Taiwan/China Update

September monthly revenues for Taiwan-listed companies have just been released. Many of these firms manufacture in China.

  • Electronic equipment sales in September 2016 were down 4% compared to September 2015 but up sequentially 27% compared to August 2016 (Chart 1)
  • ODM sales in September 2016 rose 4.8%% vs. September 2015 and up 36% sequentially from August 2016 (Chart 2). 3Q’16 ODM revenue growth was positive after three prior quarters of contraction (Chart 3).
  • Display revenues continued to climb (Chart 4).
  • Wafer foundry revenues slipped slightly from August but still remained near an all-time high (Chart 5).
  • Package and test (Chart 6) and memory (Chart 7) sales continued to increase while passive component revenues remained strong but little changed vs. August 2016 (Chart 8).
  • Solar/photovoltaic related sales have been declining since their March 2016 recent peak (Chart 9).
  • Printed circuit board and CCL (PCB laminate) revenues declined slightly from August (Chart 10) but the PMI leading indicator predicts renewed growth ahead (Chart 11).

Source: Financial reports of Taiwan stock exchange listed companies as analyzed by Custer Consulting Group

Europe Update

Eurostat released August production data for many electronics related product groups:

  • Electronic equipment production has been flat for the last few months. We still remain suspicious of the reported January 2016 large spike in production (Chart 12).
  • September motor vehicles production rebounded from July (Chart 13).
  • Aircraft/aerospace revenues continued to increase (Chart 14).
  • Instrument production declined from August but remained strong (Chart 15) while electromedical equipment production was weak (Chart 16).
  • Electronic assembly (loaded board) output grew from July (Chart 17).
  • Wiring device (PCB) production increased sharply from July (Charts 18 & 19) however the PMI leading indicator predicts slow PCB growth ahead (Chart 20).

Source: Eurostat with Custer Consulting Group analysis

Worldwide Semiconductor Revenue Forecast to decrease 0.9% y/y to $332 billion in 2016 (Chart 21)

Worldwide semiconductor revenue is forecast to total $332 billion in 2016, a decrease of 0.9% from 2015, according to Gartner, Inc. This represents two consecutive years of revenue decline, which has happened only once in history. But the outlook for the semiconductor market is improving.

“The worst appears to be over, with a stronger outlook for the remainder of 2016 driven by inventory replenishment and increasing average selling prices (ASPs) in select markets,” said Jon Erensen, research director at Gartner. “Improving conditions in the commodity memory market contributed the most to the improved outlook based on stronger supply-and-demand dynamics.”

“After an inventory correction started the year off slowly, the ramp up to the iPhone 7 launch and the build for the upcoming holiday season has spurred on the market in the second half of 2016. However, in many cases the inventory correction was too steep, and the industry is experiencing shortages and is scrambling to increase supply,” added Erensen.

Key electronic equipment markets have bottomed and stabilized, which has contributed to the stronger outlook, and in some markets, most notably smartphones and video game consoles, production estimates have been revised up for 2016. The outlook for emerging opportunities for semiconductors in the Internet of Things (IoT) and wearable electronics remains choppy with these markets still in the early stages of development and too small to have a significant impact on overall semiconductor revenue growth in 2016 and 2017.

Source: www.gartner.com

Worldwide Semiconductor Capital Spending to Decline 0.3% in 2016 (Chart 22)

Worldwide semiconductor capital spending is projected to decline 0.3% in 2016, to $64.6 billion, according to Gartner, Inc. This is up slightly from the estimated 0.7% decline in Gartner's previous quarterly forecast. The market is expected to return to growth in 2017, increasing 7.4%.

“As we enter the final quarter of 2016, we find growth returning to the semiconductor manufacturing industry, with a slightly improved capital investment outlook for 2016 from the last quarter's forecast,” said David Christensen, senior research analyst at Gartner. “The outlook for equipment has improved significantly as logic manufacturers focus their spending on ramping fabs for the introduction of high-volume 10-nanometer production in 2017 and memory producers are focusing on the move to 3D NAND flash.”

China remains something of a wild card, after the announcement of multiple fab projects that will aid overall growth through the end of the decade, while a stronger U.S. dollar in 2016 will remain a key factor in determining revenue growth of semiconductor manufacturers.

As with previous years, smartphones, mobile devices, solid-state drives (SSDs) and the Internet of Things (IoT) will remain the principal drivers of the semiconductor market for the immediate future, particularly for foundries that manufacture most of the wafers of logic chips for these devices. Although unit shipments of smartphones have slowed down, the fast migration to 4G LTE in high-end smartphones has driven the wafer demand of advanced process technologies, while the adoption of fingerprint sensors, touch display drivers and active-matrix dynamic light-emitting diodes (AMOLEDs) by Chinese smartphones has made full use of 200mm foundries' 0.18-micron capacity.

From a device perspective, DRAM conditions in the first half of 2016 were worse, but the market hit bottom at midyear. There is now tightening supply, and better demand has pulled the market into an undersupply for the second half of the year. At the start of 2017, a weaker demand environment will create a brief technical oversupply, but the industry will then move back into an undersupply for the remainder of 2017 and into 2018.

After nearly three years of oversupply, there was a pronounced shortage of NAND in the third quarter of 2016, and 3D NAND production ramp challenges persist. 2017 is expected to see a favorable supply/demand balance that loosens up by the end of the year. Substantial capacity additions during the second half of the year along with 3D NAND technology maturation from some vendors will contribute to the favorable supply/demand balance. 2016 spending on wafer-level manufacturing equipment will be up 6.4%, driven by logic manufacturers ramping to 10nm and memory players moving to 3D NAND.

Source: www.gartner.com

Global IC Foundry Output Value will rise at 5.2% CAGR from US$50.7 billion to US$66.57 billion in 2021

The global IC foundry industry output value will grow at a CAGR of 5.2% from 2016 to 2021, according to Digitimes Research.

The output value of the IC foundry industry worldwide is forecast to reach US$66.57 billion in 2021, up from US$50.7 billion in 2016, said Digitimes Research.

Smartphones will continue to provide growth momentum for the global IC foundry industry over the next five years. Meanwhile, automotive electronics, High-performance computing (HPC), Internet of Things (IoT), and applications related to virtual reality (VR) and augmented reality (AR) will enter their growth stages, driving industry growth during the five-year period, Digitimes Research indicated.

The world's top-four pure-play foundries – TSMC, Globalfoundries, UMC and SMIC – will see their production capacity reach a combined 53,954,000 8-inch equivalent wafers in 2021, representing a CAGR of 5.8% from 2016 to 2021, Digitimes Research said.

TSMC is set to move its 10nm FinFET process to volume production later in the second half of 2016. The node will start generating revenues at TSMC in the first quarter of 2017. TSMC is also expected to start making 7nm FinFET chips in early 2018, and 7nm chips using EUV lithography in 2019, Digitimes Research noted.

Source: www.digitime.com

Silicon Wafer Shipment Forecast (Chart 23)

SEMI recently completed its annual silicon shipment forecast for the semiconductor industry. This forecast provides an outlook for the demand in silicon units for the period 2016–2018. The SEMI forecast shows polished and epitaxial silicon shipments totaling 10,444 million square inches in 2016; 10,642 million square inches in 2017; and 10,897 million square inches in 2018 (refer to table below). Total wafer shipments this year are expected to exceed the market high set in 2015 and are forecast to continue shipping at record levels in 2017 and 2018.

"Silicon shipment volumes have been gaining strength in recent months, after a soft start at the beginning of the year," said Denny McGuirk, president and CEO of SEMI. "This positive momentum is expected to continue and result in modest annual growth for the segment this year, 2017 and into 2018.”

Source: www.semi.org

Global DRAM Module Sales declined 10.4% y/y to US$7.9 billion in 2015

Global DRAM module sales totaled around US$7.9 billion in 2015, down 10.4% from US$8.8 billion a year earlier, according to DRAMeXchange.

The sales decline in 2015 was caused mainly by falling PC DRAM prices and a shrinking DIY (Do It Yourself) market, said DRAMeXchange.

“The DRAM industry was hit hard by the oversupply problem in the PC market through 2015,” said Avril Wu, research director of DRAMeXchange. “Microsoft's attempt to factor in the amount of memory in a PC to the calculation of Windows 10 license fee also made the situation worse. There was no significant growth in the consumption of PC DRAM, and notebooks' average DRAM content per box even dropped 1% compared with the previous year.”

DRAM prices “on the whole were on a downtrend in 2015,” Wu continued. During the year, spot market prices had larger falls compared with contract price markets. “DRAM module makers were the first to face the impact of falling spot prices,” Wu noted.

The top-5 DRAM module companies accounted for as much as 87% of the global revenues, DRAMeXchange indicated. These major vendors are expected to gain even greater market shares in the future, DRAMeXchange said.

Kingston Technology continued to dominate the DRAM module market in 2015 with a 68.36% share, DRAMeXchange indicated. Despite falling prices for PC DRAM, Kingston managed to grow its DRAM module revenues by 3.85% in 2015.

“Due to the contraction of the spot market, DRAM module makers had to find new blue ocean opportunities to maintain their revenues in 2015,” Wu noted. “Kingston focused on the smartphone market in 2015 after finding success in the contract market in the year before. Kingston is now very active in e-sport/gaming market and has been quick to seize emerging market trends for DRAM modules.”

Other module makers are either looking at strategic products or adjusting their portfolios to give more weight to NAND flash-related products, DRAMeXchange said. High-margin and niche market segments that DRAM module makers are going to pay more attention to in the near future include industrial applications, e-sport/gaming and overclocking communities.

Source: www.digitimes.com

Global PC Shipments Declined for the Eighth Consecutive Quarter (Charts 24-27)

Worldwide PC shipments totaled 68.9 million units in the third quarter of 2016, a 5.7% decline from the third quarter of 2015, according to preliminary results by Gartner, Inc. This was the eighth consecutive quarter of PC shipment decline, the longest duration of decline in the history of the PC industry.

PC manufacturers faced many challenges, which included weak back-to-school demand, and ongoing low demand in the consumer market, especially in emerging markets.

“There are two fundamental issues that have impacted PC market results: the extension of the lifetime of the PC caused by the excess of consumer devices, and weak PC consumer demand in emerging markets,” said Mikako Kitagawa, principal analyst at Gartner. “According to our 2016 personal technology survey, the majority of consumers own, and use, at least three different types of devices in mature markets. Among these devices, the PC is not a high priority device for the majority of consumers, so they do not feel the need to upgrade their PCs as often as they used to. Some may never decide to upgrade to a PC again.

“In emerging markets, PC penetration is low, but consumers are not keen to own PCs. Consumers in emerging markets primarily use smartphones or phablets for their computing needs, and they don't find the need to use a PC as much as consumers in mature markets.” The PC market continues to consolidate, as the top six vendors combined for a record high 78% of PC shipments in the third quarter of 2016 (see Table 1). Lenovo continued to be the worldwide market leader based on preliminary PC shipments, but HP Inc. is nearly tied for this top spot, and these rankings could change when final shipment results are published. Lenovo has recorded six consecutive quarters of year-over-year shipment declines, while the nearest competitors, HP Inc. and Dell, have recorded shipment growth since the second quarter of 2016.

The stabilization of the PC business market was a key factor for HP Inc.'s shipment growth, as a majority of its revenue was generated from the business segment. Dell's shipment growth exceeded the regional average in most regions.

In the United States, PC shipments totaled 16.2 million units in the third quarter, a 0.3% decline from the same period last year (see Table 2). This is the second consecutive quarter of flat year-over-year PC shipment growth.

“Mobile PCs, which include notebooks, two-in-one PCs and Windows tablets, showed low-single-digit year-over-year growth, but the overall results were offset by a decline of desktop shipments,” Kitagawa said. “Traditionally, the third quarter has been driven by back-to-school PC sales, but back-to-school marketing campaigns have become less effective for driving PC sales. With so many PCs already in the consumer market, U.S. consumers do not feel the need to buy new PCs; many parents hand down old PCs to their kids. While our PC shipment report does not include Chromebooks, our early indicator shows that Chromebooks exceeded PC shipment growth.”

Asia/Pacific PC shipments totaled 24.7 million units in the third quarter of 2016, a 7.6% decline from the third quarter of 2015. Early indicators show that the PC vendors performed better than in the second quarter as they lowered channel inventory coming into the quarter and replenished stock for seasonal back-to-school demand. PC shipments in China are estimated to have declined 4.8%. Consumer sales in China were driven by notebook shipments, while the business market was driven by desktop PCs because of cost and computing effectiveness.

PC shipments in EMEA surpassed 19.2 million units in the third quarter of 2016, a 3.3% decline from the same period last year. The EMEA market's decline was mainly associated with very weak demand in Eastern Europe, Eurasia, and the Middle East and Africa. In the U.K., Brexit had no immediate impact on PC sales, but the depreciation of the British pound against the U.S. dollar caused some vendors to indicate prices will increase through the end of 2016 and into 2017.

Source: www.gartner.com

Global Smartphone Shipments expected to grow 7.2% y/y to 1.42 billion in 2016 and another 7% to 1.52 billion units in 2017

Apple will be the sole non-Asia brand among the top-20 smartphone brands in 2017, while all the remaining 19 vendors will come from Asia, including 1 from China. Samsung Electronics will continue to lead as the number one vendor, and Apple will rank second and manage to narrow its annual shipment gap with Samsung to within a range of 80 million units.

China-based Huawei, Oppo and Vivo will take the number three to five positions in 2017, while India-based vendors will account for three seats in the top-20 rankings, with Micromax and Intex taking the 12th and 13th positions, respectively.

None of the top-10 vendors will see its shipment grow over 20% on year in 2017, and only China's Oppo, Vivo and Gionee will enjoy the highest growth of over 15% in the year, Digitimes Research said.

Apple is expected to see its shipments grow 12% in 2017, buoyed by the release of the next generation iPhone devices in the second half of the year.

Affected by the Galaxy Note 7, Samsung's shipments will stay flat or even retreat in the second half of 2016 and the first quarter of 2017, and the vendor might see its shipments grow by a mere 2.2% in 2017 as its shipments are unlikely to stabilize until the second quarter of the year.

Huawei and ZTE will strive to ramp up their overseas shipments to reach a double-digit growth in 2017, while LG Electronics and Xiaomi Technology will only grow by single digits, Digitimes Research commended.

With future growth momentum for smartphones coming mainly from replacement demand in emerging markets such as Southeast Asia, South America and Africa, Digitimes Research estimates that global smartphone shipments are expected to increase at a moderate rate of 100 million units a year in the next five years, with total annual shipments to reach 1.93 billion units in 2021.

Source: www.digitimes.com

Global Smartphone Application Processor Market grew 3% y/y to US$10 billion in 1H’16 while Tablet AP sector declined 34% to US$889 million

The global smartphone application processor (AP) market grew 3% on year to US$10 billion in the first half of 2016, while the tablet AP sector declined 34% to US$889 million, according to Strategy Analytics.

Despite intense competition, Qualcomm held up well and topped the smartphone AP market with 39% revenue share in the first half of 2016, followed by MediaTek with 23% and Apple with 15%, said Strategy Analytics. During the six-month period, 64-bit APs accounted for two-thirds of total smartphone AP shipments.

“After a less successful 2015, Qualcomm continued to recover its flagship market share with the newly launched Snapdragon 820, which featured in several flagships including the Samsung Galaxy S7 Edge, LG G5, Xiaomi Mi 5, OnePlus 3 and others,” said Sravan Kundojjala, associate director at Strategy Analytics. “Qualcomm's mid-range Snapdragon 652, 650 and 400 series of chips also gained good traction during first-half 2016 and helped Qualcomm to maintain volume.”

In the first half of 2016, HiSilicon, MediaTek, Samsung LSI and Spreadtrum all saw their smartphone AP shipments register a strong double-digit shipment growth, Strategy Analytics indicated. Samsung LSI and HiSilicon are dependent upon Samsung Mobile and Huawei, respectively. MediaTek maintained good momentum with increased shipments of its LTE-integrated APs, while Spreadtrum maintained its lead in 3G APs and increased its LTE AP shipments in the first half of 2016.

In the global tablet AP market, Apple led with 35% revenue share in the first half of 2016, followed by Qualcomm with 18% and Intel with 13%, according to Strategy Analytics.

“The tablet AP market continues to decline and all major tablet AP vendors suffered in first-half 2016,” said Kundojjala. “We estimate that ARM-based tablet APs increased their share to 89% in first-half 2016 from 83% in the same period last year. Intel's tablet AP shipments halved in as the company shifted its focus away from Atom-based low-end Android tablets and towards Core-based tablets. Windows-based tablets accounted for the majority of Intel's tablet AP shipments in first-half 2016.”

“Our calculations show that baseband-integrated APs accounted for one-third of total tablet AP shipments in first-half 2016,” noted Stuart Robinson, executive director of Strategy Analytics' handset component technologies service. “Qualcomm, MediaTek and Spreadtrum represented over 80% of total baseband-integrated tablet AP shipments and Intel's recent decision to de-emphasize integrated APs will benefit these three vendors in the next few quarters.”

Source: www.digitimes.com

Taiwan-based ODMs, OEMs and OBMs LCD TV Shipments will expand 6.4% y/y in 2017

Taiwan-based ODMs, OEMs and OBMs (own-brand manufacturers) will ship 37.65 million LCD TVs in 2017, increasing 6.4% on year and taking up 17.2% of global total, according to Digitimes Research.

The growth mainly will be due to increased orders from US-based vendor Vizio and China-based LeEco (renamed from LeTV) and Xiaomi Technology, Digitimes Research indicated.

Among Taiwan-based makers, TPV Technology will rank first with shipments of 19.93 million LCD TVs, followed by Foxconn Electronics with 9.53 million units, Amtran Technology with 3.98 million units, Compal Electronics with 1.70 million units and Wistron with 1.13 million units.

Source: www.digitimes.com

Worldwide 3D printer shipments will grow 108% to 455,772 units in 2016, more than doubling the 219,168 units shipped in 2015 (Chart 28)

Enterprise 3D Printer Shipments Forecast to Grow 44% in 2016

Worldwide shipments of 3D printers will reach 455,772 units in 2016, more than doubling the 219,168 units shipped in 2015, according to Gartner, Inc.'s latest forecast. Despite slowing growth rates after the market's initial growth spurt, the increase in 3D printer shipments over the next four years will see the number of units shipped in 2020 total more than 6.7 million.

“Once a niche market, 3D printing has continued its rapid transformation into a broad-based mainstream technology embraced by consumers and enterprises around the world,” said Pete Basiliere, research vice president at Gartner. “The evolution of hardware and software along with an ever-expanding collection of usable materials has driven growth in both the consumer and enterprise 3D printing markets.”

3D printing is now experiencing widespread acceptance beyond its application in specialist industries. Today, 3D printing is being used to create prototypes, augment manufacturing processes and produce finished products. Industries in a broad range employ 3D printing to a modest extent. Gartner expects wider and more diverse growth to continue as new technology providers and processes emerge.

Source: www.gartner.com

Global Service Robots Sales to increase to $46 billion in the 2016-2019 period, versus $7 billion in 2015

The total number of service robots for professional use sold in 2015 increased by 25%. The sales value surged by 14% to a new record of US$ 4.6 billion. By 2019, sales forecast indicates another rapid increase up to an accumulated value of US$ 23 billion for the period 2016-2019. In terms of units, logistic systems make up 53% of the total forecast of service robots in this segment. Service Robots for personal and domestic use surged by 16% in 2015 to a value of US$ 2.2 billion. Between 2016 and 2019 estimated sales will rise up to an accumulated value of US$ 22 billion.

“The demand for service robots is seeing a historic breakthrough”, says Joe Gemma, President of the International Federation of Robotics, “In addition to the already established business with professional service robots the personal and domestic segment is increasingly dynamic. Growth forecasts between 2016 and 2019 are just excellent.”

Source: http://www.ifr.org

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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