Business Outlook for Europe’s Electronics Industry
Custer was the keynote speaker at the EIPC summer conference in Birmingham, England. His topic was “Business Outlook for the Global Electronics Industry (with emphasis on Europe).”
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May PMI Leading Indicators
Markit Economics and the Institute for Supply Management have just released their May Purchasing Managers indices. Growth is slowing in many areas of the world and most significantly in Asia.
- The global PMI declined modestly from its March peak. Although well in expansion territory its rate of growth has slowed (Chart 1).
- Chart 2 compares the May vs. April PMIs for key countries.
- The USA improved slightly in ISM’s PMI tally but slipped in Markit’s version (Chart 3).
- The Eurozone PMI climbed to a new 6-year high (Chart 4) but results varied by country (Chart 5) with Germany and Russia up strongly but most other European
- Asia saw broadly lower PMIs except for Japan (Chart 6).
- China (Chart 7) moved back into contraction (PMI<50), Taiwan saw slower growth (Chart 8) and South Korea remained in contraction (Chart 9)
European Semiconductor Distribution market increased 10.5% y/y to 2.13 billion Euros in Q1/CY17 (Charts 10 & 11)
- Semiconductor distribution notes record sales in Q1 /CY17.
- Eastern Europe, Israel and Turkey to lead the charge.
- MOS Micro, Logic and Memory show highest impact.
For the European semiconductor industry, 2017 began with a dynamic start. According to DMASS Ltd., the quarter ended with a staggering 2.13 Billion Euro, 10.5% higher than the last record quarter, Q1/CY16.
Georg Steinberger, chairman of DMASS: "The signals at last year's end did not really point to such a dynamic growth. Our outlook for 2017 was actually rather modest, given that there were not too many growth signs in the major regions of Europe and considering the macro-economic dangers looming all around us. So, the record quarter came as a bit of a surprise. As to the reason, all industry segments seem to contribute, from automotive to industrial. The bookings are also quite strong; lead-times of various product families are moving out, prices are increasing. All in all, 2017 could bring a strong growth throughout the year."
From a regional perspective, again Eastern Europe and countries like Israel, Russia and Turkey led the growth, followed by Iberia and some selected countries in the Nordic region. The most interesting country in Q1 was Poland, which has become the fifth-largest country in semiconductor distribution in Europe. Of the major regions, Germany grew below average, but UK, France and Italy remained in the low single-digits. In detail, Germany grew by 7.2% to 650 million euro, Italy by 2.2% to 205 million euro and France (+3.8% to 152 million euro) overtook the UK (+3.3% to 151 million euro). Nordic grew by 8.6% to 178 million euros.
Georg Steinberger: "Eastern Europe's strength is not surprising, given that the majority of the countries there act as lower-cost manufacturing region for Western Europe. The recent years have seen a huge production shift, predominantly from Germany, which explains why the growth in Germany has been rather moderate compared to the dynamics of its entire industry. Anyhow, over the next 12 to 18 months, we expect some serious channel shifts (distribution to direct, but also in the other direction) that could influence the overall development of the distribution market."
Product-wise, last quarter was clearly showing a general uptick in distribution friendly products like Memories, Analog, MOS Micro and Logic, followed by Power. On the negative side, Programmable Logic shrunk, Discrete and Standard Logic grew very moderately, Sensors and Opto nicely but below average. Analog grew by 13% to 654 million euro, MOS Micro by 11.6% to 435 million euro, Power by 11.2% to 207 million euro, Memory by 13.4% to 174 million euros, Programmable Logic shrunk by 3.1% to 135 million euro and Other Logic grew by 18.2% to 114 million euro.
Georg Steinberger: "One quarter does not prove a trend, so let us be cautious here with an interpretation. What is interesting, though, is that rising stars like LEDs or Programmable Logic have not participated in this overall upswing last quarter, despite the fact that these technologies appear in many industry segments. It remains to be seen how these fields develop over the course of the year."
DMASS Ltd. reports to members only new statistics on Passive Components, Electromechanical Components and Power Supplies.
North American PCB shipments were down 6% y/y in April 2017 while bookings increased 4.3% y/y
North American PCB Order Growth Pushes Book-to-Bill Ratio Higher
IPC — Association Connecting Electronics Industries® announced today the April 2017 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Although sales continued below last year’s levels, orders were up and the PCB book-to-bill ratio continued to climb, reaching 1.09.
Total North American PCB shipments in April 2017 were down 6.0% compared to the same month last year. This year to date, shipments are 4.5% below the same period last year. Compared to the preceding month, April shipments increased 10.8%.
PCB bookings in April increased 4.3% year-on-year, resulting in flat (0.0%) bookings growth compared the same period last year. Bookings were up 17.0% compared to the previous month.
“A continuation of sluggish sales and a rebound in orders for the North American PCB industry drove the April 2017 book-to-bill ratio to its highest level in 20 months,” said Sharon Starr, IPC’s director of market research. “Despite lagging sales, three consecutive months of positive and climbing book-to-bill ratios is a positive indicator for strengthening sales in the next three to six months,” she added.
Automotive IC market is expected to grow 22% y/y to a new record high of $28 billion in 2017 (Charts 12 & 13)
- 2017 Automotive IC Market on Pace for Record Year
- 22% forecast increase driven by system growth, rising ASPs for memory and logic devices.
Electronic systems that improve vehicle performance; that add comfort and convenience; and that warn, detect, and take corrective measures to keep drivers safe and alert are being added to new cars each year. Consumer demand and government mandates for many of these new systems, along with rising prices for many IC components within them, are expected to raise the automotive IC market 22% this year to a new record high of $28.0 billion.
Over the past several years, the global automotive IC market has experienced some extraordinary swings in growth. After increasing 11.5% in 2014, the automotive IC market declined 2.5% in 2015, but then rebounded with solid 10.8% growth in 2016. It is worth noting that the sales decline experienced in 2015 was primarily the result of falling ASPs across all the key automotive IC product categories—microcontrollers, analog ICs, DRAM, flash, and general- and special-purpose logic ICs, which offset steady unit growth for automotive ICs that year.
However, in the second half of 2016, steadily rising ASPs (along with demand for the new automotive systems) helped return the automotive IC market to double-digit growth. In 2017, exceptionally strong increases in DRAM and flash memory prices are expected to help drive the total automotive IC market to an extraordinary increase of 22.4%.
IC Insights recently revised its IC market outlook for 2017 and now shows DRAM average selling prices rising 50% in 2017, NAND flash ASPs increasing 28%, and the average selling price for automotive special-purpose logic devices increasing 34%. These strong ASPs gains, coupled with ongoing system demand, are driving the strong automotive IC market growth this year.
Collectively, microcontrollers, analog, standard logic, and memory ICs used in automotive applications accounted for only about 8% of total IC market share by system type in 2016, but that share is forecast to increase to more than 10% in 2020, when automotive is expected to become the third-largest end-use category for ICs, trailing only the communications and computer segments. Through 2020, IC Insights anticipates that advanced driver-assistance systems (ADAS) will be the biggest user of automotive ICs. Various ADAS systems are currently helping cars and drivers remain safe on the road and they are proving to be essential building blocks to semi-autonomous and autonomous vehicles that are being proposed for the next decade.
Global LED filament light bulb demand increased from over 70 million units in 2015 to 250 million units in 2016 and is estimated to reach 400-500 million units in 2017
Global demand for LED filament light bulbs, which are styled to look like traditional incandescent light bulbs, has increased from over 70 million units in 2015 to 250 million units in 2016 and further to an estimated 400-500 million units in 2017, according to industry sources.
The fast growing demand is possibly because many countries, such as the US, Canada and Australia, have ended sales of incandescent light bulbs and China has prohibited production and sale of 60W and above incandescent bulbs, the sources said.
MLS, the largest China-based LED packaging service provider, will invest CNY1.287 billion (US$187 million) to set up a factory with annual production capacity of 230 million LED filament light bulbs in eastern China, the sources noted.
Epistar, the largest Taiwan-based LED packaging service provider, has licensed patents regarding LED filament lighting to China-based LED lighting makers Leedarson Lighting and Foshan Lighting and Hong Kong-based one Super Trend Lighting, the sources indicated.
Worldwide AR/VR headset shipments totaled 2.3 million units in 1Q17; with expectations for triple-digit growth for 2017 (Charts 14 & 15)
Worldwide shipments of Augmented Reality (AR) and Virtual Reality (VR) headsets continued to soar with a total of 2.3 million units shipped in the first quarter of 2017 (1Q17), according to the International Data Corporation (IDC) Worldwide Quarterly Augmented and Virtual Reality Headset Tracker. With a long list of new products scheduled to ship in the second half of 2017, IDC is forecasting triple-digit growth for the full year.
VR represented the vast majority (more than 98%) of headsets shipped during the first quarter. Within VR, about two-thirds of all headset shipments were screenless viewers, such as Samsung's Gear VR and Google's Daydream View. Meanwhile, tethered VR headsets, such as the HTC Vive, Oculus Rift, and Sony's PSVR, accounted for one third of the market.
"The VR market is still very young and consumers seem to be taking a cautious approach," said Jitesh Ubrani senior research analyst for IDC's Mobile Device Trackers. "With plenty of headset options already in the market and even more coming soon, hardware isn't the issue. The bigger challenge is the slow growth in content that appeals to a mass audience, combined with the confusion associated with a lack of cross-platform support."
AR headsets saw year-over-year shipment growth of 77.4% as new products began shipping and existing headsets expanded distribution to additional countries. "It's very early days in terms of augmented reality headsets, with the vast majority of products shipping into the market focused on getting hardware into the hands of developers," said Tom Mainelli, vice president of Devices and AR/VR at IDC. "Meanwhile, we expect most consumers to experience their first taste of augmented reality through the cameras and screens of their existing mobile devices such as smartphones and tablets."
Samsung continued to drive the highest shipment volumes in the market with its Gear VR headset. Samsung's large distribution network and its partnership with Oculus have allowed the company to take the lead in the market. Though it was the only company in the top 5 to see an annual decline in shipments, IDC expects this to be temporary as the decline was largely tied to the absence of their flagship Note line of phones. The recently released Gear VR with Controller provides a welcome update to the headset and will likely bode well for Samsung moving forward.
Sony has only shipped its PlayStation VR headset for two quarters, but the company has already found its way into the top 5. Sony controls its entire VR ecosystem, including the headset, game console, and content. With a large installed base of PlayStation 4s and the support of AAA games, Sony will likely remain a leader in the near term.
With motion controllers and outside-in (room based) tracking right out of the box, the HTC Vive has provided a high-end solution for those willing to pay a premium for the best experience. Outside of the consumer market, HTC has enjoyed success in the commercial space as VR cafes have been popping up around the world, particularly in Asia. This success has also led the company to launch a commercial-friendly app store and subscription model, something other VR headset providers are trying to replicate.
Facebook was among the first premium products in the market with the Oculus Rift, though in recent months the company has faced a few hiccups in terms of retail space. However, with the addition of touch controllers, improved room-scale tracking, and a price drop from $599 to $499, IDC believes Oculus will continue to provide a compelling alternative for VR enthusiasts.
TCL rounded out the top five with the Alcatel VR headset that it bundles with Alcatel Idol 4/s smartphones. Despite notable shipment volumes, the company faces challenges due to a limited platform that largely relies on existing Cardboard apps and Littlstar (a third-party VR video company) to provide apps, games, and videos for their headset. Without control over the content and with limited distribution and compatibility, TCL/Alcatel's VR ambitions will likely face an uphill battle in the coming quarters.
Charts represent shipments of Augmented Reality and Virtual Reality headsets only. Any additional software, services, or compute devices (e.g. PC, game console, smartphone, etc.) are excluded.
Shipments of simplistic headsets that do not have any technology built in are excluded. Examples of such headsets include Google Cardboard and other Cardboard-like devices.
Automotive touch screen shipments will grow 11% y/y to 50 million units in 2017 (Chart 16)
Capacitive-touch technology will exceed resistive-touch technology in cars in 2017
With consumers already accustomed with using smartphones and tablet PCs in their everyday lives, touch screens are now increasingly making their way into their vehicles, too. Automotive touch panel shipments are expected to top 50 million units in 2017, up 11% from 45 million units in 2016, according to IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions. More importantly, capacitive-touch screen shipments are forecast to surpass that of traditionally-dominated resistive-touch screens in vehicles in 2017.
"Projected capacitive-touch technology is commonly found in consumer smartphones and tablet PCs, which consumers have grown very comfortable using," said Shoko Oi, Senior Display Analyst at IHS Markit. "Although there are safety concerns about operating touch screens while driving, automotive touch panels are becoming a standard feature in new vehicles entering the market."
Automotive screens now display content from a variety of sources coming from both inside and outside the car. However, many newer applications now require touch screen panels, which shifts the role of in-car displays from simply revealing information visually to becoming an actual human-machine interface. This shift, along with the increased volume of displayed data, is driving a growing need for easy-to-see designs of displays that incorporate larger sizes, non-rectangular or curved shapes, as well as higher resolutions.
According to the IHS Markit Automotive Touch Panel Market Report, as vehicle models are updated, projected capacitive-touch technology is replacing resistive-touch technology as the mainstream touch solution for automotive displays despite the higher module costs.
"The latest trends toward connected cars and telematics are prompting more car manufacturers to consider the adoption of projected capacitive-touch screens that can provide a similar user experience found in touch displays of smartphones and tablet-PCs," Oi said.
Global and China Automotive Infotainment Industries (Chart 17).
In 2016, the OEM Infotainment market size was estimated at USD24.2 billion, with shipments of about 32.1 million units and the average price of USD754. By 2020, the market size is expected to reach USD31 billion, the shipment about 38.3 million units, and the average price USD809. The main reason for the price increase lies in the adding of multiple features: ADAS (such as reversing video, 360 panorama) and enhanced communication functions (like Telematics system, especially 5G system); meanwhile, the increasingly complicated operating system of Infotainment causes higher and higher development costs, and beyond that, various HMI interfaces, capacitive touch screens, gesture, voice control and so on are developed.
Mobile phones have begun to compete with In-Vehicle Infotainment (IVI). With the popularity of the 4G network, the access speed of mobile phones to the network has been greatly accelerated. People have been accustomed to using mobile phones for the purpose of the Internet surfing, navigation and real-time traffic information, showing strong user stickiness. In this case, it is practical to follow the habits of consumers rather than educating them. The growth rate of IVI is to slow down beyond all doubt.
In 2016, Bosch and Aisin AW outperformed other companies. With a perfect layout in China, Bosch acts as a core supplier of SAIC GM, Shanghai Volkswagen and FAW-Volkswagen (except Audi) which are the top three carmakers in China; although the shipment growth rate was not high, the installation rate rose in 2016. Aisin AW further seized more market share in the supply chain of Audi and GM, grabbed the market share from Harman, Panasonic, Alpine and Pioneer, and attained the shipment of about 1.7 million units (an upsurge of 18%) in 2016. Harman averted its development focus from the medium and high-end market to the medium and low-end market, but the profit defied expectations despite the revenue swelled.
Chinese Infotainment industry can be divided into two camps: foreign and Chinese ones. The foreign camp mainly includes Bosch, Continental Automotive, Xugang Electronics, Harman and Japanese vendors.
Bosch mainly serves FAW-Volkswagen, Shanghai Volkswagen and Shanghai GM. Continental targets FAW-Volkswagen and Shanghai Volkswagen. Xugang Electronics has Ford as its key customer.
Japanese vendors serve BMW, Mercedes-Benz, Audi and Japanese carmakers, in which Aisin AW and Alpine are more powerful as the main suppliers of Audi. South Korean carmakers are all supported by Mobis. In the Chinese camp, the first-tier vendors embrace Desay SV Automotive, Shenzhen Hangsheng Electronics and Foryou. Desay SV Automotive primarily serves FAW-Volkswagen, FAW Mazda, Great Wall Motor and Chery, and its AM shipment is also high. Hangsheng Electronic cooperates with SAIC-GM-Wuling, Dongfeng Nissan, Dongfeng Venucia, Dongfeng Motor and Geely. Foryou’s main customers consist of Great Wall Motor, Geely, SAIC-GM-Wuling and Chery, but Foryou’s AM shipment plunges. Coagent Electronics S & T, Pateo, ChinaTSP, Inc. and Sound Technology rank among the second-tier vendors.
Squeezed by the first-tier vendors from Mainland China, Taiwanese vendors (such as Volkswagen’s supplier E-LEAD Electronic, Nissan’s supplier Join-link International Technogy, Dongfeng Peugeot’s supplier Jiangsu Shangyang Electronic Technology Co., Ltd.) lack cost competitiveness and see sharp fall in the revenue.