Taiwan/China Update

Last week we published estimates of August composite revenues of Taiwan-listed companies, many of which manufacture in China. As the balance of the companies reported their consolidated results became a bit better. The August ramp up of Apple’s iPhone 7 no doubt helped. Here are the updated results with all companies reporting:

  • Electronic equipment sales in August 2016 were up 2.5% compared to August 2015 and up sequentially 8.7% compared to July 2016 (Chart 1).
  • ODM revenues in August 2016 were up 3.6%% vs. August 2015 and up 7.9% sequentially from July 2016 (Chart 2).
  • Wafer foundry sales reached a record high (Chart 3).
  • Passive component, printed wiring board and CCL (rigid PCB laminate) revenues all rose sharply (Chart 4 & 5).
  • Solar/Photovoltaic revenues continued their decline which began in early 2016 (Chart 6).
  • Source: Monthly financial reports of Taiwan-listed companies

2Q’16 Semiconductor Equipment Billings by Major Country (Charts 7 & 8)

SEMI reported that worldwide semiconductor manufacturing equipment billings reached US$10.5 billion in the second quarter of 2016, 26% higher than the first quarter of 2016 and 11% higher than the same quarter a year ago.

Worldwide semiconductor equipment bookings were $11.9 billion in the second quarter of 2016, 17% higher than the same quarter a year ago and 27 percent higher than the bookings figure for the first quarter of 2016.

The quarterly billings data by region in billions of U.S. dollars, quarter-over-quarter growth and year-over-year rates by region are as follows:

Source: www.semi.org

North America-based SEMI Equipment Manufacturers August Book/Bill = 1.03 (Charts 9 & 10)

North America-based manufacturers of semiconductor equipment posted $1.75 billion in orders worldwide in August 2016 (3-month average basis) and a book-to-bill ratio of 1.03, according to SEMI.

SEMI reported that the 3-month average of worldwide bookings in August 2016 was $1.75 billion, 2.3% lower than July 2016 and 5.0% higher than August 2015.

The 3-month average of worldwide billings in August 2016 was $1.71 billion, approximately the same as July 2016 and 8.4% higher than August 2015.

“The book-to-bill ratio has been at or above parity since December of last year with current monthly bookings and billings levels at $1.7 billion,” said Denny McGuirk, president and CEO of SEMI. “Given the current data trends, North American equipment suppliers are clearly benefiting from strong investments by device manufacturers in the second half of the year.”

Source: www.semi.org

IC Market Share by Region in 2016 (Charts 11-15)

  • Asia-Pacific's IC sales market share is forecast to strengthen to 61.0% ($172 billion) of total global $282.0 billion market in 2016 and to 62.3% of total market in 2019\
  • Government/Military only end-use segment where Asia-Pacific does not have top IC market share.

Asia-Pacific’s grip as the dominant market for IC sales is forecast to strengthen in 2016 with the region expected to account for 61.0% of the $282.0 billion IC market this year, based on analysis published in IC Insights’ mid-year Update to the 2016 IC Market Drivers report. The forecast calls for another small gain in total IC market share in 2016 after Asia-Pacific held 57.7% share in 2013, 58.4% in 2014, and 60.5% in 2015. The Asia-Pacific region is particularly dominant with regard to IC market share in the communications and computer categories, and to a lesser extent in the consumer and industrial categories.

In 2016, IC Insights expects the Asia-Pacific region to surpass Europe and become the largest region for automotive ICs for the first time, as China continues to account for a large and growing portion of new car shipments. That will leave only the Government/Military end use segment where Asia-Pacific does not have top IC market share – a condition that is forecast to hold through 2019.

IC Insights’ Update to the IC Market Drivers 2016 report forecasts total IC usage by system type through the year 2019. Highlights from the forecast include the following items.

  • The Asia-Pacific region is forecast to increase its share of the IC market to 62.3% in 2019, from 61.0% forecast for 2016. Over the same time, North America is also forecast to increase market share to 23.8%. Conversely, Europe and Japan are expected to lose IC market share through 2019. Japan’s IC market share is forecast to slip to 5.5% and Europe is forecast to slide to 8.3% in 2019.
  • The two fastest growing end-use markets for ICs through 2019 are forecast to be the automotive and industrial/medical segments, having 2015-2019 CAGRs of 8.0% and 7.1%, respectively. Though having the greatest CAGR through 2019, the automotive IC market is not expected to account for more than 8.0% of total IC sales any time through the forecast period.
  • After slumping to only $10.6 billion in 2009, the automotive IC market is forecast to reach nearly 3x that amount ($28.0 billion) in 2019.
  • The two largest end-use markets (computer and communications) are forecast to account for 73.7% of the total IC market in 2019, almost the same as the 73.9% share they are forecast to hold in 2016.
  • In 2016, analog ICs are forecast to account for the greatest share of IC sales within the automotive (45%) and industrial (50%) segments; logic devices are expected to account for the greatest share of IC sales in communications (41%), consumer (41%), and government/military (32%) applications, and microprocessors are forecast to account for the greatest share (42%) of IC sales in the computer segment.

Source: www.ICInsights.com

Worldwide Server Revenue declined 0.8% y/y to $13.5 billion in 2Q’16, while Shipments increased 2% y/y 2.76 million (Charts 16-19)

  • Dell Moved Into Number One Position in Shipments
  • HPE Maintained Number One Spot in Revenue

In the second quarter of 2016, worldwide server revenue declined 0.8% year-over-year, while shipments grew two percent from the second quarter of 2015, according to Gartner, Inc. There was some shuffling among the top vendors in the second quarter, as Dell moved into the top spot in shipments, while Hewlett Packard Enterprise (HPE) remained the worldwide leader in server revenue.

Source: www.gartner.com

Gradual Stabilization of NAND Flash Market with Global Revenue Rising 3.4% Sequentially in 2Q’16 (Chart 20)

In the second quarter of 2016, demand for high-capacity eMMC/eMCP from Chinese smartphone brands and the stock-up activities ahead of the iPhone 7 release caused a gradual tightening of NAND Flash supply. The decline in contract prices for eMMC and SSDs of both client and enterprise grade also started to ease during the same period, according to the latest report from DRAMeXchange, a division of TrendForce. Channel prices of NAND Flash wafers have even begun to rise on a monthly basis since April. Consequently, the combined global revenue of branded NAND Flash suppliers increased 3.4% sequentially in the second quarter. This result signaled the end of revenue decline that persisted in the past two consecutive quarters.

Sean Yang, research director of DRAMeXchange, expects a profitable third and fourth quarter as the peak season takes hold: “Demand is rising sharply for smartphones and client-grade SSDs in this year’s second half, so NAND Flash supply is going to become increasingly tight in the third quarter. As NAND Flash prices go steadily upward, DRAMeXchange expects suppliers to post further growths for their revenues and operating margins in the third quarter. Sequential revenue and operating margin increases are also forecast for the fourth quarter.”

Source: www.DRAMeXchange.com

Automotive Advanced Driver Assistance Systems Electronics (Chart 21)

  • Forecasted to grow at almost 13% CAGR from $3 billion in 2015 to $7 billion in 2022
  • Continental, Bosch lead ADAS vendor share ranking

According to Semicast Research, Continental was the leading vendor of electronics for automotive ADAS in 2015, ahead of Bosch and Autoliv. Collectively the top ten vendors accounted for almost ninety percent of the ADAS market.

Semicast defines ADAS to include autonomous park assist, intelligent cruise control, integrated front safety, blind spot monitoring, night vision assist and head-up display. ADAS includes the “sense and see” electronics necessary to provide the intelligence to partially or fully automate driving functions such as braking, parking and steering; ADAS takes data from sensors positioned around the vehicle, including camera, IR, lidar, radar and ultrasonic, to determine the vehicle's environment and potential hazards and obstructions around it.

Using this definition, Semicast estimates that revenues for ADAS electronics are forecast to grow to around $7 billion in 2022, from $3 billion in 2015, a CAGR of almost thirteen percent. Revenues for total automotive electronic controllers are forecast to grow to almost $86 billion in 2022, from an estimated $53 billion in 2015, a CAGR of seven percent. ADAS is thus forecast to be the fastest growing sector for automotive electronic controllers from 2015 to 2022.

Semicast’s ADAS electronics vendor share analysis ranks Continental as the leading supplier in 2015, with an estimated market share of 18%, ahead of Bosch with 15%, Autoliv (14%), Magna (9%) and ZF TRW (7%).

Colin Barnden, Principal Analyst at Semicast Research and study author, commented “From an electronics perspective, Semicast judges the building blocks necessary to support fully autonomous driving as now in place. Tesla’s experience with the Autopilot function demonstrates that, for now, ADAS remains firmly in the category of driver assistance rather than automated driving. However the reliability, regulatory and legal issues which currently limit ADAS operation are all expected to be resolved steadily over the coming decade.”

Source: http://semicast.net

Automotive Tech to Create $350B in Supplier Opportunities (Chart 22)

Barbara Jorgensen
EPS News

Suppliers that secure a spot in an automotive design can usually look forward to decades of consistent component sales. Even though automakers demand a lot from their suppliers, car designs don’t change as quickly as – for example – consumer electronics specs. However, research firm IHS Markit believes that’s about to change.

There are considerable new business opportunities for high-tech companies as consumers demand better safety, connectivity and efficiency features in their cars. But suppliers’ attempts to grab a share of these new business opportunities come with significant challenges given the operating environment, according to IHS’s Supplier Insight and Component Forecast Analytics. Suppliers are called upon to commit resources in developing new technology at a time when technology roadmaps are a moving target due to regulation, competitor pressure and consumer demand. The level of resources that suppliers have to deploy is significant, as the share of revenues that top suppliers dedicate to R&D activities is well above 5% annually, IHS found.

Features such as fuel efficiency, weight reduction, advanced safety technologies, human machine interface (HMI), lighting and consumer comfort features will drive $350 billion in incremental automotive supplier business opportunities by 2021, IHS predicts. Suppliers that want to succeed in the next few years will also have to adapt their business processes to operate in an increasingly more agile development environment, which challenges the usual ’60 months design to job-1’ process.

“Some of the technology advances being introduced in vehicles are taking shape much more quickly than anything ever experienced in the auto industry, bringing disruption to some well- established business processes,” said Matteo Fini, senior manager, supplier solutions for IHS Automotive.

Technology costs should decrease as volumes increase and further technology refinements are in place. In some component areas such as batteries, costs are expected to follow “Swanson’s law” in a baseline scenario, which outlines a 20% reduction in costs for each doubling of the cumulated deliveries in others it might be less aggressive as technologies are more established.

Nonetheless, a cost burden will be shared among consumers, OEMs and suppliers linked to the deployment of new technology, according to IHS. As consumers have historically proven to be moderately unwilling to pay for some of the add-on technology costs, there will be increased cost pressure from the OEMs to suppliers and the request to apply “kaizen costing” more widely, in other words delivering the same or better functionality at a lower cost.

IHS cost-per-vehicle forecasts are as follows:

  • The race toward emissions compliance and weight reduction in key global markets is estimated to create an incremental cost per vehicle of $744 globally between now and 2021
  • Comfort functions such as infotainment, vehicle connectivity and autonomous driving features may add an average of $360 to vehicle costs when compared to 2015.
  • Autonomous driving features could add incremental costs of $75 per vehicle by 2021, led by increased penetration of forward collision warning and emergency braking systems

Emerging markets also are expected to play a major role in driving the average content upward on a global basis, as consumers in these markets drive demands for higher levels of sophistication for vehicles made available locally. The increased use of digital and analog-digital instrument clusters in China alone is expected to generate $1.2 billion in incremental business by 2021, IHS said. But not all component areas will equally benefit from expanded opportunities. While enhancements to powertrain subsystems and electrification are anticipated to contribute approximately 37% to the overall component cost increase by 2021, interior hardware is expected to stay relatively flat. This indicates any incremental costs in some interior sub-systems will be balanced by efficiencies in others.

IHS Automotive estimates that nearly one third of the incremental business opportunities for suppliers are linked to the introduction of new features, rather than increasing penetration of existing ones or overall vehicle production volumes. Organizations that can succeed in understanding the technology roadmap and competitive environment – while strategically aligning their business initiatives to take advantage of these opportunities quickly – can position themselves for long-term growth in the years ahead.

Source: www.EPSNews.com

World Enterprise Storage Market had 0% y/y Growth in 2Q’16

Total worldwide enterprise storage systems factory revenue remained flat year over year, posting 0.0% growth and $8.8 billion during the second quarter of 2016 (2Q’16), according to the International Data Corporation (IDC). Total capacity shipments were up 12.9% year over year to 34.7 exabytes during the quarter. Revenue growth declined within the group of original design manufacturers (ODMs) that sell directly to hyperscale datacenters. This portion of the market was down 21.5% yea-over-year to $794.7 million. Sales of server-based storage were up 9.8% during the quarter and accounted for almost $2.4 billion in revenue. External storage systems remained the largest market segment, but the $5.7 billion in sales represented flat 0.0% year-over-year growth.

“After a slow start to the year, the enterprise storage system market remained steady during the second quarter,” said Liz Conner, research manager, Storage Systems. “Spending on all flash deployments continues to grow and help drive the market. The decreasing cost of flash media, coupled with increasing use cases, high density deployments, and availability of flash-based storage products, have resulted in rapid adoption throughout the market.”

Source: www.idc.com

World Videoconferencing Equipment Revenue by Type and Vendor in 2Q’16 (Charts 23 & 24)

The International Data Corporation (IDC) reported that Worldwide Enterprise Videoconferencing Equipment showed mixed results in 2Q’16 with overall videoconferencing equipment revenue increasing 2.0% quarter-over-quarter but down slightly (-0.4%) year-over-year. Total worldwide enterprise video equipment revenue in 2Q’16 was more than $505 million, up from about $495 million in 2Q’15. The total number of videoconferencing units sold in 2Q’16 (104,209) increased 2.8% quarter over quarter and 5.2% year-over-year.

From a market segment perspective:

  • Multi-codec telepresence equipment revenue ($31.0 million) was up 29.9% quarter-over-quarter, but down 2.8% year-over-year. Unit shipments were up 23.8% sequentially and 9.8% year-over-year.
  • Room-based videoconferencing system revenue ($352.5 million) decreased 2.0% quarter over quarter but increased 3.8% year-over-year. Unit shipments increased 4.2% quarter over quarter and 13.2% year-over-year.
  • Personal videoconferencing systems revenue ($38.7 million) – including executive desktop systems – decreased 7.4% quarter over quarter and declined 35.8% year-over-year. Likewise, unit shipments were down 2.3% quarter-over-quarter and 16.0% year-over-year.
  • Video infrastructure equipment revenue ($82.9 million) – including MCUs and other video-related infrastructure – increased 18.5% quarter-over-quarter and 9.9% year-over-year.

“Worldwide videoconferencing equipment revenue managed a modest 2% sequential gain in the second quarter, thanks mostly to strength in the Asia/Pacific region. Year-over-year revenue was slightly negative in the quarter, as the challenge continues for vendors to maintain positive video equipment revenue growth,” said Rich Costello, senior analyst, Enterprise Communications Infrastructure. “We also saw a good trend continue in this quarter, as the number of video units sold increased both quarter-over-quarter and year-over-year, albeit at modest growth levels.”

Source: www.idc.com

Worldwide Ethernet Switch Market grew 3.0% y/y; Router Market was down 2.0% in 2Q’16 (Charts 25 & 26)

According to IDC the worldwide Ethernet switch market (Layer 2/3) recorded $5.97 billion in revenue in 2Q’16, an increase of 3.0% year-over-year. Meanwhile, the worldwide total enterprise and service provider (SP) router market finished at $3.67 billion in revenue in 2Q’16, declining 2.0% on a year-over-year basis.

The worldwide enterprise and service provider router market declined 2.0% on a year-over-year basis in 2Q’16 with a 3.6% decrease in the larger Service Provider segment and a 3.4% increase in Enterprise routing. The latter will be a market to watch closely over the coming quarters as software-defined architectures start to take hold across the WAN, enabling enterprise network managers and service providers alike to benefit from these emerging capabilities.

“Ethernet switching and routing remain relevant in an era of cloud migration,” said Petr Jirovsky, research manager, Worldwide Networking Trackers. “But for vendors to continue to grow, they must stay aware of changing market dynamics, including emerging demand for newer and faster Ethernet port speeds, as well as desire for more intelligent routing.”

Source: www.idc.com

Worldwide Smartwatch Shipments will increase 3.9% y/y to 20.1 million units in 2016 (Charts 27 to 29)

A year after the launch of the Apple Watch established a new benchmark for the worldwide smartwatch market, new smartwatch shipments are expected to see only modest growth for the rest of 2016 due to late-in-the-year and iterative product releases. According to a new forecast from the International Data Corporation (IDC), total smartwatch shipments will reach 20.1 million units in 2016, an increase of 3.9% from the 19.4 million units shipped in 2015.

IDC categorizes smartwatches as those that can run third party applications. Examples include Apple's Watch, Samsung's Gear S3, Motorola's Moto 360, and Pebble's Watch. Smartwatches are part of IDC's larger category of Smart Wearable devices, which also include smart glasses and certain wristbands. IDC expects total smart wearable volumes to reach 21.5 million units shipped in 2016. By volume, smartwatches account for the largest part of the category, and are expected to reach a total value of $17.8 billion dollars in 2020.

Meanwhile, IDC categorizes wearables that do not run third party applications as basic wearable devices. Basic wearables can take on multiple form factors – wristbands, clothing, and watches – but underpinning all of them is that none of them run third party apps. Examples include Fitbit's selection of fitness trackers, Garmin's Vivofit devices, and Xiami's MiBand. By the end of 2016, total shipments of basic wearables will reach 80.7 million units.

“To date, smartwatches have remained in the realm of brand loyalists and tech cognoscenti, but we expect that to change over the next few years,” noted Ramon Llamas, research manager for IDC's Wearables team. “First, smartwatches will look and feel like traditional watches, appealing to those who put a premium and design and style. Second, once the smartwatches get cellular connectivity, they’ll disconnect from the smartphone, making them more useful. Third, smartwatch applications will build on this cellular connection, and connect with other devices within the home and at work. Finally, smartwatch prices will come down, making them more affordable to a broader market.”

“It is increasingly becoming more obvious that consumers are not willing to deal with technical pain points that have to date been associated with many wearable devices,” said Ryan Reith program vice president for IDC's Mobile Device Trackers. “Complaints about battery life, smartphone dependency, and minimal use cases have been well versed across most publications and research findings.The aforementioned improvements that are rapidly being deployed by most vendors should improve this aspect, but at the same time the increase in devices that have more fashion appeal over technological appeal should also be a catalyst to growth in both smartwatches and basic watches with minimal functionality beyond normal analog.”

Source: www.idc.com

U.S. Industrial Output falls in August (Chart 30)

U.S. industrial production fell 0.4% in August after a 0.6% increase in July.

Source: www.federalreserve.gov/releases/g17/table1_2.htm

Walt D. Custer


Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.

View other posts from Walt D. Custer. View other posts from Walt D. Custer.
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