Weekly Global Update for September 19, 2018

China/Taiwan Update

August monthly revenues were released for Taiwan-listed electronics companies, many of which manufacture in China.

• OEM sales in August 2018 rose 14.2% compared to August 2017 and were up 5.6% sequentially compared to July 2018 (Chart1).
• ODM revenues increased 9.1% in August 2018 vs. August 2017 (Chart 2).
• Semiconductor shipment growth to SE Asia eased but was still up 18% in July (Chart 3).
• Wafer foundry revenues rebounded from July to August (Chart 4).
• Package and test sales were up sharply (Chart 5), memory was flat (Chart 6) but passive component shipments continued their very strong rise (Chart 7).
• Solar/photovoltaic sales were little changed (Chart 8).
• Rigid and flex circuit board sales have risen well above their trend line (Chart 9).
• CCL (PCB laminate) is remaining above printed circuit boards on a monthly trend basis – probably due to laminate price increases instituted last year (Chart 10).

The normal autumn “busy season” is now well underway.

Source: Company financial reports consolidated and analyzed by Custer Consulting Group

Europe Update

Eurostat has released July European production data by sector:

• Chart 11 summarizes the annualized (12/12) and 3-month (3/12) growth of the European electronic supply chain. Most sectors are expanding but at a slower pace.
• Chart 12 shows monthly industrial production data for key Eurozone countries. Recent growth is minimal.
• Chart 13 shows the historical business cycles for semiconductors, SEMI equipment, DMASS components and electronic equipment SEMI equipment sales growth has been VERY volatile but has now slowed significantly.  The other sectors are experiencing minimal growth at present.
• Instruments and appliances for measuring, testing and navigation remains a strong electronic equipment growth sector (Chart 14).
• Irradiation, electromedical and electrotherapeutic equipment production continues to be volatile on a monthly basis (Chart 15).
• Communication equipment production is relatively flat (Chart 16).
• Aircraft, spacecraft and related equipment production continues its strong upward growth (Chart 17).
• Automotive production dropped in July (Chart 18).
• Loaded Electronic Board Production (electronic assembly) regained growth (Chart 19).
• Printed circuit board production although continuing to decline over time has moved above its historical trend line in recent months (Chart 20).
• Semiconductor shipments to Europe have accelerated on a 3/12 growth basis (Chart 21).

Source: Eurostat and www.semiconductors.org

World Top PCB Makers by Revenue in 2017 ($ million)

Thanks to Dr. Hayao Nakahara here is the list of the top 20 printed circuit fabricators in 2017. It shows flex circuit makers are beginning to dominate.

In 2000, PCB output by the U.S. and Japan accounted for slightly more than 60% of the total world PCB output. In 2017, the combined output of Taiwan and China exceeded 55%. It is only a matter of time until Taiwan and China are responsible for more than 60% of the world’s PCB output, President Trump’s tariffs aside.

As more privately owned Chinese fabricators ascend to the NTI-100 grouping, it is becoming harder every year to ensure accurate data. A fair number of Chinese companies own several “divisions” that are not obvious because these subsidiaries do not bear names suggesting they are owned by other fabricators. Some PCB companies are subsidiaries of large international corporations, and their data are not readily available publicly. The author must make calculated guesses, and several good-sized fabricators may be missing.

2017 Detailed Results

See Printed Circuit Design & Fab link below for six summary tables.
https://pcdandf.com/pcdesign/index.php/editorial/menu-features/12929-nti-100-1809

Source: N.T. Information; Hayao Nakahara, nakanti@yahoo.com

World Enterprise WLAN Market Maintains Moderate Growth Momentum in 2Q’18

Enterprise WLAN Market Grew 2.6% Year-Over-Year in Q2 2018; Consumer Market Up Just 0.8%

The combined consumer and enterprise wireless local area network (WLAN) market segments rose 1.9% year over year in the second quarter of 2018 (2Q’18) with worldwide revenues of $2.5 billion. According to results published in the International Data Corporation (IDC) Worldwide Quarterly WLAN Tracker, the enterprise segment grew 2.6% year-over-year in 2Q’18 to $1.5 billion. Continued demand for network refreshes, digital transformation (DX) initiatives, and increased reliance on wireless networks for engaging with customers are positive indicators for continued growth in the second half of 2018.

The 802.11ac standard now accounts for 85.2% of dependent access point unit shipments in the enterprise segment and 94.5% of dependent access point revenues, marking this standard's full penetration into the market. Beginning late in 2018 and early in 2019 the market will begin to shift toward adoption of the new 802.11ax standard.

Meanwhile, consumer WLAN market revenue increased slightly, up 0.8% in 2Q’18 compared to a year earlier, finishing at $1.0 billion. In 2Q’18, the 802.11ac standard accounted for 49.4% of shipments and 73.9% of revenue. 802.11ac remained a bright spot in the consumer WLAN segment in 2Q’18 with revenues increasing 13.1% year-over-year and shipments increasing 32.8%.

"The enterprise WLAN market continues to see moderate, steady growth, underscoring the importance of wireless networking for businesses of all sizes around the world," said Brandon Butler, senior research analyst, Network Infrastructure at IDC. "Enterprises continue to explore new ways WLAN deployments can help connect workers, enable engagement with customers, and improve business processes."

Key Enterprise WLAN Company Highlights:

·         Cisco's worldwide enterprise WLAN revenue increased 3.3% year-over-year in 2Q’18 and was up 12.5% sequentially between the first and second quarters of 2018. Cisco's worldwide market share was 43.6% in 2Q’18, in line with the company's 43.3% share in 2Q’17. IDC believes that the Meraki cloud-managed WLAN portfolio remains one of the primary growth drivers for Cisco.

• Aruba-HPE (excluding its OEM business) revenues fell 10.3% year-over-year in 2Q’18 but rose 38.9% from 1Q’18. Aruba-HPE's market share stands at 15.1% in 2Q’18, down from 17.2% in 2Q’17.
• ARRIS/Ruckus continued to perform very well in 2Q’18 and grew 19.3% year-over-year and 1.5% sequentially. ARRIS/Ruckus now accounts for 6.7% of the enterprise WLAN market, up from 5.8% in the same quarter of 2017.
• Ubiquiti recorded another quarter of strong growth in 2Q’18, increasing 10.8% year-over- year. Ubiquiti accounted for 5.7% of the enterprise market in 2Q’18, up from 5.3% in 2Q’17.
• Huawei once again experienced very strong growth in 2Q’18, increasing 16.0% over 2Q’17 and up 42.8% sequentially from 1Q’18, while claiming 5.1% market share versus its 4.5% market share in 2Q’17.

Source: www.idc.com

Worldwide Enterprise Storage Systems Market up 21.3% in 2Q’18 (Charts 22 &23)

According to the International Data Corporation (IDC), vendor revenue in the worldwide enterprise storage systems market increased 21.3% year over year to $13.2 billion during the second quarter of 2018 (2Q’18). Total capacity shipments were up 70.7% year over year to 111.8 exabytes during the quarter.

Revenue generated by the group of original design manufacturers (ODMs) selling directly to hyperscale datacenters increased 31.7% year-over-year in 2Q’18 to $3.3 billion. This represents 25.1% of total enterprise storage investments during the quarter. Sales of server-based storage increased 24.9% year-over-year to $3.8 billion in revenue. This represents 28.5% of total enterprise storage investments. The external storage systems market was worth slightly over $6.1 billion during the quarter, up 14.4% from 2Q’17.

"Strong 2Q’18 growth was driven by an ongoing infrastructure refresh cycle, investments in next-generation workloads, expanded use in public cloud services and data-driven initiatives," said Sebastian Lagana, research manager, Infrastructure Platforms and Technologies. "The growing data economy is a big part of the current market growth. Companies of all sizes are investing in platforms that support their need to ingest, process, and disseminate large volumes of data cost effectively and without introducing new risks to the business."

Overall Enterprise Storage Systems Market Results, by Company:

• Dell Inc. was the largest supplier for the quarter, accounting for 19.1% of total worldwide enterprise storage systems revenue and growing 26.6% over 2Q’17.
• HPE/New H3C Group was the second largest supplier with 17.3% share of revenue and year-to-year growth of 1.9%. NetApp generated 6.3% of total revenue, making it the third largest vendor during the quarter. This represented 19.8% growth over 2Q’17. IBM was the fourth largest supplier with a 4.6% share of market revenue during the quarter and year-over-year growth of 7.5%.
• Hitachi, Lenovo, and Huawei were all statistically tied* for the number five position with shares of 3.1%, 3.0%, and 2.7% respectively. As a single group, storage systems sales by ODMs directly to hyperscale datacenter customers accounted for 25.1% of global spending during the quarter, up 31.7% over 2Q’17.

Flash-Based Storage Systems Highlights

The total All Flash Array (AFA) market generated just over $2.0 billion in revenue during the quarter, up 41.7% year over year. The Hybrid Flash Array (HFA) market was worth slightly under $2.6 billion in revenue, up 20.8% from 2Q’17.

Source: www.idc.com

Global Smartphone AP Shipments Expected to Decline 0.8% y/y to 1.59 Billion Units in 2018

Apple may see impressive demand for its three newly released iPhones, shipments for which are expected to surpass 85 million units in the second half of 2018, Digitimes Research estimates. Other smartphone vendors, however, are generally conservative about their shipment results for the entire 2018, despite the upgrades, including all-screen features, to their new devices.

But the smartphone market has entered the third-quarter high season with healthy inventory levels, Digitimes Research believes. Smartphone AP shipments worldwide are estimated to reach 450 million units in third-quarter 2018, down 0.45 on year but up 18.7% sequentially

The Digitimes Research Special Report shows that Qualcomm will remain the top smartphone AP vendor in third-quarter 2018, with total shipments nearing 200 million units. Enjoying a high penetration among leading smartphone AP vendors, Qualcomm will outperform its rivals in terms of third-quarter 2018 shipment growth, as downstream vendors prepare inventory for the high season.

The top-three smartphone AP vendors - namely Qualcomm, MediaTek and Apple - will together command a market share of over 80% in third-quarter 2018, and their combined share will drop to 76.6% in first-quarter 2019, as Qualcomm is expected to feel a major impact from competition from Huawei's and Samsung's in-house-developed smartphone APs, according to the report.

Source: www.digitimes.com

Slower Growth for Wearables in 2018 Before Ramping Up Again Through 2022 (Charts 24 & 25)

The worldwide wearables market is forecast to ship 122.6 million units in 2018, up 6.2% from the 115.4 million units shipped in 2017, according to the International Data Corporation (IDC). This will be the first year of single digit year-over-year growth for the wearables market, mostly due to continuing softness among basic wearables (devices that do not run third-party applications). However, double-digit growth will return in 2019 and through the rest of the forecast as smartwatches and new form factors gain acceptance. In 2022, IDC expects total shipment volumes will reach 190.4 million units, resulting in a compound annual growth rate (CAGR) of 11.6% over the five-year forecast.

"The slowdown in the worldwide wearables market is a sign that this is a market in transition instead of a market in slowdown," said Ramon T. Llamas, research director for IDC's Wearables team. "Vendors are slowly moving beyond first-generation devices and experiences, bringing together an ecosystem of partners and applications for improved user experiences that reach beyond step counting. The wearables of tomorrow will play a more prominent role in communication, digital health care, home IoT, and enterprise productivity that will make last year's wearables look quaint."

"The shift from basic wearables to smartwatches is well on its way," said Jitesh Ubrani senior research analyst for IDC Mobile Device Trackers. "With it, we anticipate far greater diversity in terms of design, feature set, brands, and most importantly, price points than ever before. Fitbit's Versa was one of the first mass market smartwatches to target the sub-$200 price band and in the next six to twelve months consumers can expect more options in the same or lower price tiers.

"Apart from smartwatches, we also expect growth from new products as kid's brands, fashion brands, and sports brands begin to hit the shelves," added Ubrani. "Although kids’ wearables have been a phenomenon in the Asia/Pacific region, they are just beginning to emerge in Europe and Latin America with the North American market to follow. Meanwhile, the third generation of WearOS watches is expected to make a small splash this holiday season and gain traction throughout 2019."

"Through all these changes there will still be an appetite for basic wearables," noted Llamas. "Wristbands will continue to play a significant role in the wearables market, offering simpler and less expensive solutions than their smartwatch counterparts. We also expect these devices will bring a more smartwatch-like experience to the table. Meanwhile, clothing and earwear will post market-beating growth with use cases that go well beyond their primary functions."

Forecast Highlights

Smartwatch volumes will reach a total of 46.2 million units shipped in 2018, up 38.9% from the 33.3 million units shipped last year. By 2022, total volumes will grow at a CAGR of 19.5% and reach 94.3 million units shipped, accounting for nearly half the entire wearables market. In the near-term, expect a boost from Fitbit's entry in the market as well as a reinvigorated WearOS to spur volumes. At the same time, Apple's new Watch will appeal to cardiac patients thanks to its approval from the FDA and AHA, and its refreshed watchOS5 provides reason for owners of older versions to upgrade.

Wristband volumes will remain essentially flat throughout our forecast. Although numerous vendors have exited in recent quarters and more will exit in the years to come, what will remain are best-of-breed devices that go beyond step counting and move towards being a health and fitness companion. Combined with their simple value proposition and lower prices compared to smartwatches ($44 USD vs $289, respectively) wristbands will continue to play a significant role in the wearables market.

Earwear will grow the fastest among all the other wearables products on our list. In this category, we included those devices that feature a plus-one functionality beyond audio, and already earwear has expanded to include fitness tracking and coaching and real-time language translation, and in the coming years it should not be difficult to imagine a smart assistant tucked into a user’s ear.

Source: www.idc.com/

Strong Worldwide Security Appliance Growth Continues in Q2’18 with UTM Leading the Way (Chart 26)

According to the International Data Corporation (IDC), the total security appliance market experienced positive unit shipment and revenue growth for the second quarter of 2018 (2Q’18). Worldwide revenue for the second quarter increased 11.1% quarter over quarter and 17.0% year over year to $3.6 billion. Unit shipments experienced similar growth, increasing 9.9% quarter over quarter and 25.3% year-over-year to 921,278 units.

The Unified Threat Management (UTM) sub-market continues to drive the worldwide market with revenue increasing by 9.6% quarter over quarter and 16.5% year-over-year to reach $1.9 billion in the second quarter of 2018. UTM now comprises 52.9% of the total security appliance market. Additionally, Web security (WAM included) had a strong quarter, growing by 7.3% quarter over quarter and 7.8% year over year. Although messaging security saw an increase in unit shipments of 9.0% year-over-year for 2Q’18, shipments declined 2.6% quarter over quarter. Only Ipsec VPN and SSL VPN had declining revenue for 2Q’18.

"The second quarter of 2018 extends the continued strong growth for network security with consistent double-digit growth year-over-year across the top vendors. Firewall and UTM are the strongest areas of growth as network refreshes drive perimeter security refreshes and as vendors add new features and improve performance across all product lines," said Robert Ayoub, program director, Security Products.

Source: www.idc.com