U.S. Shipments, Orders and Inventories – November “Factory Orders” Report

Based on the latest U.S. “Factory Orders” report with data through November:

  • Electronic equipment 3/12 growth rates for orders and shipments are at 7 year+ highs (Chart 1) as actual dollar denominated orders and shipments remain strong (Chart 2).
  • Electromedical, instrument and control equipment continues to drive the increase (Charts 3 & 4).
  • Vehicle shipments continued to grow driven by light trucks and utility vehicles (Chart 5).
  • Defense capital goods orders and shipments rose (Chart 6) as did military electronics demand (Chart 7).
  • U.S. electromedical, measurement and control equipment orders and shipments continue to support overall domestic electronic equipment growth (Chart 8).
  • Passive component order and shipment growth continues to increase on both a $ value (Chart 9) and 3/12 growth basis (Chart 10).

Chart 11 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain.

Source: www.census.gov/indicator/www/m3/

Global and Country Specific Purchasing Managers Indices

December Purchasing Managers indices have been released:

  • Global PMI is near an 8-year high and continues to climb (Chart 12).
  • Both the Markit Economics and ISM PMI indices for the U.S. rose in December (Chart 13).
  • European PMI performance by country was mixed (Chart 14) but the composite Eurozone PMI is at a 20-year high (Chart 15).
  • Asia was mixed with South Korea and Indonesia declining and the other key Asian countries seeing higher PMIs (Chart 16).

Source: www.markiteconomics.com

Source: www.instituteforsupplymanagement.org

Global Semiconductor Sales Increase 21.5% Y/Y in November (Charts 17-22)

Worldwide market notches highest-ever monthly sales of $37.7 billion; sales increase 1.6% compared to October

The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $37.7 billion for the month of November 2017, an increase of 21.5% compared to the November 2016 total of $31.0 billion and 1.6% more than the October 2017 total of $37.1 billion. All major regional markets posted both year-to-year and month-to-month sales increases in November, with the Americas market leading the way.

All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.

“The global semiconductor industry reached another key milestone in November, notching its highest-ever monthly sales, and appears poised to reach $400 billion in annual sales for the first time,” said SIA President and CEO John Neuffer. “Global market growth continues to be led by sales of memory products, but sales of all other major semiconductor categories also increased both month-to-month and year-to-year in November. All regional markets also experienced growth in November, with the Americas continuing to post the strongest gains.”

Regionally, year-to-year sales increased in the Americas (40.2%), Europe (18.8%), China (18.5%), Asia Pacific/All Other (16.2%), and Japan (10.6%). Month-to-month sales increased in the Americas (2.6%), China (2.1%), Europe (1.8%), Asia Pacific/All Other (0.5%), and Japan (0.3%).


Worldwide Semiconductor Revenue grew 22.2% to $419.7 billion in 2017 (Chart 22)

Undersupply helped drive 64% revenue growth in the memory market, which accounted for 31% of total semiconductor revenue in 2017

Worldwide semiconductor revenue totaled $419.7 billion in 2017, a 22.2% increase from 2016, according to preliminary results by Gartner, Inc. Undersupply helped drive 64% revenue growth in the memory market, which accounted for 31% of total semiconductor revenue in 2017.

"The largest memory supplier, Samsung Electronics, gained the most market share and took the No. 1 position from Intel — the first time Intel has been toppled since 1992," said Andrew Norwood, research vice president at Gartner. "Memory accounted for more than two-thirds of all semiconductor revenue growth in 2017, and became the largest semiconductor category." The key driver behind the booming memory revenue was higher prices due to a supply shortage. NAND flash prices increased year over year for the first time ever, up 17%, while DRAM prices rose 44%.

Equipment companies could not absorb these price increases so passed them onto consumers, making everything from PCs to smartphones more expensive in 2017. Other major memory vendors, including SK Hynix and Micron Technology, also performed strongly in 2017 and rose in the rankings.

Second-placed Intel grew its revenue 6.7% in 2017, driven by 6% growth in data center processor revenue due to demand from cloud and communications service providers. Intel’s PC processor revenue grew more slowly at 1.9%, but average PC prices are on the rise again after years of decline following the market’s shift from traditional desktops toward two-in-one and ultramobile devices.

The current rankings may not last long, however, "Samsung’s lead is literally built on sand, in the form of memory silicon," said Norwood. "Memory pricing will weaken in 2018, initially for NAND flash and then DRAM in 2019 as China increases its memory production capacity. We then expect Samsung to lose a lot of the revenue gains it has made."

2017 was a relatively quiet year for mergers and acquisitions. Qualcomm’s acquisition of NXP was one big deal that was expected to close in 2017, but did not. Qualcomm still plans to complete the deal in 2018, but this has now been complicated by Broadcom’s attempted takeover of Qualcomm.

"The combined revenues of Broadcom, Qualcomm and NXP were $41.2 billion in 2017 — a total beaten only by Samsung and Intel," said Norwood. "If Broadcom can finalize this double acquisition and Samsung’s memory revenue falls as forecast, then Samsung could slip to third place during the next memory downturn in 2019."


Fabless Company IC Sales Exceed $100 Billion in 2017 for First Time Ever (Charts 24 & 25)

Two Chinese companies—HiSilicon and Unigroup—are among the top 10 fabless IC sales leaders.

Chart 24 shows the top 10 ranking of fabless IC suppliers for 2017. Two China-based fabless companies made the top 10 ranking last year—HiSilicon, which sells most of its devices as internal transfers to smartphone supplier Huawei, and Unigroup, which includes the IC sales of both Spreadtrum and RDA. Fabless company IC sales are estimated to have exceeded $100 billion in 2017, the first time this milestone has been reached.

Unlike the relatively close annual market growth relationship between fabless IC suppliers and foundries, fabless IC company sales growth versus IDM (integrated device manufacturers) IC supplier growth has typically been very different (Figure 2). The first time IDM IC sales growth outpaced fabless IC company sales growth was in 2010 when IDM IC sales grew 35% and fabless IC company sales grew 29%. Since very few fabless semiconductor suppliers participate in the memory market, the fabless suppliers did not receive much of a boost from the surging DRAM and NAND flash memory markets in 2010, which grew 75% and 44%, respectively. However, the fabless IC suppliers once again began growing faster than the IDMs beginning in 2011 and this trend continued through 2014.

In 2015, for only the second time bon record, IDM IC sales “growth” (-1%) outpaced fabless IC company sales “growth” (-3%). The primary cause of the fabless companies’ 2015 sales decline was Qualcomm’s steep 17% drop in sales. Much of the sharp decline in Qualcomm’s sales that year was driven by Samsung’s increased use of its internally developed Exynos application processors in its smartphones instead of the application processors it had previously sourced from Qualcomm. Although Qualcomm’s sales continued to decline in 2016, the fabless companies’ sales in total (5%) once again outpaced the growth from IDM’s (3%).

In 2017, the market behaved very similarly to 2010, when strong growth in the memory market propelled the IDM IC sales growth rate higher than the fabless IC supplier growth rate. With the total memory market, a market in which the fabless IC companies have very little share, surging by 58% last year, IDM IC sales growth easily outpaced fabless company IC sales growth in 2017.


Canon to Double Output of Chipmaking Equipment

Rise of 'Internet of Things' Expected to Drive Semiconductor Demand

Canon looks to increase production of machinery used to form integrated circuits on silicon wafers, helping customers meet booming chip demand as the so-called internet of things brings a wide variety of devices online.

Two facilities north of Tokyo that manufacture photolithography systems are to be expanded in the latter half of 2018. Output capacity is expected to grow 50-100%, though specific production and investment figures have not been made public. Plans are to roughly double output in 2018 compared with 2017.

Canon is the world's No. 3 maker of photolithography equipment, behind ASML of the Netherlands and Japan's Nikon. While the two market leaders handle such cutting-edge technologies as immersion lithography and extreme-ultraviolet lithography systems, which can create some of the smallest circuits available, Canon focuses on lower-cost i-line and deep-UV systems.

The planned expansion will increase output of these lower-end technologies, which account for an estimated 60% of the market by volume. A growing number of semiconductor makers are reaching for such equipment as a bevy of networked devices hit the market. Growth in the "internet of things" is pushing companies to produce a wide variety of sensors and communications chips in relatively small quantities.

Canon will also feed the market for legacy machinery, modifying certain equipment to accept 200mm silicon wafers and other largely supplanted substrates. Machinery that can process such wafers is in severely short supply in the market for used equipment.

Source: Nikkei

Top 25 European EMS Providers

Foxconn, Flex and Jabil accounted for 44% of the euro 28.1 billion European EMS market in 2016

Reed Electronics Research’s annual ranking of the leading EMS manufacturers in Europe was again dominated by the leading Group 1 Global EMS providers with the Top 3 – Foxconn, Flex and Jabil – accounting for 44% of the euro 28.1 billion European EMS market in 2016. The German Zollner Group remained the leading indigenous European EMS provider with revenues estimated at Euro 1.04 billion of which 53% were generated from the company’s domestic operations. The Hungarian company Videoton was ranked fifth and along with Fideltronik was one of the two CEE-headquartered companies in the ranking.

The acquisition by Scanfil, of the Swedish company PartnerTech in 2015, has strengthened the position of the Finnish- headquartered company although revenues in 2016 were impacted by the realignment of the combined group’s manufacturing operations in Europe which included plant closures and the sale of non-core activities.

The Dutch company Neways Electronics International moved to 8th in the ranking, from 10th in the previous year. Their acquisition of the German company BuS Elektronik in 2014 has now been fully integrated and has significantly strengthened its overall EMS market position and in particular its exposure to the important German market and the automotive sector.

The Swiss company Enics dropped one place in the ranking with European sales stable during the year.

Apart from éolane, which reported marginally lower European EMS revenues in 2016, the other French companies in the ranking – Asteelflash, ALL CIRCUITS and LACROIX Electronics – all reported increased revenues. Although achieving stable revenues in France, Asteelflash benefited from a further increase in revenues at the company’s German operations. Although falling one place in the overall ranking LACROIX Electronics sales increased by 6.7% during the year, this after the prior year’s double-digit growth, while ALL CIRCUITS’ revenues grew by just under 20%.

The North American companies Sanmina, Celestica, Kimball Electronics and Plexus all reported growth during the year as did the remaining non-European company in the ranking Integrated Micro-Electronics, the Philippines headquartered group reporting a 16% increase in revenues in 2016.

Overall the Top 10 companies accounted for 57% of European EMS revenues and the Top 25 companies collectively represent 68% of the total European EMS market.

Source: Reed Electronics Research

Huawei Shipped 153 Million Smartphones in 2017, up 10.1% from 2016

Huawei has announced that it shipped 153 million smartphones in 2017, up 10.07% from the 139 million units shipped a year earlier.

Buoyed by its dual-brand strategy, Huawei also saw its global market share expand to over 10% in 2017, making it one of the three vendors in the world to reach that mark, while also maintaining its top market position in the domestic market, according to company rotating CEO Ken Hu.

Huawei will continue its R&D to further expand AI and AR applications for smartphones in 2018, Hu said.

Huawei took the third position in the global smartphone market with a 10.5% share in the third quarter of 2017, trailing Samsung Electronics' 22.3% and Apple's 12.5%, according to IDC.

Source: www.digitimes.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.

View other posts from Walt D. Custer. View other posts from Walt D. Custer.
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