2Q'18 Global Electronic Equipment Supply Chain Growth - First Estimate
Second quarter company financial results are just being released allowing a very preliminary estimate of 2Q’18 global electronic supply chain growth by sector.
- Electronic equipment world revenues (consolidated to U.S. dollars) grew nearly 10% in 2Q’18 vs. 2Q17 (Chart 1)
- By sector all groups except consumer electronics had positive growth in the second quarter (Chart 2)
- Combined revenues of 52 global EMS and ODM companies grew 10% in 2Q’18 vs. 2Q’17 (Chart 3)
- Although the second quarter was strong PCB related process equipment, materials and laminate sales growth appears to have peaked (Chart 4)
Note: Second quarter financial report releases are incomplete and ongoing. The results noted above are based on a combination of actual and estimated data and the conclusions are still very preliminary. Regular updates will be provided through August.
Source: Company financial reports analyzed by Custer Consulting Group
July PMI "Flash" Leading Indicator Estimates
IHS Markit has just released “flash” July Purchasing Managers results for select countries (Chart 5).
- USA’ PMI (Chart 6) rose very little
- Europe’s 6-month PMI plunge ceased (Chart 7). It should be noted that although Eurozone manufacturing growth has slowed it still remains well in expansion territory (PMI > 50)
- Germany (Chart 8) and France (Chart 9) had PMI increases
- Japan continued it PMI drop that began in January (Chart 10)
Source: www.markiteconomics.com
U.S. June Durable Goods Report
The U.S. Commerce Department released June preliminary shipments, orders and inventories for select domestically produced goods:
- Electronic equipment book/bill rose to 1.019 on a 3-month average basis (Chart 11). For June alone it was 1.025
- Electronic equipment order growth reached almost +10% on a 3/12 basis (Chart 12) as orders continued to expand (Chart 13)
- Inventories relative to orders are being consumed as the ratio of inventories/orders continues to decline (Chart 14)
- Defense capital goods orders eased to their shipment trend line (Chart 15)
- Aircraft shipments rose from May led by the commercial sector (Chart 16)
The more complete “Factory Orders” report will be issued August 2.
Source: www.census.gov/manufacturing/m3/
Japan Update
JEITA just released Japan’s May domestic production data:
- Electronic equipment production rose 6.2% sequentially from April to May 2018 and was up11.2% comparing May 2018 to May 2017 (Chart 17)
- Discrete semiconductor production was flat from April but IC output rose (Chart 18)
- Passive component production continued its increase (Chart 19)
- Printed circuit production eased (Chart 20) but it remains +3.5% ahead of last year on a 3-month growth basis (Chart 21)
- Electronic component growth remained positive but electronic device output is shrinking (Chart 22)
- As noted above Japan’s PMI manufacturing leading indicator (Chart 10) has been declining since January
Source: www.jeita.or.jp
North American Semiconductor Equipment Industry June 2018 billings up 8.1% y/y but down 8.1% sequentially from May (Chart 23)
North America-based manufacturers of semiconductor equipment posted $2.49 billion in billings worldwide in June 2018 (3-month average basis), according to SEMI. The billings figure is 8.0% lower than May 2018 and 8.1% higher than the June 2017 billings level of $2.30 billion.
“Global billings of North American equipment manufacturers declined for the current month by 8% from the historic high but is still 8% higher than billings for the same period last year,” said Ajit Manocha, president and CEO of SEMI. “Billings remain robust.”
Source: www.semi.org
Park Electrochemical selling its Electronics Business to AGC (formerly Asahi Glass) (Chart 24)
Park Electrochemical has agreed to sell its laminate business to AGC Inc., formerly Asahi Glass for USD $145 million in cash. The AGC Group employs approximately 50,000 people worldwide and generates annual sales of approximately USD $13.3 billion (revenues for fiscal year ended December 31, 2017 were 1,464 billion yen) through businesses in approximately 30 countries.
Park will retain its Aerospace Business which develops and manufactures advanced composite materials, primary and secondary structures and assemblies and low volume tooling for the global aerospace markets and includes Park's principal aerospace manufacturing and development facility located in Newton, Kansas and its satellite aerospace manufacturing facility located in Singapore.
Source: parkelectro.com
DRAM Industry Likely to Face Oversupply in 2019
While the global DRAM market still remains robust, the recent capacity ramps by Micron Technology and the planned kick-off of commercial production by China-based Fujian Jin Hua Integrated Circuit and Innotron Memory (previously known as Hefei ChangXin) could lead to oversupply for the memory in 2019, according to industry sources.
Samsung Electronics and SK Hynix would be forced to overhaul their current profit-oriented business strategy as both firms believe that the booming memory market, which has continued for 2-3 years, is likely to be over by the end of 2018, according to a Korea-based Digital Times report.
Although Samsung and SK Hynix both stated, at their latest investors conferences, respectively, that they will continue to ramp up capacities for memory chips, the aggressive moves by rival companies have made the two companies hesitate, said the report.
Samsung has seen its share in the DRAM market continue to dive after hitting a high of 50.2% in the third quarter of 2016 as rivals including Micron have jacked up their revenues and profits.
Notably, Micron has ramped up its operating margin to as high as 50% so far in 2018 compared to 20% at the end of 2016. Additionally, Samsung saw its share in the market drop to 44.4% in the first quarter of 2018, while Micron managed to ramp up its share to 23.1%, according to IHS Markit.
The global DRAM market is expected to reach a peak of US$104 billion in 2018, before contracting by 1.8% and 2.6%, respectively, in 2019 and 2020, according to an industry estimate. Meanwhile, automotive applications will gradually replace the smartphone sector to become the largest market for memory chips.
Source: www.digitimes.com
Graphics Card Sales Expected to Face Difficulties in 2H'18 due to Uncertainties in Crypto Mining Sector
Despite Nvidia's releasing its next-generation GPUs, sales of graphics cards are expected to face difficulties in the second half of 2018 due to uncertainties in the crypto mining sector.
Nvidia reportedly is set to roll out its GeForce GTX 1180 series graphics cards at the end of August, followed by the launch of its GeForce GTX 1170 series at the end of September and GeForce GTX 1160 series a month later, according to industry sources.
However, these graphics cards' mass production schedules and volumes will still be adjusted depending on the status of the GeForce GTX 1080 and 1070's inventory digestion.
Most graphics card players currently still have high levels of GTX 1080/1070 graphics card inventory, but are not willing to lower prices to clear them, as they still hope cryptocurrency mining can regain its momentum.
With the prices of the current-generation graphics cards to remain at high levels, the next-generation devices are likely to be priced even higher in order to create differentiation, but this will also deter demand for the new cards, the sources noted.
Graphics card sales are expected to be significantly undermined in the second half as demand from cryptocurrency miners has been declining, while consumers in the gaming area will continue to wait for prices to drop. With some miners having already begun selling their second-hand graphics cards in the PC DIY channels, demand for new cards is expected to be weakened further.
Nvidia's GeForce GTX 1180 is manufactured via Taiwan Semiconductor Manufacturing Company's (TSMC) 12nm process and the GPU giant reportedly will release a GPU made using TSMC's 7nm process at the end of 2018. AMD is planning to release a new series of Radeon Instinct graphics cards based on its 7nm Vega architecture in the second half, targeting datacenter and professional image processing applications. AMD's GPUs will also be handled by TSMC.
Source: www.digitimes.com
U.S. GDP Growth up 4.1% in 2Q'18 (Charts 25-27)
U.S. quarterly GDP rose 4.1% in the second quarter however some of this growth may be non-recurring.
See: www.crfb.org/papers/can-america-sustain-recent-economic-boost
- The good news is that the economy is doing well; however, this is unlikely to turn into sustained growth at the same rate.
- Short-term improvements in economic growth are primarily the result of the completion of the economic recovery and the temporary stimulative or one-time effects of debt-financed tax cuts and spending increases; this is unlikely to translate into a sustained improvement in growth.
- Sustained growth is still projected to average less than two percent annually rather than three percent, primarily due to the aging of the population.
- The country should adopt pro-growth policies whenever sensible, but be realistic about the structural challenges constraining growth.
Sources: www.bea.gov/national/ - www.crfb.org