2018 & 2019 Global Supply Chain Forecasts
Charts 1 and 2 summarize the recent forecasts for global growth of GDP (World Bank), electronic equipment (Custer Consulting Group), printed circuit boards (Custer Consulting Group), semiconductors (SIA/WSTS) and semiconductor capital equipment (SEMI).
Chart 3 is a recent caution from the World Bank.
China/Taiwan Update
June sales were just released by Taiwan-listed electronics companies, many of which manufacture in China:
- June 2018 electronic equipment revenues were up 7.3% compared to June 2017 and up 8.7% sequentially compared to May 2018 (Chart 4).
- Network equipment sales rebounded (Chart 5).
- Wafer foundry sales dropped sharply. They are often a leading indicator of global semiconductor shipments (Chart 6).
- Memory revenues continued to climb (Chart 7) as did package and test (Chart 8).
- Passive component revenues continued to surge (Chart 9).
- Solar/photovoltaic related sales were little change from May (Chart 10).
- ODM sales in June 2018 were up 4.9% vs. June 2017 and up 4.9% sequentially from April 2018 (Chart 11). For 2Q’18 they increased 7.9% versus 2Q’17 (Chart 12).
- A combination of 46 Taiwan-listed rigid and flex PCB makers reported a modest sales increase from May to June (Chart 13).
- Copper clad (CCL) laminate revenues declined more than rigid PCB sales (Chart 14). Does this signal more freely available laminate supply?
Source: Company financial reports
Europe Update
Eurostat just released May European electronic supply chain production data.
- Chart 15 summarizes the annualized (12/12) and 3-month (3/12) growth of the European electronic supply chain. It should be noted that the reported total still shows an apparent historical discontinuity (Chart 16). Reader/Eurostat clarification would be most welcome!
- Industrial production increased in May (Chart 17).
- Motor vehicle production rose modestly from April (Chart 18).
- Aircraft, spacecraft and related equipment is approaching an all-time high (Chart 19).
- Production of instruments and appliances for measuring, testing and navigation rebounded from April (Chart 20).
- Irradiation, electromedical and electrotherapeutic equipment growth remained erratic (Chart 21).
- Communication equipment sales were flat from April (Chart 22).
- PCB (wiring device) production climbed (Chart 23).
- Chart 24 shows the monthly growth of the European supply chain on a 3/12 basis. Semiconductor capital equipment growth far exceeds the other series but is very volatile.
Source Eurostat, www.semiconductors.org and www.semi.org
Worldwide New Semiconductor Manufacturing Equipment Sales Projected to Increase 10.8% y/y to $62.7 billion in 2018 (Charts 25-27)
SEMI reported that worldwide sales of new semiconductor manufacturing equipment are projected to increase 10.8% to $62.7 billion in 2018, exceeding the historic high of $56.6 billion set last year. Another record-breaking year for the equipment market is expected in 2019, with 7.7% forecast growth to $67.6 billion.
The SEMI mid-year forecast predicts wafer processing equipment will rise 11.7% in 2018 to $50.8 billion. The other front-end segment, consisting of fab facilities equipment, wafer manufacturing, and mask/reticle equipment, is expected to jump 12.3% to $2.8 billion this year. The assembly and packaging equipment segment is projected to grow 8.0% to $4.2 billion in 2018, while semiconductor test equipment is forecast to increase 3.5% to $4.9 billion this year.
In 2018, South Korea will remain the largest equipment market for the second year in a row. China will rise in the rankings to claim the second spot for the first time, dislodging Taiwan, which will fall to the third position. All regions tracked except Taiwan will experience growth. China will lead in growth with 43.5%, followed by Rest of World (primarily Southeast Asia) at 19.3%, Japan at 32.1%, Europe at 11.6%, North America at 3.8% and South Korea at 0.1%.
SEMI forecasts that, in 2019, equipment sales in China will surge 46.6% to $17.3 billion. In 2019, China, South Korea, and Taiwan are forecast to remain the top three markets, with China rising to the top. South Korea is forecast to become the second largest market at $16.3 billion, while Taiwan is expected to reach $12.3 billion in equipment sales.
Worldwide Personal Computer Shipments Grew for First Time in Six Years during 2Q’18 (Charts 28-31)
Steady Business Market Demand Drives PC Sales
Worldwide PC shipments totaled 62.1 million units in the second quarter of 2018, a 1.4% increase from the second quarter of 2017, according to preliminary results by Gartner, Inc. This is the first quarter of year-over-year global PC shipment growth since the first quarter of 2012.
All regions experienced some growth compared with a year ago. While the results are a positive result for the PC industry, Gartner analysts said this sign of market stability is not enough to declare a PC industry recovery just yet.
"PC shipment growth in the second quarter of 2018 was driven by demand in the business market, which was offset by declining shipments in the consumer segment," said Mikako Kitagawa, principal analyst at Gartner. "In the consumer space, the fundamental market structure, due to changes on PC user behavior, still remains, and continues to impact market growth. Consumers are using their smartphones for even more daily tasks, such as checking social media, calendaring, banking and shopping, which is reducing the need for a consumer PC.
"In the business segment, PC momentum will weaken in two years when the replacement peak for Windows 10 passes. PC vendors should look for ways to maintain growth in the business market as the Windows 10 upgrade cycle tails off."
With the completion of Lenovo's joint venture with Fujitsu, three out of four PCs were shipped by the top five PC vendors in the second quarter of 2018. With the inclusion of Fujitsu’s PC shipments due to the joint venture (a formation of Joint Venture with Fujitsu), Lenovo was in a virtual tie with HP Inc. for the top spot in the second quarter of 2018 based on global PC shipments. All of the top five PC vendors experienced an increase in worldwide PC shipments in
HP Inc. had its third consecutive quarter of year-over-year PC shipment growth. HP Inc. maintained steady growth across all regions, except the U.S. In the other regions, its shipment growth well exceeded the regional averages. Lenovo experienced its highest growth rate since the first quarter of 2015.
While Dell's competitors have shown PC shipment declines periodically in the past two years, Dell's shipments did not decline during this time because of its strong focus on growth areas, especially in the commercial segment, as well as cutting off unprofitable businesses.
In the U.S. PC market, the industry returned to growth after six consecutive quarters of shipment declines. In the second quarter of 2018, U.S. PC shipments totaled 14.5 million units, a 1.7% increase from the same period last year. HP Inc. continued to be the market leader in the U.S., but Dell closed the gap, as Dell's U.S. PC shipments increased 7.2%.
"In the U.S., business PC demand was particularly strong among the public sector as the second quarter is typically PC buying season among government and education buyers," Ms. Kitagawa said. "Desk-based PC growth was attributed to continued high usage of desk-based PCs in the U.S. public sectors. Mobile PCs grew in the U.S., but strong Chromebook demand in the education market adversely affected PC growth. Overall, Chromebooks grew 8% in the U.S., but Chromebooks are not included in the PC market statistics."
PC shipments in EMEA reached 17.4 million units in the second quarter of 2018, a 1.3% increase year over year. In Western Europe, demand was strong for business PCs in Germany and the U.K. Eurasia, which includes Russia, remained the growth region in EMEA. While the second quarter is usually a slower quarter in terms of PC demand, several countries, such as Russia, Ukraine and Kazakhstan, continued to see increasing consumer demand.
PC shipments in Asia/Pacific totaled 21.3 million units, a 0.1% increase from the second quarter of 2017. India, Indonesia, Thailand and other emerging markets in Asia showed improvement in the commercial segment due to demand for replacing aging PCs and upgrading to Windows 10. In China, PC shipments declined 3.6% year over year as some business procurements have been postponed to 2019, and the consumer market is saturated.
Increasing PC Prices Will Lead to Flat Growth of Global Device Shipments in 2018 (Chart 32)
Organizations Should Prioritize Windows 10 Adoption as Windows 7 Support Will End in January 2020
Worldwide shipments of devices — PCs, tablets and mobile phones — are on pace to record 0.9% growth to reach 2.28 billion units in 2018, according to Gartner, Inc. The PC and tablet market is estimated to decline 1.2% in 2018, while the mobile phone market is on pace to record an increase of 1.4%.
"The PC market is still hindered by the undersupply of the DRAM market for all of 2018, due to the lack of new wafer capacity coming online. As a result, PC vendors will continue to increase their prices throughout 2018," said Ranjit Atwal, research director at Gartner. "Larger screens and more graphic boards also mean rising costs, adding to the bill of hardware materials for businesses and household buyers."
While the PC market is price-sensitive, Gartner is witnessing business demand migrating to high-end PCs such as ultramobile premium devices, where value is seen as higher. Gartner estimates shipments of ultramobile premium units to increase by 12% in 2018.
End of Windows 7 Adoption Will Mark Next Major Shift in PC Market
The next major shift in the PC market will be marked by the end of support for Windows 7 in January 2020. "It is becoming paramount for businesses to migrate to Windows 10 as soon as possible, and certainly by the end of 2019," said Atwal.
North America kicked off the first Windows 10 migration phase in 2015 and will complete around 2019. Western Europe is increasing its adoption in 2018. However, in China, Japan and other emerging regions, migration plans are shifting from 2018 to 2019 as they continue to prepare for inherent complications in changing process and procedures for Windows as a service.
China's Influence on Global Device Market
While the global device market is affected by macro-economic factors and technology developments, it can also be influenced by the Chinese device market alone. "China accounts for over 20% of global spending on devices, so any changes occurring there can have a significant ripple effect globally," said Atwal.
With nearly 1.9 billion units to be shipped in 2018, mobile phones are the main influencer of the global device market growth. In China, mobile phone sales declined 8.7% in 2017 to 428 million units, but are estimated to grow 3.3% in 2018, representing 23% of total mobile phone sales this year.
The traditional PC market in China is on pace to decline 1.7% to 38.5 million shipments in 2018, representing 21% of global traditional PC shipments. The drop will come despite China being business-dependent, with two-thirds of PC shipments coming from this segment.
"The downward trend that China is experiencing is undoubtedly affecting the worldwide device market," said Atwal. "China is an interesting country to watch this year. The continued roll-out of a Chinese version of Windows 10 in the second half of 2018 as well as Apple iPhone's replacement cycle expected through 2019 will generate demand."
Global Industrial Automation Equipment Market
According to IHS Markit, the global industrial automation equipment (IAE) market was estimated at $202.2 billion in 2017, and it is projected to grow by 3.8% in 2018 and by 4% in 2019 to reach $218.2 billion.
This growth is driven by rising industrial production, a strong global economy, growing machinery production and capital expenditure. In 2017, the automation equipment category led with 37.1% share of the industrial automation equipment market, followed by power transmission equipment with 32.9%, and motors and motor controls with 30%. Total industrial capital expenditure is expected to continue to grow by 3%, year-over-year, in 2017, 6% in 2018 and 4% in 2019.
IHS Markit expects that some companies will close their doors to new proof-of-concept smart manufacturing projects in 2018, until existing and ongoing projects are completed or show a return on investment.
Rising machinery production points to growing demand for automation equipment going into the new machines. The global industrial automation equipment market is expected to maintain solid growth through 2019, for the following reasons:
In 2017, many smart manufacturing initiatives began to materialize, especially in countries like the United States, Germany and China. However, more multi-national end-users are expected to only accept trials of new solutions that are fully funded by the vendor, until returns are realized.
Total industrial capital expenditure is expected to continue to grow through 2019. Specifically, spending on industrial automation equipment is forecast to increase in 2017 and beyond.
Rising industrial production typically follows a stronger world economy. After 3.2% growth in 2017, the IHS Markit forecast in April 2018 showed world real gross domestic product (GDP) growth is projected to increase 3.4% in 2018 and 2019 respectively.