Japan’s PMI leading indicator moved higher in September (Chart 1) suggesting increased manufacturing growth ahead. However, the most recently available (August) Japanese domestic production data were generally weak.
- Total electronic equipment production was down 4.2% in August 2017 vs. August 2016 however it increased very slightly from July to August 2017 (Charts 2 & 3).
- Semiconductor shipment growth to Japan appears to have peaked (Chart 4) at about +23% comparing June-Aug 2017 vs the same three months in 2016. This semiconductor growth was well in excess of electronic equipment suggesting a downward semiconductor growth rate correction is imminent.
- Discrete semiconductor domestic production is flat (Chart 5) but IC production is rising (due to memory)?
- Passive component output has risen recently (Chart 6).
- PCB production was little changed from July (Chart 7) however its growth is near zero (3/12=1) relative to this time last year (Chart 8).
- Component and device production growth remains strong (Chart 9).
The yen/dollar exchange rate has been relatively stable hovering about 110-112 yen/US dollar in recent months (Chart 10).
North American Semiconductor Equipment Industry September 2017 Billings (Chart 11)
SEMI reports that the 3-month average of worldwide billings of North American equipment manufacturers in September 2017 was $2.03 billion, 6.9% lower than August 2017 and 36.0% higher than September 2016.
"Global semiconductor equipment billings of North American headquartered suppliers for September were $2.0 billion, down 12% from the peak level set in June of this year," said Ajit Manocha, President and CEO of SEMI. “Total billings through the first three quarters of this amazing year have surpassed total billings for all of 2016."
IC Market Growth Rate Forecast Increased to 22% for 2017 due to 74% surge in DRAM Market and 44% Jump in NAND Flash Market (Chart 12)
IC Insights has raised its IC market growth rate forecast for 2017 to 22%, up six percentage points from the 16% increase shown in its Mid-Year Update. The IC unit volume shipment growth rate forecast has also been increased from 11% depicted in the Mid-Year Update to 14% currently. As shown below, a large portion of the market forecast revision is due to the surging DRAM and NAND flash markets.
In addition to increasing the IC market forecast for this year, IC Insights has also increased its forecast for the O-S-D (optoelectronics, sensor/actuator, and discretes) market. In total, the semiconductor industry is now expected to register a 20% increase this year, up five percentage points from the 15% growth rate forecast in the Mid-Year Update.
For 2017, IC Insights expects a whopping 77% increase in the DRAM ASP, which is forecast to propel the DRAM market to 74% growth this year, the largest growth rate since the 78% DRAM market increase in 1994. After including a 44% expected surge in the NAND flash market in 2017, including a 38% increase in NAND flash ASP this year, the total memory market is forecast to jump by 58% in 2017 with another 11% increase forecast for 2018.
At $72.0 billion, the DRAM market is forecast to be by far the largest single product category in the semiconductor industry in 2017, exceeding the expected NAND flash market ($49.8 billion) by $22.2 billion this year. As shown in Figure 1, the DRAM and NAND flash segments are forecast to have a strong positive impact of 13 percentage points on total IC market growth this year. Excluding these memory segments, the IC industry is forecast to grow by 9%, less than half of the current total IC market growth rate forecast of 22% when including these memory markets.
Worldwide Device Shipments will Increase 2% in 2018, Reaching Highest Year-Over-Year Growth since 2015 (Charts 13-15)
End-User Survey Reveals Even Split of Usage between PCs and Smartphones
Worldwide shipments of PCs, tablets and smartphones are predicted to exceed 2.35 billion units in 2018, an increase of 2.0% from 2017, according to Gartner, Inc. This would be the highest year-over-year growth since 2015.
The misconception persists that the world has gone mobile and relies solely on smartphones. "However, our latest online end-user survey* shows that users depend just as much on PCs or tablets as they do on smartphones," said Ranjit Atwal, research director at Gartner. "Forty percent of respondents said that they use mostly a PC/tablet for certain daily experiences, such as reading and writing detailed emails or watching videos, while 34% mostly use a smartphone for its convenience while on the move."
Atwal added: "Users holding onto their PCs for longer remains a major issue for the PC market. In contrast, users continue to replace their smartphone quite frequently."
Traditional PC shipments are forecast to decline 4.4% in 2018 while mobile phone shipments are expected to increase 2.4%.
Driven by Positive Business PC Sales, PC Market to Grow 0.8% in 2018
Business PC shipments are estimated to return to growth by the end of 2017, driven by faster Windows 10 replacement in many regions, especially in Western Europe. "Despite the fact that prices have been rising due to higher component costs, Windows 10 replacements have kept the PC market relatively stable through 2017," said Atwal. "We estimate that the PC market (desk-based, notebook and ultramobiles) is set to return to 0.8% growth in 2018."
This upward trend is assisted by two factors. The PC market in Russia has been positively influenced by an upturn in the country's economic prospects, which has seen business spending on PCs increase by 5% in 2017. This growth will persist into 2018. Spending is primarily focused on desktop PCs, which are more aggressively priced than mobile PCs or hybrid devices.
The second factor is China, where the move to Windows 10 has been delayed due to security and privacy issues, leading to slow PC sales in 2017. However, Microsoft is now working with a Chinese government agency to develop a government-approved version. "The features of Windows 10 could be particularly useful for the Chinese Government that is looking to move from desktops and notebooks to ultramobile premium devices," said Atwal. "We expect this development to positively impact the PC market in 2018."
Smartphone Sales to Total More Than 1.6 Billion Units in 2018
Mobile phone sales are expected to return to year-over-year growth in 2018, with shipments totaling 1.9 billion units. Smartphones will represent 86% of total mobile phone shipments in 2018, up 6% from 2017.
Gartner expects Apple's iPhone X to be the sales driver in North America, China and Western Europe, despite its high price. "Given the late November availability of the iPhone X, we expect the iPhone's replacement cycle to flow more strongly into 2018," said Roberta Cozza, research director at Gartner.
Component shortages could lead to the inability to meet smartphone demand in the fourth quarter of 2017, further favoring unit sales moving into 2018. "Decrease in total mobile phone demand in 2017 is also expected to come from a weaker lower end of the smartphone market," said Cozza. "For this segment, local vendors continue to struggle against the shift toward top brands, while component price increases affect the ability of some Android vendors to compete more aggressively on price." While this is expecting to limit smartphone growth in 2017, the 2018 growth rate is accordingly estimated to be higher than previously forecast.
Global IC Testing Packaging Industry to Grow 2.2% to US$51.73 Billion in 2017 (Charts 16 & 17)
ASE, Amkor and JCET Expected to Top TrendForce’s Revenue Ranking of OSAT Providers for 2017
The annual revenue from the global IC testing and packaging industry for 2017 is estimated to grow by 2.2% to reach US$51.73 billion, according to the latest research from TrendForce.
Furthermore, providers of outsourced semiconductor assembly and test (OSAT) are projected to represent a share of 52.5% in the year’s total revenue.
The IC testing and packaging industry is expected to register recovery and growth in 2017 in contrast to the 2016 revenue result that showed a slight annual decline. This year, the main revenue driver has been the increase in the amount of IC components demanded for mobile devices. The strong demand for IC components has also expanded the deployment of advanced packaging solutions that offer higher levels of integration and higher numbers of I/O connections. In sum, the rising quantity and quality of demand during this year has benefited the IC testing and packaging industry revenue-wise.
The projected revenue ranking of the top 10 OSAT providers for 2017 is overall similar to the 2016 ranking. This year’s top three in sequence are ASE, Amkor and JCET. Among the top 10, PTI has gained enormously from the memory boom caused by the combination of tight market supply, application growth for high-performance computing and strong demand for high-density storage products. PTI also has the advantage of having a strong relationship with the memory giant Micron. TrendForce estimates that PTI’s annual revenue growth for this year will reach an impressive 26.3%, putting the company in the fifth place of the ranking.
China’s IC backend service providers are focusing on developing their technologies as their progress in overseas mergers and acquisitions slows
TrendForce’s survey of the testing and packaging industry in 2017 also finds that there are now much fewer M&A targets for Chinese companies because of the increasing level of competition and consolidation activities in the global semiconductor sector. Furthermore, the barriers against Chinese companies for making overseas acquisitions using domestic capital have also been raised. Thus, Chinese IC backend service providers are shifting their focus away from trying to get technologies and market shares via overseas M&As. Instead, they are investing their resources in developing technologies related to fan-out processing and system-in-package (SiP) integration. They eventually want to get their solutions verified by potential clients, proving that they have the in-house expertise to be competitive in the market.
Chinese testing and packaging companies continue to gain processing capacity for packaging technologies that are high-end (e.g. flip chip and bumping) and more advanced (e.g. fan-in, fan-out, 2.5D interposer and SiP). Because of the progress in both technology development and M&As, Chinese service providers such as JCET, TSHT and TFME are projected to rise above the industry’s average in their revenue performances this year with double-digit growth rates.
Additionally, China’s IC testing and packaging industry will be supported by the growing number of domestic fabs in the coming year. TrendForce forecasts that China’s monthly 12-inch wafer capacity will increase by about 162,000 pieces before the end of 2018. This 180% increase from the current capacity level will give a sizable injection of demand into the domestic testing and packaging market.
Global Chip Testers & Packagers to grow 2.2% y/y to US$51.73 Billion in 2017
Fastest Growth from Chinese Players such as Jiangsu Changjiang Electronics Technology
Taipei-based researcher TrendForce said that the industry increase is expected in part as the demand for advanced packaging services grows
Global chip testers and packagers are to resume revenue growth at an annual pace of 2.2% this year, with the fastest growth from Chinese players such as Jiangsu Changjiang Electronics Technology Co (JCET), TrendForce Corp said.
The Taipei-based researcher attributed the industry's pickup to an increase of semiconductor content in mobile devices and a rising demand for advanced packing services.
Overall, global chip testers and packagers are to expand to US$51.73 billion this year, TrendForce forecast.
Chinese companies are likely to be among the biggest beneficiaries from this trend, as they are shifting their focus to heavily invest on developing advanced packaging technologies, such as integrated fan-out packaging and system in package technologies, because their overseas acquisitions have been thwarted, the researcher said.
"Because of the progress in both technology development and mergers and acquisitions, Chinese service providers such as JCET...are projected to have revenue performance this year that rises above the industry's average with double-digit growth rates," TrendForce said.
JCET, No. 3 worldwide in the outsourced semiconductor assembly and test (OSAT) industry, is expected to see revenue rise 12.5% year-over-year to US$3.23 billion this year, TrendForce's forecast said.
The growth will help JCET gain a bigger market share of 12.5% this year, compared with last year's 11%, TrendForce's projection said.
China's Tianshui Huatian Technology Co (TSHT) and Tongfu Microelectronics Co (TFME) are likely to register 28.3% and 32% annual growth in revenue this year to US$1.06 billion and US$910 million, respectively, TrendForce predicted.
TSHT and TFME ranked No. 6 and No. 7 in the global OSAT market, with market shares of 3.1% and 2.6%, respectively.
Additionally, China's IC testing and packaging services providers are to see a further boost in revenue from China as more Chinese fabs are to ramp up production next year, TrendForce said.
China's 12-inch wafer capacity is to soar 1.8 times to 162,000 wafers per month by the end of next year, TrendForce said.
The expansion "will inject sizable demand into the domestic testing and packaging market," TrendForce said.
Taiwanese memory chip tester and packager Powertech Technology Inc. (PTI) is likely to see revenue jump 26.3% year-over-year to US$1.89 billion this year, backed by increasing demand from applications in high-performance computing and high-density storage products, the researcher said.
In addition to defending its No. 5 position, PTI is benefiting from its partnerships with US memory chipmaker Micron Technology Inc., the researcher said.
Taiwan's Advanced Semiconductor Engineering Inc. (ASE) has defended its top position with a market share of 19.2% this year, up from 18.7% last year. ASE's revenue is likely to grow 6.4% year-over-year to US$5.21 billion this year, TrendForce said.
Amkor Technology Inc. seized the No. 2 spot, with revenue up 4.3% to US$4.06 billion this year, the researcher said, adding that Amkor's market share is expected to inch up from 14.9% last year to 15% this year.
Wafer Shipments to Increase in 2017, 2018 and 2019 (Chart 18)
Polished and epitaxial silicon shipments totaling 11,448 million square inches in 2017; 11,814 million square inches in 2018; and 12,235 million square inches in 2019
SEMI recently completed its annual silicon shipment forecast for the semiconductor industry.
This SEMI forecast provides an outlook for the demand in silicon units for the period 2017–2019. The SEMI forecast shows polished and epitaxial silicon shipments totaling 11,448 million square inches in 2017; 11,814 million square inches in 2018; and 12,235 million square inches in 2019 (refer to table below). Total wafer shipments this year are expected to exceed the market high set in 2016 and are forecast to continue shipping at record levels in 2018 and 2019. "Silicon shipment volumes are expected to ship at historic highs for this year and into 2019," said Dan Tracy, senior director of Industry Research & Statistics at SEMI. "The expectation is for steady annual growth due to the proliferation of connected devices required for automotive, medical, wearables, and high-performance computing applications.”
U.S. Industrial Production increased 0.3% in September (Chart 19)
Growth was moderated due to hurricane damage in Texas gulf coast and Florida by Harvey and Irma.
The Federal Reserve said that the storms, which struck the Gulf Coast and Florida, held down industrial output by 0.25 percentage points.
Almost all countries globally are currently experiencing positive industrial production growth (Chart 20)
Worldwide Gaming Notebook Shipments to reach 5.5 million units in 2017
Worldwide gaming notebook shipments are estimated to reach around 5.5 million units in 2017 with Micro-Star International (MSI) to account for 1.1-1.2 million units and Asustek 1.3 million.
In China, where inexpensive gaming models are the mainstream, Lenovo is the largest vendor. But in Europe and North America where product ASPs are higher, and in Asia Pacific markets other than China, Asustek and MSI are the top-2 vendors.
Because of the cryptocurrency mining trend and rising demand for gaming products, Asustek and MSI both enjoyed strong profits in the third quarter.
Although overall demand for both graphics cards and gaming notebooks is expected to slide in the fourth quarter, the two vendors are only expected to see a limited impact thanks to their leading positions and strong brand images.
With the strong performance in the third quarter, MSI is estimated to ship more than five million graphics cards in 2017. Meanwhile, Gigabyte Technology's rising graphics card sales are also expected to help offset the profit decline from the company's motherboard business.
In addition, TUL, which focuses mainly on selling AMD-based graphics cards, turned to a profitable operation in the second quarter and its combined consolidated revenues for the first nine months of 2017 also grew 58% on year.
Global OLED Smartphone Panel Shipments to Surpass LCD Ones in 2020
Global shipments of OLED smartphone panels are expected to top 1.37 billion units in 2019 and surpass the unit shipments of TFT LCD panels in 2020, DSCC (Display Supply Chain Consultants) has estimated.
In addition to the smartphone segment, OLED panels will also increase its penetration in the smartwatch, tablet and TV sectors.
Among them, shipments of OLED TVs are likely to reach 1.5 million units in 2017 and further increase to 2.4 million units in 2018, DSCC said.
Overall, OLED revenues are expected to grow 57% on year to US$23.2 billion in 2017, expand another 50% to US$34.9 billion in 2018, and reach as much as US$62.8 billion in 2022, DSCC added.
Panel makers in Korea and China have been most active on equipment investment for production of OLED panels, Samsung Electronics to lead in equipment investment until 2018 before being replaced by BOE Technology in 2019-2022.
Since the bulk of current equipment investment for smartphone applications has been focusing on flexible products, the production capacity of flexible OLED panels will surpass that of rigid OLED panels in the fourth quarter of 2017, and actual output of flexible models will exceed that of rigid ones in the third quarter of 2018, DSCC estimated.