January “Flash” PMI Leading Indicators
Markit Economics just released its preliminary January “flash” Purchasing Managers Indices for a few countries:
- PMI values remained strong, all well into expansion territory (Chart 1).
- The U.S. PMI continued its strong growth reaching a 23-month high (Chart 2).
- The eurozone PMI hit a 70-month high although its growth (which is well in expansion territory) appears to be slowing (Chart 3).
- Japan’s PMI reached a 35-month high (Chart 4).
Global Electronic Equipment Shipment Growth
Based on regional data we have updated our monthly electronic equipment shipment charts:
- Not surprisingly electronic equipment growth peaked in November in China and has begun its typical seasonal downturn while the rest of the world’s output is relatively flat (Chart 5).
- China’s share of global electronic equipment has stabilized, as the strong dollar has effectively limited the dollar-denominated China growth (Chart 6).
- Chart 7 compares dollar-denominated global electronic equipment value when calculated at constant vs. fluctuating exchange rates. As the dollar has strengthened, the fluctuating exchange based total (green line) has become smaller relative to that of fixed exchange total (blue line).
Source: Regional data analyzed by Custer Consulting Group
4Q’16 EMS Company Performance
Here is a preliminary estimate of fourth quarter EMS industry financial performance.
- A total of nine large EMS company saw sales decline 0.3% in 4Q’16 versus 4Q’15 (Chart 8).
- Excluding Foxconn the 4Q’16 EMS total was down 3% vs. 4Q’15 (Chart 9) as this group’s growth has been near zero in recent time (Chart 10).
Note that this is still a preliminary estimate as not all the companies in the sample have reported their 4Q’16 financials
Source: Company financial reports
Printed Circuit Board Monthly Revenues by Region
Based on regional data converted to U.S. dollars:
- China PCB shipments reached their seasonal peak in November while the rest of the world’s output remains relatively flat (Chart 11).
- Total global PCB growth was near zero when calculated at fluctuating exchange rates vs. the U.S. dollar and is expected to expand a few percent in 2017(Chart 12). This assumes that our global political climate does not further destabilize.
- China’s share of global PCB production continues to expand (Chart 13).
Source: Regional data analyzed by Custer Consulting Group
U.S. Durable Goods Report
The December U.S. “Durable Goods” report provided the initial estimate of domestic shipment, orders and inventories by major product type:
- Electronic equipment book/bill ratio increased (Chart 14).
- 3/12 growth rates for electronic equipment orders and shipments improved (Chart 15) as orders rose significantly (Chart 16).
- Electronic equipment inventories relative to orders dropped to their lowest level since 2009 (Chart 17).
- Defense capital goods orders dropped sharply (Chart 18).
- Aircraft shipments have been on the decline, at least at least partially due the strong dollar hurting exports (Chart 19). Aircraft orders declined sharply in December (Chart 20).
- Communication equipment orders improved (Chart 21) while computer revenues continue to shrink (Chart 22).
- On a 3/12 growth basis semiconductor shipments to North America have finished their excess inventory/order correction and now appear to gain be headed to exceeding electronic equipment growth (Chart 23).
Worldwide Semiconductor Revenues forecast to grow 7.2% y/y to $364.1 billion in 2017 (Chart 24)
Worldwide semiconductor revenue is forecast to total $364.1 billion in 2017, an increase of 7.2% from 2016, according to Gartner, Inc. This represents a complete turnaround for the semiconductor industry as the market experienced 1.5% growth in 2016.
"The worst is now over with a positive outlook emerging for 2017 driven by inventory replenishment and increasing average selling prices (ASPs) in select markets, particularly commodity memory and application-specific standard products," said Ganesh Ramamoorthy, research vice president at Gartner. "The turnaround that started at the end of the second quarter of 2016 will continue to gain momentum and we expect the improved conditions to carry through 2017."
Gartner has increased the outlook for 2017 by $14.1 billion in its most current forecast, of which the memory market accounts for nearly $10 billion. "Memory market supply and demand have turned positive for memory vendors who are pushing ASPs higher to recover margins. ASP increases for application-specific standard products (ASSP), discrete and analog chips and higher semiconductor content in key applications including the Internet of Things (IoT) were the other key drivers for revenue increases," added Ramamoorthy.
Overall, the mixed growth seen in 2016 will turn into a broad and more consistent growth in 2017. Areas to watch for in 2017 include the industrial, automotive and storage markets, which are growing quickly but represent a smaller portion of the overall market. Additionally, the slow-growth outlook for traditional applications such as smartphones and PCs highlights the importance of semiconductor markets outside of these categories, notably the IoT.
"This implies that semiconductor product managers who have depended upon these categories must now continue to look for adjacent opportunities in new emerging applications in the IoT and in areas like industrial, storage and automotive markets," said Ramamoorthy.
Chipset Suppliers will begin to release 5G chips in 2H’17
While business opportunities related to 5G equipment and services are expected to start emerging in 2018, 5G chipset suppliers will begin to release 5G chips to vie for the market in the second half of 2017, according to industry sources.
Qualcomm and Intel are expected to launch chipset solutions for 5G equipment supporting 28GHz frequency band in the second half of 2017, while Samsung Electronics is also likely to release comparable chips during the same period, said the sources.
Intel, Qualcomm, Samsung and HiSilicon Technologies are also expected to release chips for 3.5GHz frequency band, added the sources, noting that the 28GHz and 3.5GHz are the two frequency bands to be available for 5G services.
Meanwhile, Qualcomm, MediaTek and Spreadtrum Communications will compete for the 5G chipset solution orders for smartphones, as Apple, Samsung and Huawei will also roll out their own smartphone-use 5G chips.
Smartphone solution vendors may also begin to use 14-16 nm process nodes to fabricate their chips for the entry-level and mid-range smartphones later in 2017, instead of the 28nm process being used currently, said the sources.
Meanwhile, Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung are expected to start producing high-end smartphone chips using an advanced 7nm process in 2018, but it remains to be seen how big the high-end solution in market would be in the future.
North America-based SEMI Equipment Manufacturers December Book/Bill=1.06 (Charts 25 & 26)
North America-based manufacturers of semiconductor equipment posted $1.99 billion in orders worldwide in December 2016 (3-month average basis) and a book-to-bill ratio of 1.06, according to SEMI.
SEMI reports that the 3-month average of worldwide bookings in December 2016 was $1.99 billion, 28.3% higher than November 2016 and 47.8% higher than December 2015.
The 3-month average of worldwide billings in December 2016 was $1.87 billion, 15.7% higher than November 2016 and 38.2% higher than December 2015.
“2016 ended the year with bookings levels approaching $2 billion," said Denny McGuirk, president and CEO of SEMI. “This combined with a significant increase in billings puts 2016 equipment sales of North American manufacturers well above 2015 levels and well positioned for 2017.”
SEMI will cease publishing the monthly North America Book-to-Bill report. The December 2016 report and press release are the last publication. The decision to discontinue the Book-to-Bill report is based on changes in reporting by some participants where the reporting of orders/bookings into the data collection program is no longer considered a necessary component of their industry analysis.
SEMI will continue publish a monthly billings report and issue a press release Worldwide Semiconductor Equipment Market Statistics (WWSEMS) report that SEMI prepares in collaboration with the Semiconductor Equipment Association of Japan (SEAJ). The WWSEMS report currently reports billings and bookings data by 24 equipment segments and by seven end market regions. Beginning with the January 2017 WWSEMS, bookings information will only be available for the back-end equipment segments of the industry.
World's top-six graphics card suppliers (excluding Nvidia) totaled about NT$5 billion (US$159.49 million) in 2016
Increasing sales of Nvidia graphics cards to affect profitability of other suppliers.
Efforts by Nvidia to push sales of its own-brand Founders Edition graphics cards are likely to affect the profitability of graphics card suppliers in Taiwan and China in 2017 and beyond, according to industry sources.
Increasing sales and profits earned by Nvidia from PC-use graphics cards has prompted the company to actively promote sales of the Founders Edition graphics cards, said the sources.
While supplying GPUs to graphics card makers, including Taiwan-based Asustek Computer, Gigabyte Technology, Micro-Star International (MSI), Palit Microsystems, Hong Kong-based Zotac and China-based Colorful, Nvidia is also competing with these clients in the PC-use graphics card market, noted the sources.
Excluding Nvidia, the sum of profits earned by the world's top-six graphics card suppliers totaled about NT$5 billion (US$159.49 million) in 2016, encouraging Nvidia to step into the segment to slice part of the growing earnings, said the sources.
PC Gaming Hardware Market Minting Billions (Chart 28)
Market has breached the $30 billion mark for the first time.
Jon Peddie Research (JPR) announced that the global PC Gaming Hardware market has breached the $30 billion mark for the first time.
Comprising pre and DIY built gaming computers, upgrades, and accessories such as input devices and audio/communication systems, the market exceeded $30 billion in 2016 and is forecast to grow at a 6% CAGR through 2019.
Due of an entrenched PC gaming culture, large population, and a lack of significant console traction, the Asia Pacific Region leads the world in both growth and market size with a forecasted 7% CAGR to 2019 from a TAM of almost $11.3 billion in 2016. However, North America and Western Europe both individually lead Asia Pacific for High-End hardware, albeit at lower growth rates of 5.78% and 6.63% vs. 9.61% respectively. The western appetite for PC gaming systems costing thousands of dollars is strong.
Ted Pollak, Senior Game Industry Analyst for JPR said “Global consumers continue to embrace the PC platform for video games due to multiple factors. The desktop ergonomic is popular because the display distance offers increased detail when using HD and UHD monitors.
Additionally there is superior control with mouse and keyboard control interfaces. This has been validated with eSports overwhelmingly being played on PCs. Additionally, product designers have given PC gamers thousands of options for complete customization from a functionally and aesthetic perspective. Examples of this include dedicated driving and flight systems, multi-display setups, super-powerful graphics boards, and a wide selection of gaming notebooks ranging from desktop substitutes to innovative “thin and light” offerings. Liquid cooling, lighting, solid state drives, genre specific gaming mice, mechanical keyboards, notebook graphics amplifiers, and Xbox accessory compatibility offer gamers more choices than they have ever had.”
JPR has renamed the three segments of hardware it tracks to Entry-Level, Mid-Range, and High-End (from Mainstream, Performance, and Enthusiast). Jon Peddie, President of JPR said “We know that gamers with lower budgets are just as passionate about gaming as those with more resources and are enthusiasts in the purest sense of the word, so we decided to transition to a more descriptive terminology. Nvidia and AMD are not ignoring these customers either and offerings like the GTX 1050 bring powerful graphics processing for around $120. We are also very excited about the prospects for the AMD Ryzen CPU platform and think it will be adopted at all three hardware tiers. Of course Intel CPUs currently offer superior power and value for gamers of every budget level, and their integrated graphics now rival game consoles.”
Part of the phenomena JPR observes is that the ranks of PC gamers are growing in the mid and High-End where ASPs are high. Also that the average PC sale is increasingly motivated by the video game use model which is important to understand in a stagnant or declining overall PC market. As basic computing functions become more entrenched with mobile devices, the PC ultimately becomes a power user’s tool, whether for gaming, photo and video editing, content creation, etc.
Japan's Electronics Unions to seek pay-scale hike of ¥3,000
An umbrella body of labor unions at Japanese electronics makers is set to demand a pay-scale hike of ¥3,000 a month in upcoming “shunto” spring wage negotiations, it was learned Thursday.
It will mark the fourth straight year of a pay-scale increase demand from the Japanese Electrical, Electronic and Information Union.
The size of the pay hike request is the same as that for last year’s shunto.
The union will formalize the pay hike demand after discussing the matter at a central committee meeting on Friday, the last day of the two-day committee meeting in Yokohama.
“We need to make a strong appeal for continuing increases in wage levels, in order to maintain and improve workers’ lives,” Takahiro Nonaka, head of the committee, said during Thursday’s meeting.
Following a decision by the central committee, major member unions will submit written requests to management sides on Feb. 16 to kick off negotiations. The management sides will give their responses together on March 15.
Sharp Corp., now rebuilding its operations under Taiwan’s Hon Hai Precision Industry Co., has decided to withdraw from the collective bargaining for the fifth straight year.
Faced with a huge loss in its U.S. nuclear plant business, Toshiba Corp. will also likely walk away from the shunto talks for the second year in a row. It plans to make a final decision after confirming numbers in its earnings report for April-December, due out on Feb. 14.
Source: Jiji Press