European Update (Charts 1-11)
Eurostat just released the April Eurozone production data.
- Eurozone 28 industrial production climbed in most key countries (Chart 1).
- The Eurozone PMI Leading Indicator reached a new 6-year high (Chart 2).
- Electronic equipment production rebounded from March (Chart 3) as its 3/12 rate of growth increased to 1.062 (Chart 4). That is electronic equipment production increased 6.2% in Feb-Apr 2017 vs. Feb-Apr 2016.
- Motor vehicle production continued its 3-month decline from its recent January high (Chart 5).
- Aerospace production also declined (Chart 6).
- Instruments & appliances for measuring, testing and navigation reached a record high (Chart 7).
- Irradiation, electromedical and electrotherapeutic equipment continued its sharp rebound (Chart 8).
- Semiconductor shipments to Europe continued to outgrow electronic equipment suggesting over-ordering and/or the effect of rising memory prices (Chart 9).
- Electronic assembly (loaded board) recovered slightly from a long downturn (Chart 10).
- Wiring device (PCB) production increased (Chart 11).
North America-Based SEMI Equipment Manufacturers Worldwide Billings increased 41.9% Y/Y in May 2017 (Chart 12)
North America-based manufacturers of semiconductor equipment posted $2.27 billion in billings worldwide in May 2017 (3-month average basis), according to SEMI. SEMI reports that the 3-month average of worldwide billings of North American equipment manufacturers in May 2017 was $2.27 billion. The billings figure is 6.4 percent higher than the final April 2017 level of $2.14 billion, and is 41.9 percent higher than the May 2016 billings level of $1.60 billion.
“Semiconductor equipment billings for North American headquartered equipment manufacturers increased for the fourth month in a row and are 42 percent higher than the same month last year," said Ajit Manocha, president and CEO of SEMI. “The strength of this cycle continues to be driven by Memory and Foundry manufacturers as the industry invests in 3D NAND and other leading-edge technologies."
The SEMI Billings report uses three-month moving averages of worldwide billings for North American-based semiconductor equipment manufacturers. Billings figures are in millions of U.S. dollars.
China Accounted for 10 of Top 14 Leading Smartphone Suppliers in 2016 as Share Grows to 39% (Chart 13)
IC Insights recently released its Update to its 2017 IC Market Drivers Report. The Update includes IC Insights’ latest outlooks on the smartphone, automotive, PC/tablet and Internet of Things markets.
The Update shows a final 2016 ranking of the top smartphone leaders in terms of unit shipments. As shown in Chart 13, 7 of the top 10, and 10 of the top 14 companies were headquartered in China with two South Korean (Samsung and LG) and one U.S. (Apple) and one Taiwanese company (Asus) making up the remainder of the companies listed. It is interesting to note that OPPO and Vivo, the two fastest growing smartphone suppliers on the list last year with each company growing almost 90%, are owned by the same China-based parent company—BBK Electronics.
Samsung and Apple dominated the smartphone market from 2014 through 2016. In total, these two companies shipped 555 million smartphones and held a combined 39% share of the total smartphone market in 2015. Although these two companies still shipped over one-half billion smartphones (526 million) in 2016, their combined smartphone unit market share dropped four percentage points to 35%.
Samsung’s total smartphone unit sales were down by 4% in 2016 to 311 million units, a weak showing in a total smartphone market that grew by 4%. With orders sagging for Apple’s pre-iPhone 7 smartphones (the iPhone 7 was first released on September 7, 2016), Apple’s total smartphone shipments dropped by 7% in 2016, much worse than the total 4% growth rate exhibited for the worldwide smartphone market. Although Samsung and Apple still hold a strong share of the high-end smartphone segment (>$200), it appears that both companies are losing smartphone market share to the up-and-coming Chinese producers like Huawei, OPPO, and Vivo.
Overall, there was very little “middle ground” with regard to smartphone shipment growth rates among the top 14 suppliers in 2016. As shown, seven of the top 14 companies registered declines in 2016 shipments while five companies logged 25% or better increases. In fact, four Chinese smartphone suppliers’ shipments surged by greater than 30% (Vivo, OPPO, Gionee, and Huawei) in 2016. LeEco, which only began shipping its smartphone handsets in 2015, became Coolpad’s largest shareholder in October 2016. As a result, IC Insights combined the two companies’ smartphone sales for 2015 and 2016.
In 2014, Japan-based Sony was ranked 10th in smartphone shipments with sales of 40.0 million handsets. However, in 2016, Sony’s shipments of smartphones had dropped precipitously to only 15.1 million (with sales expected to increase only slightly in 2017 to about 16 million). In contrast to the weakening fortunes of Sony, 2015-2016 smartphone sales from most of the top China-based suppliers surged. In fact, Huawei, the third largest smartphone producer in 2016, has set its sights on surpassing Apple within the next five years.
Combined, the 10 top-14 smartphone suppliers that are based in China shipped 587 million smartphones in 2016, a 15% increase from the 511 million smartphones these 10 companies shipped in 2015. As a result, the top 10 Chinese smartphone suppliers together held a 39% share of the worldwide smartphone market in 2016, up three points from the 36% share these companies held in 2015 and seven points better than the 32% combined share these companies held in 2014.
Worldwide Internet of Things Spending Forecast to Grow 16.7% Y/Y to $800 Billion+ in 2017 and to nearly $1.4 Trillion by 2021
A new update by International Data Corporation (IDC) forecasts worldwide spending on the Internet of Things (IoT) will grow 16.7% year-over-year in 2017, reaching just over $800 billion. By 2021, global IoT spending is expected to total nearly $1.4 trillion as organizations continue to invest in the hardware, software, services, and connectivity that enable the IoT.
'The discussion about IoT has shifted away from the number of devices connected,' said Carrie MacGillivray, vice president, Internet of Things and Mobility at IDC. 'The true value of IoT is being realized when the software and services come together to enable the capture, interpretation, and action on data produced by IoT endpoints. With our Worldwide IoT Spending Guide, IDC provides insight into key use cases where investment is being made to achieve the business value and transformation promised by the Internet of Things.'
The IoT use cases that are expected to attract the largest investments in 2017 include manufacturing operations ($105 billion), freight monitoring ($50 billion), and production asset management ($45 billion). Smart grid technologies for electricity, gas and water and smart building technologies are also forecast to see significant investments this year ($56 billion and $40 billion, respectively). While these use cases will remain the largest areas of IoT spending in 2021, smart home technologies are forecast to experience strong growth (19.8% CAGR) over the five-year forecast. The use cases that will see the fastest spending growth are airport facilities automation (33.4% CAGR), electric vehicle charging (21.1% CAGR), and in-store contextual marketing (20.2% CAGR).
The industries making the largest IoT investments in 2017 are Manufacturing ($183 billion), Transportation ($85 billion), and Utilities ($66 billion). Cross-Industry IoT investments, which represent use cases common to all industries, such as connected vehicles and smart buildings, will be $86 billion in 2017 and rank among the top segments throughout the five-year forecast. Consumer IoT purchases will be the fourth largest market segment in 2017 at $62 billion, but will grow to become the third largest segment in 2021. Meanwhile the industries that will see the fastest spending growth are insurance (20.2% CAGR), Consumer (19.4%), and cross-industry (17.6%).
From a technology perspective, hardware will be the largest spending category until the last year of the forecast when it will be overtaken by the faster growing services category. Hardware spending will be dominated by modules and sensors that connect end points to networks, while software spending will be similarly dominated by applications software. Services spending will be about evenly split between ongoing and content services and IT and installation services. The fastest growing areas of technology spending are in the software category, where horizontal software and analytics software will have five-year CAGRs of 29.0% and 20.5% respectively. Security hardware and software will also see increased investment, growing at 15.1% and 16.6% CAGRs, respectively.
“As enterprises are adopting to new and innovative services provided by different vendors a lot of new threats are introduced, so it's very important to upgrade existing security systems to ensure that an optimal business outcome can be reached and ROI can be justified,” said Ashutosh Bisht, research manager for IT Spending across APeJ.
Asia/Pacific (excluding Japan)(APeJ) will be the IoT investment leader throughout the forecast with spending expected to reach $455 billion in 2021. The second and third largest regions will be the United States ($421 billion in 2021) and Western Europe ($274 billion). Manufacturing will be the leading industry for IoT investments in all three regions, followed by Utilities and Transportation in APeJ and Western Europe, and Transportation and Consumer in the United States. Cross-Industry IoT spending will be among the leading categories in all three regions as well. The regions that will experience the fastest growth in IoT spending are Latin America (21.7% CAGR), the Middle East and Africa (21.6% CAGR), and Central and Eastern Europe (21.2% CAGR).
Automotive Electronics Market: A View from Material Supplier (Chart 14)
- With the increasing sophistication of future vehicles, new and more advanced semiconductor technologies will be used and vehicles will become technology centers.
- Large efforts are being deployed in the car industry to transform the driving experience.
Electrical vehicles are in vogue and governments are encouraging this market with tax incentives.
Cars are becoming smarter, capable of self-diagnostics, and in the near future will be able to connect with each other. Most importantly, the implementation of safety features has greatly reduced the number of accidents and fatalities on the roads in the last few decades. Thanks to extensive computing power, vehicles are now nearing autonomous driving capability. This is only possible with a dramatic increase in the amount of electronic devices in new vehicles.
Recent announcements regarding acquisitions of automotive electronics specialists by semiconductor giants and strategic plans from foundries highlight the appetite from a larger spectrum of semiconductor manufacturers for this particular market. Automotive electronics has become a major player in an industrial transformation.
Automotive electronics is, however, very different from the consumer electronics market. The foremost focus is on product quality, and the highest standards are used to ensure the reliability of electronics components in vehicles. This has also an impact on the quality and supply chain of materials such as gases and chemicals used in the manufacturing of these electronics devices.
Automotive electronics market: size and trends
When you include integrated circuits, optoelectronics, sensors, and discrete devices, the automotive electronics market reached around USD 34 billion in 2016. While this represents less than 10% of the total semiconductor market, it is predicted to be one of the fastest growing markets over the next 5 years.
There are several explanations for such growth potential:
- The vehicle market itself is predicted to steadily grow on an average 3% in the coming 10 years and will be especially driven by China and India, although other developed countries will still experience an increase in sales.
- The semiconductor content in each car is steadily increasing and it is expected that the share of electronic systems in the vehicle cost could reach 50% of the total car cost by 2030.
While it is clearly challenging to describe what the driving experience will be in 10 to 15 years, some clear trends can be identified:
- Safety: The implementation of integrated vision systems, in connection with dozens of sensors and radars, will allow thorough diagnoses of surrounding areas of the vehicles. Cars will progressively be able to offer, and even take decisions, to prevent accidents.
- Fuel efficiency: The share of vehicles equipped with (hybrid) electrical engines is expected to steadily grow. For such engines, the electronics content is estimated to double in value compared to that of standard combustion engines.
- Comfort and infotainment: Vehicle drivers are constantly demanding a more enhanced driving experience. The digitalization of dashboards, the sound and video capabilities, and the customization of the driving and passenger environment should heighten the pleasure of time spent in the vehicle.
In order to coordinate all these functions, communication systems (within the vehicle, between vehicles, and between vehicles and infrastructures) are critical and large computing systems will be necessary to treat large amount of data.
Quality really makes automotive electronics different
Automotive electronics cannot be defined by specific technologies or applications. They are currently characterized by a very large portfolio of products based on mature technologies, spanning from discrete, optoelectronics, MEMS and sensors, to integrated circuits and memories.
Until now, the automotive electronics market has been the preserve of specialized semiconductor manufacturers with long experience in this field. The reason for this is the specific know-how required for quality management.
A component failure that appears harmless in a consumer product could have major safety consequences for a vehicle in motion. Furthermore, operating conditions of automotive electronics components (temperature, humidity, vibration, acceleration, etc.), their lifetime, and their spare part availability are differentiators to what is common for consumer and industrial devices.
Currently, some of the most technologically advanced vehicles integrate around 450 semiconductor devices. As they become significantly more sophisticated, the semiconductor content will drastically increase, with many components based on the most advanced semiconductor technology available. Introducing artificial intelligence will require advanced processors capable of computing massive amount of data stored in high-performance and high capacity memory devices. This implies that not only the most advanced semiconductor devices will be used, but that these will need to achieve the highest degree of reliability to allow a flawless operation of predictive algorithms.
It is expected that smart vehicles capable of fully autonomous driving will employ up to 7,000 chips. In this case, even a failure rate of 1ppm, already very low by any standard today, would lead to 7 out of 1,000 cars with a safety risk. This is simply unacceptable.
The automotive electronics industry has therefore introduced quality excellence programs aimed at a zero defect target. Achieving such a goal requires a lot of effort and all constituents of the supply chain must do their part.
The automotive electronics industry is one of the most conservative in terms of change management. Long established standards and documentation procedures ensure traceability of design and manufacturing deviations. Qualification of novel or modified products is generally costly and lengthy. This is where material suppliers can offer competence and expertise to provide material with the highest quality standards.
What does this mean for a material supplier?
As a direct contact to its customer, the material supplier is responsible for the complete supply chain from the source of the raw material to the delivery at the customer’s gate. The material supplier is also accountable for long-term supply in accordance with the customer’s objectives. There are essentially two fields where the material supplier can support its customer: quality and supply chain.
Source: Linde Electronics
Handset Component Business Outlook Positive in 2H’17, Driven by Traditional Peak Season Effects in Third Quarter and New Models Launched by Brand Vendors
Business prospects for handset part and component suppliers in the second half of 2017 are positive, driven by traditional peak season effects in the third quarter and new models launched by brand vendors for the latter half of the year, according to sources from upstream component suppliers.
Efforts by some vendors, particularly China-based ones, to move their supply chains for parts and components to emerging markets such as India are also expected to create new business opportunities for component makers, said the sources.
Most component suppliers have seen a pick-up in orders from China-based smartphone vendors as inventory levels in China have been brought down following continued adjustments over the past two quarters, said the sources.
Recent launch of new models, including Xiaomi Technology's Mi 6 and Max 2, Gionee's S10, Oppo's R11 and Meizu's E2, is also instrumental to stir up demand for parts and component, the sources added.
Meanwhile, Oppo is inviting its supply chain makers to join its overseas expansion projects by setting up production lines in India, indicated the sources, noting that about seven companies, including Foxlink, have been approached by Oppo for going to India.
NAND Flash Memory Chip Market to Have Severe Shortage in 3Q’17; Tight Supply Will Persist Through 4Q’17
There will be a severe shortage of NAND flash memory chips in the third quarter of 2017, and the tight supply will persist through the fourth quarter, according to Taiwan-based Innodisk, which develops and manufactures industrial-class storage products.
The ongoing tight supply of NAND flash chips was caused by chipmakers' transition to 3D NAND memory said Innodisk. Yield rates for chipmakers of 3D NAND technology required for 1Xnm and sub-1Xnm process manufacturing remain unstable.
Meanwhile, NAND flash demand for SSD boot drives, digital monitoring, in-vehicle systems and other customized market applications has been strong, Innodisk indicated. Demand for the upcoming iPhone devices is also huge.
Innodisk specializes in industrial embedded flash and memory solutions with a strong focus on the automation, aerospace and defense, surveillance, communications and server industries. The company posted a record NT$1.4 billion (US$46.4 million) in the first quarter of 2017, while net profits came to NT$107 million or NT$1.62 per share.
Innodisk reported revenues of NT$543 million in May 2017, down slightly from the record high of NT$546 million in the prior month. The company's cumulative 2017 revenues through May came to NT$2.49 billion, rising 38.8% on year.
Global Glass Fiber Market Forecast to Grow 4.8% CAGR to $9.4 Billion by 2022
According to a new market report published by Lucintel, the future of the global glass fiber market is attractive with opportunities in the end use industries such as transportation, construction, pipe and tank, electrical and electronics, wind energy, and consumer goods. The global glass fiber market is expected to reach an estimated $9.4 billion by 2022 and it is forecast to grow at a CAGR of 4.8% from 2017 to 2022 The major driver for market growth is the rise in demand for glass composite-made products, including bathtubs, pipes, tanks, printed circuit boards, wind blades, and automotive parts.
In this market, transportation, construction, pipe and tank, electrical and electronics, consumer goods and wind energy are the major end use industries. On the basis of its comprehensive research, Lucintel forecasts that the segments of wind energy and construction are expected to show average growth during the forecast period from 2017 to 2022.
Within the global glass fiber market, transportation is expected to remain the largest market by value and volume consumption. Government regulations, such as CAFE Standards in the U.S. and carbon emission targets in Europe, are putting pressure on OEMs to incorporate lightweight materials to curb the overall vehicle weight, and this is the key driver for glass fiber in the transportation industry.
U.S. Industrial Production Declined 0.4% in May, after 1.1% Increase in April (Chart 15)
Factory output dropped for the second time in three months, due to declines in production of motor vehicles, business equipment and construction supplies.