4Q’17 Electronic Equipment Growth – Updated
Henderson Ventures just published its updated estimate of 2017 electronic equipment sales by product type (Chart 1).
Concurrently Custer Consulting Group updated fourth composite sales, net income and inventories of 213 global OEMs based on their financial reports. This group had a 7% sales increase in 4Q’17 vs. 4Q’16.
Using composite sales of individual companies making similar products, we then obtained 4Q’17 growth by sector Chart 3.
Using Chart 1 as a base year for global product mix and the 4Q’17 sector growth rates in Chart 3 (plus historical data) we calculated $ sales of electronic equipment by sector from 2000 to 2017 (Chart 4).
World electronic equipment sales using the product mix in Chart 1 and growth rates in Chart 3 increased 8.3% in the fourth quarter of last year.
Source: Company financial reports with Henderson Ventures and Custer Consulting Group analyses.
Note: Ed Henderson of Henderson Ventures has just retired following 35 years of service tracking, analyzing and forecasting the global electronic supply chain. We have learned a lot from Ed and wish him well in his retirement!
Growth of Electronic Supply Chain (Chart 5)
Chart 5 shows the 2000-2017 quarterly (3/12) growth rates of the global PMI leading indicator, electronic equipment, semiconductors and printed circuit boards. Price increases for memory chips raised recent semiconductor $ growth.
Sources: SIA semiconductor, ISM Markit PMI, regional PCB and composite global electronic equipment data analyzed by Custer Consulting Group
IC Market Forecast Increased from 8% to 15% (Chart 6)
Increased Expectations for DRAM and NAND Flash Markets Spur Upward Revision
IC Insights’ latest market, unit, and average selling price forecasts for 33 major IC product segments for 2018 through 2022 is included in the March Update to the 2018 McClean Report. The Update also includes an analysis of the major semiconductor suppliers’ capital spending plans for this year.
The biggest adjustments to the original MR18 IC market forecasts were to the memory market; specifically the DRAM and NAND flash segments. The DRAM and NAND flash memory market growth forecasts for 2018 have been adjusted upward to 37% for DRAM (13% shown in MR18) and 17% for NAND flash (10% shown in MR18).
The big increase in the DRAM market forecast for 2018 is primarily due to a much stronger ASP expected for this year than was originally forecast. IC Insights now forecasts that the DRAM ASP will register a 36% jump in 2018 as compared to 2017, when the DRAM ASP surged by an amazing 81%. Moreover, the NAND flash ASP is forecast to increase 10% this year, after jumping by 45% in 2017. In contrast to strong DRAM and NAND flash ASP increases, 2018 unit volume growth for these product segments is expected to be up only 1% and 6%, respectively.
At $99.6 billion, the DRAM market is forecast to be by far the largest single product category in the IC industry in 2018, exceeding the expected NAND flash market ($62.1 billion) by $37.5 billion. Chart 6 shows that the DRAM market has provided a significant tailwind or headwind for total worldwide IC market growth in four out of the last five years.
The DRAM market dropped by 8% in 2016, spurred by a 12% decline in ASP, and the DRAM segment became a headwind to worldwide IC market growth that year instead of the tailwind it had been in 2013 and 2014. As shown, the DRAM market shaved two percentage points off of total IC industry growth in 2016. In contrast, the DRAM segment boosted total IC market growth last year by nine percentage points. For 2018, the expected five point positive impact of the DRAM market on total IC market growth is forecast to be much less significant than it was in 2017.
Source: www.ICInsights.com
Europe Update
For those awaiting January European electronic supply chain and industrial production data, there has been a delay. Eurostat’s website noted:
Base year in STS from 2010 to 2015
In order to reflect changes in the structure of the economy, the base year of all short-term business statistics (STS) will be updated from 2010 to 2015, starting with the publication of data for the reference month January 2018. The four STS indicators regularly covered by Eurostat News Releases are: industrial producer prices, retail trade turnover, industrial production and production in construction. Data for January 2018 for these indicators will be published progressively through March 2018. The STS indicators in base year 2010 (I10) will not be updated after March 1, 2018 but remain available.
Source: ec.europa.eu/eurostat/
Global Fab Equipment Spending Expected to Grow 9% y/y in 2018 & 5% y/y in 2019 (Chart 7)
Global fab construction investment will see another strong year based on our latest outlook to 2019. SEMI analysts expect 9% growth for fab equipment spending in 2018 and 5% in 2019. Fully 82 future facilities/lines with various probabilities are scheduled to start volume production in 2018 or later. This year Samsung will invest about US$14 billion in fab equipment, down from US$17 billion in 2017. China (including non-Chinese headquartered companies) will begin to ramp up to US$11 billion in 2018, rising to US$18 billion in 2019.
Fab investment is just one indicator of how growing demand in areas such as from Artificial Intelligence (AI), cloud/data storage, automotive and Internet of Things (IoT) is driving unprecedented spending in the semiconductor industry. Below are a few highlights of recent SEMI FabView insights:
Intel plans to invest US$5 billion in Israel Intel plans to invest in production expansion at its Kiryat Gat plant in southern Israel. Work is expected to start in 2018 with wafer size and technology conversions to be completed in 2020.
Intel EUV-ready Fab in Arizona
The fab retrofit began in the first half of 2017 and we have updated our forecast for investment size, equipment move-in, operation start, and the volume production capacity schedules for 2019 in SEMI FabView.
TSMC's new R&D Center in Hsinchu, Taiwan A new TSMC research and development (R&D) center project is expected to start no sooner than the latter half of 2019. The center will support future technology development and transfer within TSMC, with the most advanced technology development to come in late 2020 or early 2021.
Samsung's new fab plan in Pyeongtaek, South Korea Samsung plans to build another fab in Pyeongtaek. Initially listed in the SEMI FabView November 2017 edition, the investment is huge with construction starting in 2018. SEMI analysts estimate that Samsung will start production of DRAM at this site to meet increased market demand.
Fab closure by ADI
ADI plans to close its Milpitas, California (Silicon Valley) lab, the smallest of the four fabs it acquired from Linear Technology in March 2017, within the next few years.
Bosch 300mm Fab in Dresden, Germany
We pushed out the construction start of Bosch's planned 300mm fab in Dresden. Bosch announced new investments in new 300mm infrastructure at the site, with fab construction expected to account for less than a third of the total investment. Detailed estimates for equipment move-in, ramp up and pass production schedules are available in SEMI FabView.
By Christian Dieseldorff and Dan Tracy, Industry Research and Statistics Group at SEMI
Source: www.semi.org
U.S. and Global Industrial Production Growth (Charts 8 & 9)
U.S. industrial production grew 1.2%, the most since October 2017 as automobile production and oil and gas drilling rebounded (Chart 8). Chart 9 shows industrial production growth by country. It is positive for all countries listed.
Sources: www.federalreserve.gov and www.economist.com
