Weekly Global Update for January 25, 2017 | TTI, Inc.

 

Electronic Equipment Shipments by Month by Country

  • China/Taiwan electronic equipment shipments peaked in November and, although they declined sequentially, were unseasonably strong in December (Chart 1).
  • When country revenues in local currencies are converted to U.S. dollars exchange rates have a big impact on the consolidated dollar growth rates.
  • Due to the recent strengthening of the U.S. dollar (Chart 2), there is a significant difference in total monthly electronic equipment shipments when calculated a constant 2015 versus fluctuating (actual) exchange rates (Chart 3).
  • Converting the monthly constant and fluctuating exchange revenues in Chart 3 to quarterly growth rates (Chart 4) the impact of the strong dollar is significant. In 4Q’16 versus 4Q’15 world electronic equipment dollar shipments were down 0.15% at constant exchange but 3.2% at fluctuating exchange.
  • Of course fluctuating (actual) exchange rates are used for P&L calculations. Therefore expect multinational companies that report their financials in dollars to see a negative exchange rate impact on their fourth quarter financial results.

Source: Regional U.S., Europe, Japan, Taiwan/China and South Korea monthly electronic revenues consolidated to U.S. dollars.

Japan Update

JEITA just reported November domestically produced Japanese electronic equipment, component and device production.

  • Electronic equipment production was up 7.7% in November 2016 versus November 2015 but are down 6.8% for the 12 month total ending in November 2016 versus the same period a year earlier (Charts 5 & 6).
  • Semiconductor shipments to Japan remain “in sync” with electronic equipment on a 3/12 growth basis (Chart 7). Growth rates for both are still in a contraction mode (3/12 <1) but the rate of contraction is lessening.
  • IC production continues to rise while discrete semiconductor production is flat (Chart 8).
  • Passive component production declined in both October and November (Chart 9).
  • PCB production dropped sequentially from October to November (Chart 10) as the 3/12 growth rate continues to worsen (Chart 11).
  • The Japan’s PMI leading indicator points to continued declines in PCB production – but at a slower rate of decline (Chart 12).
  • Component & device production (Chart 13) continued to contract (3/12<1).

Source: www.jeita.or.jp/

Worldwide Semiconductor Revenue Grew 1.5% in 2016 (Chart 14)

Intel Retains Position as Number One Semiconductor Vendor for 25th Consecutive Year

Worldwide semiconductor revenue totaled $339.7 billion in 2016, a 1.5% increase from 2015 revenue of $334.8 billion, according to preliminary results by Gartner, Inc. The top 25 semiconductor vendors' combined revenues increased 7.9% compared with 2015, and accounted for 75.9% of the market.

"After a poor start to the year, characterized by inventory burn-off, the second half of 2016 was fueled by inventory replenishment and improved demand and pricing," said Adriana Blanco, senior research analyst at Gartner. "Overall, semiconductor revenue for the second half of the year was much stronger than the first half, reflecting the strengthening memory market and continued inventory replenishment, as well as inventory build for both the iPhone 7 and the holiday season."

Intel remained in the top spot, reaching a quarter of a century as the number one semiconductor vendor, with 15.9% market share. Samsung Electronics maintained the number 2 position for the 15th year with 11.8% of the market. Broadcom Ltd. was the best performer in the top 25, climbing 11 places to reach the fifth position after the Avago Technologies acquisition of Broadcom Corporation.

"When it comes to end-application markets, wireless and compute are the largest end markets for semiconductors but showed very different growth patterns in 2016," said Blanco. "Wireless revenue grew 9.6% and continued to be driven by smartphones and the exposure to the memory markets, where conditions were much more favorable than the overall memory market, in part because of strong bit content growth, and also improved performance of other device categories, including ASICs and non-optical sensors. Compute revenue, on the other hand, declined 8.3%, as it continues to be dragged down by a sluggish PC and tablet market and exposure to the memory segment."

The memory market in 2016 started with the DRAM and NAND markets in oversupply and pricing declining. By the middle of the year, both markets moved into undersupply, and pricing increased strongly. The NAND flash market, in particular, had a turbulent start in 2016, plagued by oversupply conditions, but deep shortages and increasing prices during the second half of 2016 spurred growth.

In terms of macroeconomic factors during 2016, the euro was relatively stable compared with the U.S. dollar, whereas the yen strengthened significantly. The U.K. Brexit decision in June 2016 had no significant effect on the global semiconductor market, although equipment demand in the U.K. was hit by higher pricing as a result of a weakening sterling.

Source: www.gartner.com

EIPC Winter Conference Salzburg, Austria

The EIPC will be running a special panel discussion at the upcoming EIPC Winter Conference in Salzburg to look at the issues facing the raw materials supply chain for the PCB industry worldwide.

The price increases that have taken, and are taking, place will have a significant impact on both the manufacturers and the end-users, and there is uncertainty over the length of duration of these cost hikes.

EIPC have gathered together Andres Folge from Technolam, Karl Stollenwerk from Isola and Thomas Michels from Ventec to talk about the impact of this issue in the global PCB supply chain.

This is an additional item on the program, and will take place immediately after the keynote speech by Walt Custer of Custer Consulting.

If you want to attend you will need to quickly register as a delegate to the EIPC WINTER CONFERENCE in Salzburg, Austria, on February 2 – 3, 2017.

Here is a link to the Detailed Conference Agenda: www.eipc.org/eipcevent/2017-winter-conference/

You can download the registration form here. In case of any questions contact Kirsten at kwestenberg@eipc.org

Source: www.eipc.org

Motherboard and Graphics Card shipments expected to fall 10% y/y in 2017 due to weak demand

Asustek Computer, Gigabyte Technology and Micro-Star International (MSI), due to continual increases in costs for processors, hard disk drives and PCBs as well as depreciation of the Chinese yuan, will hike retail prices for motherboards and graphics cards in China in early February after the 2017 Lunar New Year holidays, according to industry sources.

The sources expect the motherboard players to raise their product prices by around 5%. Since demand for motherboards has not been strong for the past few years, maintaining sales with the price increases will be a major task for the players.

The sources noted that motherboards using Intel's 200-series chipsets and graphics cards with Nvidia's Pascal GPUs as well as many previous-generation graphics card models are expected to become more expensive in China.

Currently, Nvidia's GTX 1080 and 1070 GPUs are in shortage due to issues at an upstream foundry partner. Although Nvidia tried to shift its orders to Taiwan Semiconductor Manufacturing Company (TSMC), TSMC's fully loaded capacity is expected to prolong the shortages. As a result, Nvidia has been adjusting its GPU supply to graphics card vendors recently and this has caused graphics card prices to rise.

Because of weak demand, some market watchers originally estimated the motherboard and graphics card market to see a 10% on-year drop in 2017 shipments, but the shortages are expected to make the situation worse.

Source: www.digitimes.com

Global OLED panel production capacity will grow at 52% CAGR from 7.5 million Square Meters in 2016 to 40.4 million Square Meters in 2021

Global shipments of smartphones equipped with OLED panels will exceed those of smartphones equipped with TFT-LCD panels in 2019, according to U.S.- and Japan-based Display Supply Chain Consultants (DSCC).

Annual global production capacity for OLED panels will grow from 7.5 million square meters in 2016 to 40.4 million square meters in 2021 at a compound annual growth rate of 52%, DSCC said. Samsung Display and LG Display together occupied 92% of the global OLED production capacity in 2016 and the share will drop to 63% in 2021, while the global share for all China-based OLED panel makers will rise from 6% in 2016 to 32% in 2021.

Global shipments of OLED panels will increase from 389 million units in 2016 to 134 billion units in 2021 of which 99% will be used in smartphones and 1% in VR (virtual reality) devices and smartwatches. iPhone will account for 20-35% of global shipments of OLED panels beginning 2017.

During 2016-2018, Samsung Display will be the globally largest producer of OLED panels, followed by LG Display and China-based BOE Technology.

Source: www.digitimes.com

Indian electronics and hardware industry is expected to grow at a 13-16% CAGR to US$ 112-US$ 130 billion by 2018 (Chart 15)

Over the next five years, accelerated local manufacturing of electronic products catering to growing domestic demand will drive the market for electronic components in India.

The Indian market for electronic products is poised for significant growth in the next few years. According to an ASSOCHAM-Ernst & Young (E&Y) study, the Indian electronics and hardware industry is expected to grow at a CAGR of 13 to 16 per cent during 2013-18, and to reach US$ 112 to US$ 130 billion by 2018 from the previous year’s level of US$ 75 billion. This growth will be driven by rising local demand and growing disposable incomes.

Moreover, adoption of high-end technology devices, technology-driven transformation such as roll out of 4G/LTE networks and the Internet of Things (IoT), policy and incentive boosts from the government, government initiatives like Digital India, Smart Cities, wider broadband connectivity, e-governance programs and so on are driving accelerated adoption of electronic products. Growth of the electronics products industry has started driving the expansion of the electronic components industry as well. Local brands under the Make in India initiative as well as global manufacturers looking to relocate their manufacturing base from China to alternate locations such as India, Vietnam and Indonesia due to mounting labor costs provide a strong impetus to the Indian electronics and hardware industry. This, in turn, presents an opportunity to the electronic components manufacturing industry of the country. Over the next five years, accelerated local manufacturing of electronic products catering to growing domestic demand will drive the market for electronic components in India.

Electronic components industry: Value addition
Value addition in electronic components is extremely limited as most of the raw materials are either imported or are purchased at a high cost. Most manufacturers believe that value addition in the electronic components industry does not exceed 40 per cent. With the increase in imports of components from China, value addition achieved in India is expected to reduce further.

Market mix

  • The electronic components market can be broadly bucketed under the following sub-categories:
  • Passive components: capacitors, resistors, wound components, crystals
  • Active components: diodes, transistors, integrated circuits, light-emitting diodes
  • Electromechanical components: printed circuit boards, switches, relays, cables, connectors
  • Associated components/other components: optical disks, magnets, radio frequency tuners, heat-sinks, magnetrons, magnetic tapes

In 2015, the total market revenue for electronic components was US$13.5 billion. The market was dominated by electromechanical components, which accounted for 30 per cent of the total demand, followed by passive components with 27 per cent market share.

However, in recent times, active components and associated components have also witnessed significant growth. While the industry composition is not predicted to change substantially, there is a rapid decline in products such as cathode ray picture tubes and CDs/DVDs, which had till recently constituted a significant share of the manufacturing base and market. This is an outcome of advancing technology and consumer preferences.

According to an ELCINA study, electronic components produced in India include, among others, wound components such as transformers and coils, diodes, transistors, resistors, capacitors, switches, relays, connectors, magnetic heads and so on. Components such as picture tubes and magnetic tapes have become almost extinct due to changes in technology. India had a strong industry for these components and we have not been able to upgrade to new technologies such as LED/LCD and solid-state storage devices to keep our market share.

Nearly 70 per cent demand of electronic components is fulfilled through imports. Increasing reliance on imports for sourcing electronic components used in electronic products makes it crucial to enhance/strengthen India’s electronics manufacturing capabilities.

Countries that account for a major portion of India’s imports include China, Taiwan, South Korea, Japan and some European countries. Share of imports is higher for specialized and precision components like integrated circuits, chip components, printed circuits boards and light-emitting diodes.

For components that do not require sophistication, India has established near self-reliance. These components include cables, speakers, cathode ray tubes and so on. India has also been exporting these components to other countries (Table I).

Market drivers
Consumer durables and telecommunication (including mobile devices) account for the major demand for electronic components in India. This is followed by information technology and office automation and automotive industries. Other application industries like industrial electronics, medical electronics, strategic electronics and lighting industry contribute to the balance of the market. Industries like lighting and strategic electronics are expected to witness substantial growth in the near future.

Market trends
The electronics industry is going through an exciting phase with growth in demand and importance of electronics as well as revolutionary changes in technology, launch of innovative products and the challenge of global competition. This has necessitated the electronic product and component manufacturers to focus on continuous improvement in their products in order to stay ahead of the pack, resulting in the following trends:

Convergence of technologies
Convergence allows a single device to use multiple technologies/services. Convergence of technologies has become a reality in the last couple of years with the launch of main-line products enabling it. A smartphone is one of the key examples of the advent of convergence as it allows communication and computing to use the same device.

Convergence is moving beyond mobile phones to several other electronic devices like music players, IPTV, iPads and the like. This trend is expected to convert most electronic products into multi-utility products, thereby requiring high-tech electronic components and technology.

Miniaturization
This refers to the creation of smaller-scale devices or components for mechanical, optical and electronic products. The dawn of convergence has led manufacturers to integrate multiple devices. At the same time, demand from consumers to reduce the size of products to make these easy to manage has led to these products becoming smaller in size or miniaturized.

Miniaturization results in greater density of components that is usually possible through very-large-scale integration designs. This also enables lower cost of production, resulting in reduction in overall product pricing. Miniaturization is expected to increase and impact the traditional component market as most of the traditional components will be replaced by chip components and integrated circuits.

Artificial intelligence
Consumers are becoming increasingly technology-conscious and are demanding products with built-in intelligence. This is resulting in electronics and consumer durable products being manufactured with intelligent functions and logic. For example, washing machines available now can sense the load and decide the appropriate washing cycles. Intelligence has moved beyond consumer products, and is also available in several medical and industrial electronics products with computer-numerical-control functions.

Components manufacturing hubs
Most of the large electronic components manufacturing companies (Indian or multinational) are located around six cities of the country, namely, Delhi-NCR, Mumbai, Bengaluru, Hyderabad, Chennai and Pune. Delhi-NCR (which includes Noida, Gurgaon, Ghaziabad and Faridabad region) is the largest manufacturing hub, as it hosts a large number of component manufacturers. This is followed by Mumbai and Bengaluru. Apart from these, cities like Ahmedabad, Pune and Baroda are some of the upcoming manufacturing hubs in India.

Moving forward
The Above changes in technology are expected to change the landscape for electronic components manufacturing. Apart from the above, manufacturers across the globe have started moving towards green electronics and sustainable development with the implementation of the Restriction of Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE) regulations.

In line with this trend, the Indian government, too, has issued notifications to regulate the use of hazardous substances (like lead, cadmium and mercury) and proper disposal of WEEE. Similarly, rules have also been notified with respect to energy-efficiency norms and labelling of most consumer electronics and durables.

Traditional components will increasingly face stiff competition from passive chip components, integrated circuits and surface-mount technologies that will replace these in several electronic products. Therefore in the near future, it is important for component manufacturers to shift focus from discrete components manufacturing to integrated components manufacturing so as to be able to benefit from the changing landscape of the country.

Source: www.electronicsb2b.com

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.

 

Statements of fact and or opinions expressed in MarketEYE by its contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc.

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