user organizations and vendors," said Jim Tully, analyst at Gartner.
"Aside from connected cars, consumer uses will continue to account for the greatest number of connected things, while enterprise will account for the largest spending," said Tully. Gartner estimates that four billion connected things will be in use in the consumer sector in 2016, and will reach 13.5 billion in 2020
In terms of hardware spending, consumer applications will amount to US$546 billion in 2016, while the use of connected things in the enterprise will drive US$868 billion in 2016.
In the enterprise segment, Gartner considers two classes of connected things. The first class consists of generic or cross-industry devices that are used in multiple industries, and vertical-specific devices that are found in particular industries.
Cross-industry devices include connected light bulbs, HVAC and building management systems that are mainly deployed for purposes of cost saving. The second class includes vertical-specific devices, such as specialized equipment used in hospital operating theaters, tracking devices in container ships, and many others.
"Connected things for specialized use are currently the largest category; however, this is quickly changing with the increased use of generic devices. By 2020, cross-industry devices will dominate the number of connected things used in the enterprise," said Tully.
Worldwide Personal and Entry-level Storage Shipments declined 13.4% y/y to 16.7 million units in 3Q’15 (Charts 29 & 30)
Worldwide personal and entry-level storage (PELS) shipments declined − 13.4% year over year to 16.7 million units in the third quarter of 2015 (3Q’15), but were up 10.3% compared to the previous quarter, according to the International Data Corporation (IDC ) Worldwide Personal and Entry − Level Storage Tracker. Shipment values declined along with unit shipments,
down − 19.8% from a year ago to $1.3 billion.
The personal and entry-level storage market was stagnant in 2014 and started to show signs of decline in 2015, said Jingwen Li, Senior Research Analyst, Storage Systems. The adoption of cloud storage has been gaining traction in the consumer space with its easy data access and mobile device integration. One of the negative impacts of cloud storage deployment leads to shrinking demand within the PELS market.
Global DRAM Revenue Dropped 1.2% in Q3 as Mobile Application Took Greater Share of Total Shipments (Charts 31-33)
The average selling price of DRAM continues to decline due to market oversupply. However, manufacturers are reallocating production capacity from PC DRAM – which has experienced the greatest price decline – to server DRAM and mobile DRAM as the latter two application markets are seeing more stable prices and higher margins. This strategy, along with continuing bit supply growth, prevented the global DRAM industry from suffering a significant revenue loss in the third quarter. Quarterly revenue decline was only 1.2% based on the latest analysis from DRAMeXchange, a division of TrendForce. Moreover, the share of mobile DRAM in the total revenue expanded greatly from 33.7% in the second quarter to 40% in the third quarter.
Avril Wu, DRAMeXchange assistant vice president, said the share of mobile application in the overall DRAM production will increase corresponding to the growth of smartphone shipments in the fourth quarter. However, the market will be affected by negative seasonal headwinds in the following period. Manufacturers also will increase the bit supply by producing on the 20/21nm processes. Thus, the oversupply problem will worsen and DRAM prices will continue to decline in the near future.
Dominant suppliers are pushing their costs down, aggravating the supply-demand imbalance and keeping margins low
The two Korean memory makers’ operating margins did not change much in the third quarter – Samsung’s was 47% and SK Hynix’s was 36%. Micron’s operating margin, on the other hand, dropped notably from 21% in the second quarter to 15% in the third quarter. As for market share, Samsung remained in the lead with 47%, while SK Hynix came in second with 28%. Micron took roughly 19% of the market.
Wu noted that Samsung’s 20nm production in the third quarter not only included PC and server products but LPDDR4 mobile DRAM as well. By becoming the first manufacturers to supply LPDDR4 made on the 20nm process, Samsung will have significant cost advantage as the market is experiencing falling prices.
SK Hynix has already sent 21nm samples its clients and mass production is expected to begin in the first or second quarter of next year. The 21nm will likely make a major contribution to the manufacturer’s overall production.
Micron is the furthest behind in technology as its 20nm process is making small batches of server DRAM and samples of PC DRAM (which will later be verified by clients).
NAND Flash Revenue Growth Slowed in Third Quarter as Prices Showed Steep Decline (Chart 34)
The latest report from DRAMeXchange, a division of TrendForce, finds that NAND flash prices fell rapidly in the third quarter, resulting in a mere 2.4% quarterly increase in the global NAND Flash revenue. Sean Yang, assistant vice president of DRAMeXchange, said demand was uncharacteristically weak in the third quarter and did not adhere to the seasonal pattern. NAND Flash end demand was below expectations due to macroeconomic factor. This resulted in oversupply and sharp price decline in the NAND Flash market, putting heavy pressures on NAND Flash suppliers’ revenue growth and margins. DRAMeXchange expects the suppliers’ revenue situation to remain difficult during the fourth quarter because of the persisting oversupply problem.