April PMI Leading Indicators

April Purchasing Managers Indices have been released.

  • Global PM dipped slightly in April (Chart 1) but still remained solidly in expansion territory (PMI>50).
  • Manufacturing growth accelerated in Europe and Japan and slowed in the U.S., China and Taiwan. South Korea remained in contraction although its PMI improved (Chart 2).
  • In the U.S. both the Markit Economics and ISM PMIs softened, signaling domestic manufacturing growth at a slower pace (Chart 3).
  • The Eurozone (Chart 4) remained strong although the rate of PMI growth dipped slightly in Germany and more noticeably in Russia and Sweden (Chart 5).
  • Asia was mixed (Chart 6). Japan improved to near its 4-year high (Chart 7), China declined significantly (Chart 8), Taiwan’s growth slowed slightly (Chart 9) and South Korean continued to contract but at a slower pace (Chart 10).

 

Source: www.markiteconomics.com

Source: www.instituteforsupplymanagement.org

1Q’17 Global Growth by Electronic Sector – Updated

We continue to update the estimated growth by sector of the world electronic supply chain.

  • Most sector groups except military electronics, instruments and control equipment and printed circuit boards showed positive growth in 1Q’17 vs. 1Q’16 (Chart 11).
  • Based on the revenue composites of 213 global OEMs electronic equipment sales rose an estimated 3.2% in the first quarter (Charts 12-14).

 

Note that these estimates are still preliminary and based on a combination of actual and estimated first quarter revenues of publicly traded companies. Many large OEMs including HP, Lenovo, Dell, Applied Materials, Cisco and Medtronic have not yet reported.

Source: Company financial reports with Custer Consulting Group analysis

U.S. March “Factory Orders” report

The U.S. Department of Commerce released its detailed report on March shipments, orders and inventories.

  • Monthly electronic equipment orders have declined slightly in the last four months (Chart 15) with medical, measuring and control equipment remaining the largest end market sector (Chart 16).
  • Vehicle shipments are flat (Chart 17).
  • Aircraft shipments improved in March (Chart 18) and orders rose (Chart 19).
  • Military electronic shipments and orders were little changed from February with shipments declining and orders rising slightly (Chart 21).
  • Electromedical, measurement and control equipment orders and shipments flattened (Chart 22).
  • Passive component shipment and order growth continued at a modest pace (Chart 23).

 

Chart 24 summarizes the 1Q’17 versus 1Q’16 growth of the domestic electronic supply chain.

Data sources are noted on the individual charts

Global Semiconductor Sales in March Up 18.1% Year-to-Year (Charts 25-29)

SIA released global semiconductor sales data for the month of March 2017. Key points:

  • Worldwide sales of semiconductors reached $30.9 billion for the month of March 2017, an increase of 18.1% compared to the March 2016 total of $26.2 billion and 1.6% more than the February 2017 total of $30.4 billion.
  • Year-to-year growth in March was the market's largest since October 2010.
  • Sales from the first quarter of 2017 were $92.6 billion, up 18.1% compared to the first quarter of 2016 but down 0.4% compared to the last quarter of 2016.

 

“Global semiconductor sales saw solid sales growth in March, increasing sharply compared to last year and more modestly compared to last month,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Global sales are up 18% compared to last year, the largest increase since October 2010, with all major regional markets posting double-digit year-to-year growth. All major semiconductor product categories also experienced year-to-year growth, with memory products continuing to lead the way.”

Source: www.semiconductors.com

North American PCB shipments dropped 4.7% y/y in March 2017 and bookings decreased 6.7% (Charts 30-33)

North American PCB Order Growth Boosts Book-to-Bill Ratio IPC announced the March 2017 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Although sales and orders continued below last year’s levels, the PCB book-to-bill ratio continued upward, reaching 1.07.

Total North American PCB shipments in March 2017 were down 4.7% compared to the same month last year. This year to date, shipments are 3.8% below the same period last year. Compared to the preceding month, March shipments increased 21.8%.

PCB bookings in March decreased 6.7% year-on-year, pushing year-to-date bookings down to 1.7% below the same period last year. Bookings were up 12.8% compared to the previous month.

“North America PCB sales continued below last year’s level in March, while year-on-year order growth fell back into negative territory after a brief upturn in February,” said Sharon Starr, IPC’s director of market research. “The good news is that the book-to-bill ratio continued to climb, albeit due to weaker performance in sales than in orders in the first quarter, but positive ratios may indicate strengthening PCB sales in the next several months,” she added.

Source: www.ipc.org

Worldwide Smartphone Shipments grew 4.3% to 347 million units in 1Q’17 (Charts 34 & 35)

According to preliminary results from the International Data Corporation (IDC) phone companies shipped a total of 347.4 million smartphones worldwide in the first quarter of 2017 (1Q’17). In light of what might seem like a slowing market, consumers continue to show demand for smartphones and OEM flagship hype seems strong as ever. Worldwide smartphone shipments grew 4.3% in 1Q’17, which was slightly higher than IDC's previous forecast of 3.6% growth.

According to preliminary results from the International Data Corporation (IDC) phone companies shipped a total of 347.4 million smartphones worldwide in the first quarter of 2017 (1Q’17). In light of what might seem like a slowing market, consumers continue to show demand for smartphones and OEM flagship hype seems strong as ever. Worldwide smartphone shipments grew 4.3% in 1Q’17, which was slightly higher than IDC's previous forecast of 3.6% growth.

When breaking down precisely where the first quarter growth came from, IDC continues to see the largest catalysts being a handful of Chinese OEMs. The clear leaders are Huawei, OPPO, and vivo, which have all well outpaced market growth for over a year now. And as these companies gain share in new territories the potential to continue this trend is high.

"Although we have seen an abundance of premium redesigned flagships that just entered the market, moving forward, we still expect most of the growth to come from more affordable models in a variety of markets" said Anthony Scarsella, research manager with IDC's Worldwide Quarterly Mobile Phone Tracker. "Despite all the popularity and media hype around premium devices, we continue to witness a shift in many companies' portfolios geared towards affordable devices with premium-type styling compared to flagship models. Companies have started to implement a single premium design language that ultimately blurs the lines between the high-end and the low-end, allowing the average consumer to jump on the brand without a hefty upfront investment."

Source: www.idc.org

Smartphones' average DRAM content will increase 33.4% y/y to 3.2GB per device in 2017

A rally in mobile DRAM prices will hold back the growth of average per device memory content for smartphones in 2017, according to TrendForce. Average DRAM content in smartphones is forecast to reach 3.2GB per device in 2017, said TrendForce, which previously estimated 3.7GB.

TrendForce's revised outlook for 2017 average DRAM content in smartphones represents an increase of 33.4% compared to 2016.

"Smartphones' average memory content was around 2.4GB in 2016, and its growth for this year was initially expected to be significantly larger due to LPDDR4 becoming the market mainstream," said TrendForce analyst Avril Wu. "However, the continuing rise in prices of mobile DRAM products is increasing the cost pressure on smartphone makers and constraining their efforts to raise memory specifications for their products."

Wu continued that smartphone vendors especially Android phone makers intend to increase the memory content of their new products because of performance and consumer preference.

Several high-end smartphones feature 4GB or even 6GB of mobile DRAM, which are already comparable to the specs of some mainstream notebooks, Wu identified.

Nevertheless, intensifying competition and spiking prices of mobile DRAM products will decelerate the growth of average per device memory content for smartphones in 2017, Wu said. Very few among the world's smartphone companies, such as Samsung and Apple, have the economies of scale to earn impressive profits. "The recent price increases in the mobile DRAM market have further added to the cost burdens of smartphone makers, thereby slowing the growth of the average memory content per device," Wu indicated.

In addition, TrendForce predicted that of the three new iPhone devices that will be released in 2017, the model with a 5.8-inch AMOLED display and the model with a 5.5-inch LCD display will both have 3GB of memory, while the 4.7-inch LCD model will carry 2GB. An iPhone that comes with 4GB of RAM is unlikely to arrive until 2018, according to TrendForce.

Source: www.digitimes.com

Source: www.trendforce.com

Worldwide Tablet Shipments Decline 8.5% in the First Quarter as the Slow Migration from Slates to Detachables Continues (Charts 36 & 37)

The worldwide tablet market once again contracted in the first quarter of 2017 (1Q’17) with total shipments of 36.2 million, a year-over-year decline of 8.5%, according to preliminary data from the International Data Corporation. The first quarter contraction marks the tenth straight quarter that tablets have experienced a decline over the same quarter a year earlier, with the previous five quarters recording double-digit drops.

The tablet market is comprised of two different product categories, which are headed in very different directions as noted by IDC in the past. Devices offering a first-party keyboard, which IDC refers to as detachable tablets, continue to grow for the most part. Many of these devices have quickly grown to resemble products that IDC refers to as traditional notebook PCs or laptops. The other product category is slate tablets (those lacking this keyboard option), which saw shipments peak in 2014 and is now in a steep decline that IDC believes will continue throughout the forecast period.

"As far as most are aware, the tablet market was created in 2010 with the launch of the original iPad, despite unsuccessful product attempts by other OEMs in the years leading up to this," said Ryan Reith, program vice president with IDC's Worldwide Quarterly Mobile Device Trackers. "The rate at which the tablet market grew from 2010 to 2013 was unlike many other consumer-oriented device markets we've seen before. However, it appears for many reasons consumers became less eager to refresh these devices, or in some instances purchase them at all. We continue to believe the leading driver for this was the increased dependency on smartphones, along with rather minimal technology and form factor progression."

At the same time that this roller coaster of tablet growth, peak, and decline was taking place, the personal computer market was experiencing one the worst declines the market's history. Fast forward to 1Q’17 and traditional PCs have returned to growth, albeit relatively flat growth, for the first time since 1Q’12.

"A long-term threat to the overall PC market lies in how the market ultimately settles on the detachable versus convertible debate," said Linn Huang, research director, Devices & Displays at IDC. "To date, detachable shipments have dwarfed those of convertibles, but growth of the former has slowed a bit. In IDC's 2017 U.S. Consumer PCD Survey, fielded over the previous two months, detachable owners held slightly more favorable attitudes towards their detachables than convertible owners did for their convertibles. However, owners of both were far more likely to recommend a convertible over a detachable."

IDC's outlook is that detachables will continue to far outpace convertibles in shipments, but the market pendulum seems to be swinging back in favor of convertibles if ever so slightly. Still, the detachable market has proven it will move with major product launches and Microsoft and Apple have yet to launch their 2017 salvos.

Source: www.idc.com

Global notebook shipments increased 10.1% y/y to 35.8 million units in 1Q’17

Taiwan-based ODMs shipments grew 13.5% y/y to 29.3 million units in the period

There were 35.82 million notebooks (not including 2-in-1 models) shipped globally in the first quarter of 2017, decreasing 13.7% on quarter but increasing 10.1% on year.

HP, Lenovo, Dell, Apple and Acer were the five largest vendors, while Taiwan-based ODMs shipped 29.28 million units in the period, slipping 12.6% on quarter but growing 13.5% on year, according to Digitimes Research.

Source: www.digitimes.com

Top 10 German EMS Providers (Chart 38)

Accounting for 13.6% of European EMS revenues and 34.7% of those generated in Western Europe Germany is, and will, continue to play a key role in the development of the European EMS industry. The industry is served by a large number of companies although the majority are small to medium-sized with revenues below Euro 10 million and for many revenues are below euro five million.

As with other countries in Western Europe domestic players dominate the market with Zollner, Europe’s largest indigenous EMS provider, the clear industry leader with 13% share of revenues.

Within the Top 10 there are two foreign-owned groups both of which have acquired German companies. Neways International, with headquarters in Son, the Netherlands, significantly expanded its existing manufacturing operations in the country following the acquisition of BuS Holding GmbH in 2014 while the French company Asteelflash established a presence in the country following the acquisition of EN ElectronicNetwork in 2012.

Of the global Tier 1 EMS providers Sanmina and Jabil Circuit have operations in Germany although it is reported that Jabil, which focused on optoelectronics, has ended small series production at the site and will focus on development only. Flex, the world’s second largest EMS provider, sold its EMS site in Paderborn in 2014 and has also transferred production at Flextronics Automotive GmbH & Co KG to a site in Hungary and is focusing on R&D and prototyping at the site.

Source: www.rer.co.uk

Samsung poised to become largest semiconductor supplier in 2Q’17 (Chart 39)

Intel could yield the #1 position it has held since 1993.

After nearly a quarter of a century, the semiconductor industry could see a new #1 supplier in 2Q’17. If memory market prices continue to hold or increase through 2Q’17 and the balance of this year, Samsung could charge into the top spot and displace Intel, which has held the #1 ranking since 1993. Using the mid-range sales guidance set by Intel for 2Q’17, and a modest, yet typical, 2Q sales increase of 7.5% for Samsung, the South Korean supplier would unseat Intel as the world’s leading semiconductor supplier in 2Q’17. If achieved, this would mark a milestone achievement not only for Samsung, specifically, but for all other competing semiconductor producers who have tried for years to supplant Intel as the world’s largest supplier. In 1Q’16, Intel’s sales were 40% greater than Samsung’s, but in just over a year’s time, that lead may be erased and Intel may find itself trailing in quarterly sales.

Samsung’s big increase in sales has been driven by an amazing rise in DRAM and NAND flash average selling prices. IC Insights expects that the tremendous gains in DRAM and NAND flash pricing experienced through 2016 and into the first quarter of 2017 will begin to cool in the second half of the year, but there remains solid upside potential to IC Insights’ current forecast of 39% growth for the 2017 DRAM market and 25% growth in the NAND flash market.

Intel has been locked in as the world’s top semiconductor manufacturer since 1993 when it introduced its x486 processor and soon thereafter, its revolutionary Pentium processor, which sent sales of personal computers soaring to new heights.

Over the past 24 years, some companies have narrowed the sales gap between themselves and Intel, but never have they surpassed the MPU giant. If memory prices don’t tank in the second half of this year, it’s quite possible that Samsung could displace Intel in full-year semiconductor sales results as well. Presently, both companies are headed for about $60.0 billion in 2017 semiconductor sales.

IC Insights 5/17

Top MCU Supplier in 2016 (Chart 40)

MCU suppliers aligning themselves to be at the epicenter of big-growth opportunities in IoT, automotive, and other emerging systems.

Strong growth in MCUs for IoT applications and suppliers jockeying for market share in this IC segment have resulted in several major acquisitions that changed the pecking order of MCU leaders in 2016, according to data released in IC Insights' April Update to The McClean Report, which was released earlier this month. Chart 40 ranks the largest MCU suppliers in 2016 by dollar-sales volume. Among the top MCU suppliers shown, NXP, Microchip, and Cypress Semiconductor moved up in the sales ranking during 2016 with strong increases in revenues, which were driven by acquisitions of IC companies that sold microcontrollers. Meanwhile, those suppliers not making significant acquisitions in microcontrollers posted low-single digit percentage increases or declines in MCU sales in 2016.

Although overall growth in microcontrollers has wobbled and stalled in the past couple years, MCUs remain at the epicenter of tremendous growth in the Internet of Things, automotive, robotics, embedded applications and other emerging systems. Major MCU suppliers have been improving their portfolios to address many of these key markets. Part of that improvement process has included merging and acquiring competitors in order to gain a quick foothold into these developing markets.

In 2016, NXP in the Netherlands overtook Renesas Electronics in Japan as the world’s largest microcontroller supplier with MCU revenues climbing 116% following its $11.6 billion purchase of U.S.-based Freescale Semiconductor in December 2015. Prior to its acquisition, Freescale was ranked second in MCUs and was catching up with Renesas in microcontroller sales with only $210 million separating the two companies in 2015 versus about a $1 billion gap in 2014. Renesas suffered a 19% drop in MCU dollar sales in 2015 (largely due to the weak yen exchange rate in that year but also because of the continued fallout from Japan’s troubled economy). In 2016, Renesas’ fall in MCU sales eased, dropping 4% to nearly $2.5 billion, or about 16% of the total microcontroller market. In 2011, Renesas’ MCU market share was 33% of worldwide microcontroller sales.

The Freescale acquisition moved NXP from sixth in the 2015 MCU ranking to the top spot in 2016 with a market share of 19% ($2.9 billion). About three-quarters of NXP’s 2015 microcontroller sales were 8-bit and 16-bit MCUs used in smartcards. After Freescale’s business was merged into NXP, smartcard MCUs accounted for a little over one-quarter of the company’s total microcontroller sales in 2016. MCUs developed and introduced by Freescale are aimed at a wide range of embedded control applications, including significant amounts in automotive systems. NXP and Freescale both have developed extensive 32-bit MCUs with Cortex-M CPU design cores licensed from ARM in the U.K.

U.S.-based Microchip Technology climbed from fifth in the 2015 MCU ranking to third in 2016 with sales increasing 50% to $2.0 billion following its $3.4 billion acquisition of Atmel in 2Q’16. U.S.-based Atmel was ranked ninth in MCU sales in 2015 ($808 million). Prior to buying Atmel, Microchip had been the only major MCU supplier not licensing ARM CPU technology. For about 10-years, Microchip has developed and sold 32-bit MCUs, based on a RISC-processor architecture developed by MIPS Technologies (which is now owned by Imagination Technology in the U.K., a rival of ARM). Six months after completing the Atmel acquisition, Microchip said it would expand both its MIPS-based PIC32 MCU product line and Atmel’s ARM-based SAM series. Microchip has promised to “remain core agnostic, fitting the best solution with the right customer and for the right application.”

Meanwhile, Cypress in Silicon Valley moved into eighth place in the MCU ranking with sales increasing 15% in 2016 to about $622 million. Cypress boosted its presence in MCUs when it acquired Spansion for about $5.0 billion in stock in March 2015. Originally spun out of Advanced Micro Devices as a NOR flash memory supplier, Spansion had purchased Fujitsu Semiconductor’s Microcontroller and Analog Business in 2013 for $110 million as part of its efforts to expand beyond nonvolatile storage ICs. Spansion also licensed ARM’s 32-bit CPU cores for microcontrollers in 2013. Cypress’ increase in microcontroller sales was partly a result of having a full year of revenue from Spansion’s MCU business but also growth in the company’s programmable system-on-chip (PSoC) products, which combine microcontroller functionality with user-configurable peripherals of mixed-signal and digital functions that are targeted at end-use applications.

The biggest decline in the MCU leader list was posted by Samsung, which saw its sales drop 14% in 2016, primarily because of weakness in the smartcard microcontroller market. Samsung sells MCUs to OEMs but also serves in-house needs for its own brands of consumer electronics, computers, and communications systems (i.e., smartphones).

Source: www.icinsights.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.

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