February PMI Leading Indicators
Markit Economics and Institute for Supply Management just released its February PMI leading indicators:
- The Global PMI is at its highest level since January 2014 (Chart 1) as key electronics producing countries except Taiwan saw a February 2017 increase (Chart 2).
- For the U.S. ISM reported the highest PMI since November 2014 while Markit Economics saw a slight sequential decline from January 2017 (Chart 3).
- The Eurozone PMI was at a 6-year high (Chart 4) however the results were mixed by European country (Chart 5)
- In Asia Taiwan and Indonesia saw declines but other key countries had PMI increases (Chart 6). See Japan (Chart 7), China (Chart 8), Taiwan (Chart 9) and South Korea (Chart 10).
Source: www.instituteforsupplymanagement.org
www.markiteconomics.com
North American PCB Industry Results for January 2017 (Chart 11)
IPC — Association Connecting Electronics Industries® announced the January 2017 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Sales declined in January, while the PCB book-to-bill ratio strengthened slightly to 0.99.
Total North American PCB shipments in January 2017 were down 4.0% compared to the same month last year. Compared to the preceding month, January shipments decreased 15.6%.
PCB bookings in January declined by 5.6% year-on-year. Bookings were down 7.6% compared to the previous month.
“January is typically a slow month for PCB sales and orders,” said Sharon Starr, IPC’s director of market research. “The North American PCB book-to-bill ratio remained below parity in January for the third straight month, but it climbed back up a notch to 0.99, which is an encouraging sign,” she added.
Source: www.ipc.org
Custer comment: Since the makeup of the PCB companies in the IPC sample typically changes each year it will take until the March data to calculate reliable 3/12 growth rates for N. American PCB shipments and orders for the 2017 sample companies.
Eleven Companies to account for 78% of Semi Capex in 2017 (Chart 12)
Three of the top 11 companies are expected to increase capex spending by 25% or more.
IC Insights’ McClean Report showed that eleven companies are forecast to have semiconductor capital expenditure budgets greater than $1.0 billion in 2017, and account for 78% of total worldwide semiconductor industry capital spending this year. By comparison, there were eight companies in 2013 with capital spending in excess of $1.0 billion. Three of the top 11 major capital spenders (Intel, GlobalFoundries, and ST) are forecast to increase their semiconductor spending outlays by 25% or more in 2017.
The biggest percentage increase in spending by a major spender in 2016 came from the China-based pure-play foundry SMIC, which ran its fabrication facilities at ≥95% utilization rate for much of last year. SMIC initially set its 2016 capital expenditure budget at $2.1 billion. However, in November, the company raised its spending budget to $2.6 billion, which resulted in outlays that were 87% greater than in 2015.
In contrast to the surge of spending at SMIC last year, the weak DRAM market spurred both Samsung and SK Hynix to reduce their total 2016 capital spending by 13% and 14%, respectively. Although their total outlays declined, both companies increased their spending for 3D NAND flash in 2016. As shown, Micron is forecast to cut its spending by 13% in 2017, even after including Inotera, which was acquired by Micron in December of last year.
In 2016, GlobalFoundries had plenty of capacity available. As a result, the company cut its capital expenditures by a steep 62%. As shown, the company is forecast to increase its spending this year by 33%, the second-largest increase expected among the major spenders (though its 2017 spending total is still expected to be about half of what the company spent in 2015). It is assumed that almost all of the spending increase this year will be targeted at installing advanced processing technology (the company announced that it is focusing its efforts on developing 7nm technology and will skip the 10nm node).
After spending about $1.06 billion last year, Sony is expected to drop out of the major spender listing in 2017 as it winds down its outlays for capacity additions for its image sensor business and its spending drops below $1.0 billion. As shown in Figure 1, ST is expected to replace Sony in the major spender listing this year by increasing its spending by 73% to $1.05 billion. It should be noted that ST has stated that this surge in outlays is expected to be a one year event, after which it will revert back to limiting its capital spending to ≤10% of its sales.
Source: www.ICInsights.com
Worldwide Wearables Market shipments grew 16.9% y/y to all-time high 33.9 million units in 4Q’16 (Charts 13 & 14)
Wearables Aren't Dead, They're Just Shifting Focus as the Market Grows 16.9% in the Fourth Quarter, According to IDC
The worldwide wearables market reached a new all-time high as shipments reached 33.9 million units in 4Q’16, growing 16.9% year over year. Shipments for the entire year grew 25% as new vendors entered the market and previous champions refreshed their product lineups. The year came to a close with 102.4 million devices shipped according to International Data Corporation (IDC).
Early on, the market was bifurcated between smart wearables – those capable of running third party apps – and Basic wearables, which lack this ability. However, despite the additional features and tech available on smart wearables, their utility and necessity has been questionable at best. In the past few months, two major platforms, WatchOS and Android Wear, have pivoted towards fitness and health applications. This is no accident, as that has been the only use case with any "stickiness" and the ability to run third party apps has taken a backseat.
"Like any technology market, the wearables market is changing," noted Ramon Llamas, research manager for IDC's Wearables team. "Basic wearables started out as single-purpose devices tracking footsteps and are morphing into multi-purpose wearable devices, fusing together multiple health and fitness capabilities and smartphone notifications. It's enough to blur the lines against most smart wearables, to the point where first generation smartwatches are no better than most fitness trackers.
"Meanwhile, smart wearables are also evolving," Llamas continued. "Health and fitness remains a major focus, but once these devices become connected to a cellular network, expect unique applications and communications capabilities to become available. This will also solve another key issue: freeing the device from the smartphone, creating a standalone experience."
Beyond the top five vendors are new entrants, including fashion icons like Fossil along with their sub-brands and emerging companies like BBK and Li-Ning, that are tapping into niche segments of the wearables market. In the case of Fossil, this happens to be as a luxury/fashion device, while BBK focuses on child-monitoring devices, and Li-Ning on step-counting shoes.
"With the entrance of multiple new vendors with strengths in different industries, the wearables market is expected to maintain a positive outlook, though much of this growth is coming from vendor push rather than consumer demand," said Jitesh Ubrani senior research analyst for IDC Mobile Device Trackers. "As the technology disappears into the background, hybrid watches and other fashion accessories with fitness tracking are starting to gain traction. This presents an opportunity to sell multiple wearables to a single consumer under the guise of 'fashion.' But more importantly, it helps build an ecosystem and helps vendors provide consumers with actionable insights thanks to the large amounts of data collected behind the scenes."
2016 also proved that there is more to wearables than just wrist-worn devices. Ear-worn devices (hearables) surpassed 1% of all shipments for the first time in a quarter and sensor-laden clothing accounted for more than 1% of the entire market for the full year 2016. Though these numbers were miniscule, they show promise as numerous devices are expected from notable vendors in 2017.
Source: www.idc.com
Worldwide Enterprise Storage Market declines in 4Q’16 (Charts 15 & 16)
Total worldwide enterprise storage systems factory revenue was down 6.7% year-over-year while reaching $11.1 billion in 4Q’16, according to IDC. Total capacity shipments were up 18.3% year over year to 52.4 exabytes during the quarter.
Revenue growth increased within the group of original design manufacturers (ODMs) that sell directly to hyperscale datacenters. This portion of the market was up 3.2% year over year to $1.2 billion. Sales of server-based storage declined 7.8% during the quarter and accounted for $3.4 billion in revenue. External storage systems remained the largest market segment, but the $6.4 billion in sales represented a year-over-year decline of 7.8%.
It should be noted that the size of the server-based storage market has been updated this quarter to reflect a change to IDC's enterprise storage systems taxonomy. IDC's new methodology for sizing the server-based storage market is now more inclusive than in the past, thus increasing the size of the market in terms of value, systems shipped, and capacity consumed. Changes to the server-based storage market have been applied retroactively to ensure continuity with past quarters.
"2016 represented a year of considerable change for the enterprise storage systems market," said Liz Conner, research manager, Storage Systems. "While the broader enterprise storage systems market has been impacted by headwinds, companies continue to increase their investments in several key areas, such as software-defined storage, cloud-based storage, all flash storage systems, and converged systems. As a result, traditional enterprise storage vendors have aligned their portfolios to meet the shifting demands."
Dell Technologies was the largest external enterprise storage systems supplier during the quarter, accounting for 32.9% of worldwide revenues. HPE, IBM, and NetApp finished in a statistical tie for the number two position with 10.2%, 10.1% and 10.0% of market share, respectively. HPE's share and year-over-year growth rate includes revenues from the H3C joint venture in China that began in May of 2016; as a result, the reported HPE/New H3C Group combines storage revenue for both companies globally. Hitachi rounded out the top five with revenue share of 7.0%.
Source: www.idc.com
Worldwide Server Revenue declined 1.9% y/y to $14.8 billion while shipments grew 0.1% y/y to 2.9 million units in 4Q’16 (Charts 17-20)
In the fourth quarter of 2016, worldwide server revenue declined 1.9% year-over-year, while shipments fell 0.6% from the fourth quarter of 2015, according to Gartner, Inc. In all of 2016, worldwide server shipments grew 0.1%, but server revenue declined 2.7%.
"There were some distinct factors that produced the final results for 2016," said Jeffrey Hewitt, research vice president at Gartner. "Hyperscale data centers (e.g., Facebook, Google) grew and, at the same time, drove some significant server replacements. Enterprises grew at a lower rate as they continued to leverage server applications through virtualization and in some cases, service providers in the cloud."
From a regional perspective, Asia/Pacific was the only region to exhibit positive growth in both shipments and revenue in the fourth quarter of 2016. All other regions declined, with Latin America experiencing the largest decline in shipments (12.2%, while the Middle East and Africa declined 14.7% in terms of revenue.
Hewlett Packard Enterprise (HPE) led the worldwide server market based on revenue in the fourth quarter of 2016 (see Table 1). The company ended the year with $3.4 billion in revenue for the fourth quarter of 2016 for a total share of 22.9% worldwide. However, revenue was down 11% compared with the same quarter in 2015.
Of the top five global vendors, only Dell and Huawei exhibited growth for the quarter, increasing 1.8% and 88.4%, respectively.
Source: www.gartner.com
Global HDD Shipments dropped 9.2% y/y to estimated 425.8 million units in 2016 (Chart 21)
There were 425.8 million hard disk drives (HDDs) shipped globally in 2016, slipping 9.2% on year, and annual shipments kept decreasing from the peak of 651.4 million units in 2010, according to International Disk Drive Equipment and Materials Association (IDEMA) Japan.
Global HDD shipments are expected to drop to 407.7 million in 2017. Despite continual drops in shipment volume, total storage capacity for globally shipped HDDs rose from 535.8EB (Exabyte) in 2015 to 633EB in 2016 and will rise to 756EB in 2017, meaning that the average storage capacity per HDD is on the rise.
Production of 1.8-inch HDDs has almost come to an end, and sales of 2.5-inch HDDs used in notebooks and 3.5-inch units have been on the decline. However, HDDs used in nearline storage have witnessed sales growth, reflecting increasing demand for NAS (network-attached storage) from individual and home users as well as small- and medium-size businesses.
There are only four HDD vendors, that is, Seagate Technology, Western Digital, HGST under Western Digital (originally under Hitachi) and Toshiba.
Source: www.digitimes.com
Worldwide Smartphone Shipments to grow 4.2% y/y to 1.53 billion units in 2017 and an additional 4.4% in 2018, growing at a 3.8% CAGR to 1.77 billion units in 2021 (Chart 22)
Coming off the smartphone market's lowest year-over-year growth of 2.5% in 2016, a new forecast from International Data Corporation (IDC shows worldwide smartphone shipments rebounding in 2017 and beyond). While growth is expected to remain in the low single digits, IDC predicts 2017 shipment volumes to grow 4.2% in 2017 and 4.4% in 2018 with a compound annual growth rate (CAGR) of 3.8% over the 2016-2021 forecast. Shipments are forecast to reach 1.53 billion units in 2017 and grow to 1.77 billion in 2021.
From a platform perspective, IDC doesn't expect much change throughout the forecast with Android accounting for roughly 85% of smartphone shipments and Apple making up the rest. The outlook for Microsoft-based smartphones remains virtually nonexistent given the lack of OEM partner support. Although Android growth will gradually decline, IDC does not yet see a point where shipments will contract year over year given the demand for new features such as augmented and virtual reality. For iOS, 2016 was the first time Apple experienced a year-over-year decline in shipments with iPhone volumes falling 7.0%. IDC expects a strong rebound in iPhone volumes in 2017 following the launch of its next set of devices with many rumored technical changes as well as a strong push for the 10th anniversary.
"We continue to get questions about longer smartphone life cycles given the number of markets with high penetration levels, but so far we are not seeing any trend in this direction," said Ryan Reith, program vice president with IDC's Worldwide Quarterly Mobile Device Trackers. "When you break down the market you have many different trends occurring. In some low-cost markets like China, we are beginning to see users gradually buying up to a more premium device. This is likely caused by poor satisfaction from previously owned devices and demand for better feature sets. And in mature markets, the premium space is as competitive as ever. This is illustrated by the number of high-end smartphone announcements at MWC this week."
"Despite the moderate 2.5% growth in 2016, phablets displayed 49% year-over-year growth as consumers continue to flock to big-screened devices in both emerging and developed markets," said Anthony Scarsella, research manager with IDC's Worldwide Quarterly Mobile Phone Tracker. "Phablets will undoubtedly be the main force driving the market forward thanks to an abundance of feature-rich devices in both the premium and entry-level segments. Total phablet shipments worldwide are expected to reach just under 680 million units by 2021, resulting in a compound annual growth rate of 9.2% for 2016–2021. In comparison, regular smartphones will grow at a rate of just 1.1% during the same period, proving perhaps that bigger may be better, or at least more popular when it comes to smartphones."
Source: www.idc.com
Global Consumer Smart Home spending to grow from $76 billion in 2016 to $158 billion by 2022 (Chart 23)
Strategy Analytics released its "State of the Smart Home Market: 1Q 2017" report citing a period of competitive turbulence as new vendors vie for position in the burgeoning market. Business models are in flux as service providers seek sustainable revenues other than for security monitoring and smart home platforms are seen as critical for differentiation. To maintain control of key features and enhancements some firms have built platforms in-house (e.g., Lowe's, Vivint) or acquired platform developers (AT&T, British Gas, Eneco); others such as Dixons Carphone, Telefonica, KPN, O2, Orange and Securitas have licensed platforms from Zonoff , Huawei, Qivicon, AT&T, MiOS and Alarm.com respectively.
Key findings include:
- Elegantly designed devices will become part of "Connected Integrated Systems". Device manufacturers need to create an ecosystem such as Apple is doing with HomeKit or join one.
- Developing a recurring revenue business model is a key factor for success. Cross-industry partnerships are essential to building compelling value added services.
- Offering professional installation for smart home services ensures higher customer satisfaction.
"Our user experience research confirms that consumers don't want multiple apps on a smartphone to manage multiple smart home devices," states Bill Ablondi, director in Strategy Analytics Intelligent Home Group and co-author of the study. "One-off devices will remain a significant portion of the market, but a unified software platform managing all the devices in the home as a system – an Intelligent Home System – is where we see the market going."
Predictions for 2017 include:
- Business models monetizing data collected by smart home devices will emerge
- Bluetooth Mesh emerges and coupled with Bluetooth 5 capabilities threatens ZigBee, Z-Wave and Thread
- The move away from the smartphone as the primary interface for the home will continue in 2017
Consumer spending on smart home services will nearly triple on a global basis from $17 billion in 2016 to $50 billion in 2022.
North America to remain the largest market over the forecast period, but China is driving growth in Asia-Pacific region.
Source: www.stratetegyanalytics
U.S. GDP increased at 1.9% annual rate in 4Q’16 (Chart 24)
U.S. economic growth slowed in the fourth quarter, with strong consumer spending offset by downward revisions to business and government investment.
Source: www.bea.gov/national/
