U.S. August Shipments, Orders and Inventories
The Department of Commerce releases its August Durable Goods report with preliminary data on electronic supply chain shipment, orders and inventories.
- Electronic equipment book/bill ratio dropped to 0.98 on a 3-month average basis (Chart 1).
- Electronic equipment shipments continued to increase but orders declined on both a US$ and 3/12 rate of growth basis (Charts 2 & 3).
- Defense capital goods orders rose sharply (Chart 4).
- Aircraft shipments rose versus July (Chart 5) but non-defense orders declined (Chart 6).
Source: www.census.gov/manufacturing/m3/
Tight Supply of Intel Processors Unlikely to Ease Until 2H’19
The ongoing tight supply of Intel's processors is unlikely to ease until the second half of 2019 and will undermine worldwide notebook shipments during the upcoming peak season, according to Martin Wong, president and CEO of Compal Electronics.
Wong noted that so far Intel has not yet given its downstream partners a clear schedule on when the shortages can be resolved.
In response to the CPU shortages, Intel noted that it has been cooperating closely with its partners to manage their extra orders and its supply priority will be given to Xeon and Core series processors including the latest eighth-generation U and Y series.
Acer recently noted that the shortages are not only affecting certain individual brands, but the notebook market as a whole.
Wistron originally expected its notebook shipments to grow 5-10% sequentially in the third quarter, but has already cut the forecast to 5% or less.
Inventec expects its third-quarter shipments to rise by a single-digit percentage sequentially and stay at the same level in the fourth quarter, while Quanta also expects a single-digit percentage sequential growth for the third quarter shipments, but was unable to give an estimate on its fourth-quarter performance.
However, some market watchers are still optimistic about the situation and expect the problem to improve in the first quarter of 2019.
Source: www.digitimes.com/
DRAM Products May Experience Steeper Price Decline of 5% QoQ in 4Q’18 Due to Oversupply and Weak Demand
DRAMeXchange, a division of TrendForce, reports that DRAM suppliers have been negotiating with their clients over the 4Q18 contracts towards the end of September. Looking ahead to the next quarter, DRAMeXchange expects that the quotations of DRAM products to decline by 5% QoQ, higher than the previous forecast of 1~3%. The weak quotations are mainly due to increasing bit supply yet fairly limited growth in demand, despite the coming of holiday sales season.
“DRAM products have begun to see a weak price trend since 3Q18 after the price growth of nine consecutive quarters,” says Avril Wu, senior research director of DRAMeXchange. Particularly, PC DRAM and server DRAM showed only a 1~2% price hike QoQ in the third quarter, while mobile DRAM applications witnessed a flat price trend despite the busy season. Graphics DRAM has even started to experience a price drop during the same period. On the other hand, the spot prices have been sliding since the beginning of this year and then dropped to a level lower than contract prices at the end of June. Currently, the spot prices are 10% lower than contract prices, which is an early indicator of the possible DRAM price decline in general.
Server DRAM products may see steeper price drop in the slowing DRAM market
In the server DRAM market, orders from data center customers in North America and the transition to the new server processor platform have driven up the demand. Amid the tight supply of DRAM in 1H18, the end-clients tended to secure the supply by double booking. By 3Q18, the undersupply has been eased with significantly improved order fulfillment rates, as the DRAM suppliers continue to increase the proportion of server DRAM applications in their product mixes. Looking ahead to the fourth quarter, DRAMeXchange expects the quotations to decline by 5% QoQ, higher than the previous forecast of 2%. This is because the server demand is uncertain and spot prices of DRAM products continue to fall in the channel market.
Particularly, Korean DRAM manufacturers have already lowered their target prices for 4Q18.
Similar to server DRAM, the PC DRAM market also expects an oversupply and a price drop up to 5%. The price decline is larger than the previous forecast, for the shortage of Intel CPUs may lead to lower demand for notebooks and PC DRAM in a row. In terms of specialty DRAM, DRAMeXchange notes that the demand has already gone weak, together with price declines since September, because the U.S-China trade war has brought some uncertainties to the market. For 4Q18, there is a higher chance for the contract prices of specialty DRAM to decrease, even steeper than PC DRAM and server DRAM.
Mobile DRAM products also expect a weak price trend in 4Q18 although the shipments of new iPhones are expected to boost the demand. However, the market tends to be conservative about the smartphone sales due to new iPhones’ high price tag. Therefore, DRAMeXchange expects high possibilities for the oversupply of DRAM. Specifically, in 4Q18, the prices of discrete solutions may decline by around 3% QoQ, while eMCP may see up to 8% QoQ price decline due to the continuous price drop of NAND Flash.
Source: www.dramexchange.com/
Graphics Card Manufacturing to move out of China to Avoid Tariffs
A new round of U.S. tariffs was implemented adding a 10% fee on imports of more than $200 billion from China. In the sweeping tariff increases, graphics cards are one of the many tech items affected.
Both AMD and Nvidia are affected by the tariffs, although the true extent is still being determined. Buyers of prebuilt systems need not worry about any additional tariffs since they do not apply to complete computers at this time. Only graphics cards sold individually and manufactured in China are affected.
For now, the "vast majority" of graphics cards are still made in China. Bank of America's investment arm Merrill Lynch sent notice to clients that Nvidia's RTX line may see price hikes of 5 to 10% over the next few months. It is estimated that gaming segment graphics cards accounted for as much as 60% of Nvidia's sales in the third quarter. AMD's graphics division likely only made up around one-fourth of its revenue.
To counter the new tariffs, board partners are already looking at relocating to Taiwan and Mexico in order to avoid the added import fees in the U.S. Given that Nvidia and AMD are both fabless companies, choosing manufacturing partners outside of China for GPU dies will not be too burdening if either still even have substantial manufacturing going on there. Nvidia and AMD are both working with their partners to try and lessen the impact of tariffs, but neither provided specific details on how they are doing so.
In the official listing of product categories subject to new tariffs, "printed circuit assemblies" and "electronic calculating machines" could be where graphics cards fall into place. The trade office has yet to verify which category consumer graphics cards will be placed in.
Source: www.techspot.com/
PCB Sector Sees Little Impact from US-China Tariff War
The US has recently kicked off imposing additional tariffs on roughly US$200 billion of imports from China, causing Taiwan major assemblers of electronics products to seriously consider relocating their manufacturing operations from China back to Taiwan or to Southeast Asia. By contrast, PCB makers have stayed relatively quiet as they feel little impact from the tariff war between the world's two largest economies, according to industry sources.
The sources said that most PCB makers do not deliver shipments directly to the U.S. but to downstream PCB assembly plants before the assembled PCBs are sent to the final assemblers of electronics products subject to extra tariffs imposed by the US.
PCB makers can only take a wait-and-see attitude before downstream assemblers move to discuss with them over how to adjust production capacity, quotes for orders and ways of delivery after negotiating with brand vendors. Accordingly, there is no need for PCB makers to worry about plant relocation or tax evasion issues for the moment, the sources continued.
The US has reduced the ratio of consumer electronics subject to extra tariffs, with Apple devices excluded from the latest tariff lists, mainly to reduce the burden on U.S. consumers. With this, unless PCBs are supplied to makers of communication network equipment and servers associated with 5G applications, PCB makers will not feel the pinch of the ongoing tariff war in the short term.
In terms of cost structure, PCBs command an extremely low ratio of product costs, and even if it they are subjected to a 25% tariff, the overall cost increase is rather limited.
Industry sources said that the U.S. tariff scheme is mainly to force manufacturing plants with high production value in China to move to the US, and therefore the PCB industry, which involves high energy consumption, high pollution and low production value, is the least concerned, let alone relocating to the U.S.
Source: www.digitimes.com/
China 5G Market Unlikely to Grow in Scale until after 2022
The end-user market for 5G networks in China may not enter a stage with meaningful growth until after 2022, as telecom operators there are aiming to kick off commercial operations of their 5G networks in 2020 leveraging the expertise they gained from the participation in the setting of the TD-LTE standards and the commercialization of 4G networks, according to Digitimes Research.
As one of the member countries being organized to push for the standardization of 5G networks, China kicked off in 2015 a two-stage preparation work for the commercialization of its 5G networks and also began to test its 5G networks for multi-scenario applications in 2018.
Although China Mobile said earlier that it would support only standalone 5G networks, the company, together with China Telecom and China Unicom, announced unanimously during the MWC Shanghai 2018 that they would adopt both standalone and non-standalone 5G networks.
Given that the deployment of two 5G network standards at the same time will result in increased capital expenditure and procurement of terminal devices, and that the 4G market in China still have room for growth, Digitimes Research believes that the 5G market in China is unlikely to grow in scale until after 2022.
Source: www.digitimes.com/
World Spending on Cloud IT Infrastructure (Charts 7 & 8)
- Continued Double-Digit Growth Rate in 2Q’18
- Accounts for Nearly Half of Overall IT Infrastructure Spending
According to the International Data Corporation (IDC) vendor revenue from sales of infrastructure products (server, enterprise storage, and Ethernet switch) for cloud IT, including public and private cloud, grew 48.4% year over year in the second quarter of 2018 (2Q18), reaching $15.4 billion. IDC also raised its forecast for total spending (vendor recognized revenue plus channel revenue) on cloud IT infrastructure in 2018 to $62.2 billion with year-over-year growth of 31.1%.
Quarterly spending on public cloud IT infrastructure has more than doubled in the past three years to $10.9 billion in 2Q18, growing 58.9% year-over-year. By end of the year, public cloud will account for the majority, 68.2%, of the expected annual cloud IT infrastructure spending, growing at an annual rate of 36.9%. In 2Q18, spending on private cloud infrastructure reached $4.6 billion, an annual increase of 28.2%. IDC estimates that for the full year 2018, private cloud will represent 14.8% of total IT infrastructure spending, growing 20.3% year-over-year.
The combined public and private cloud revenues accounted for 48.5% of the total worldwide IT infrastructure spending in 2Q18, up from 43.5% a year ago and will account for 46.6% of the total worldwide IT infrastructure spending for the full year. Spending in all technology segments in cloud IT environments is forecast to grow by double digits in 2018. Compute platforms will be the fastest growing at 46.6%, while spending on Ethernet switches and storage platforms will grow 18.0% and 19.2% year-over-year in 2018, respectively. Investments in all three technologies will increase across all cloud deployment models – public cloud, private cloud off-premises, and private cloud on-premises.
The traditional (non-cloud) IT infrastructure segment grew 21.1% from a year ago, a rate of growth comparable to 1Q18 and exceptional for this market segment, which is expected to decline in the coming years. At $16.4 billion in 2Q18 it still accounted for the majority, 51.5%, of total worldwide IT infrastructure spending. For the full year, worldwide spending on traditional non-cloud IT infrastructure is expected to grow by 10.3% as the market goes through a technology refresh cycle, which will wind down by 2019. By 2022, we expect that traditional non-cloud IT infrastructure will only represent 44.0% of total worldwide IT infrastructure spending (down from 51.5% in 2018). This share loss and the growing share of cloud environments in overall spending on IT infrastructure are common across all regions.
"As share of cloud environments in the overall spending on IT infrastructure continues to climb and approaches 50%, it is evident that cloud, which once used to be an emerging sector of the IT infrastructure industry, is now the norm. One of the tasks for enterprises now is not only to decide on what cloud resources to use but, actually, how to manage multiple cloud resources," said Natalya Yezhkova, research director, IT Infrastructure and Platforms. "End users' ability to utilize multi-cloud resources is an important driver of further proliferation for both public and private cloud environments."
All regions grew their cloud IT Infrastructure revenue by double digits in 2Q18. Asia/Pacific (excluding Japan) (APeJ) grew revenue the fastest, by 78.5% year-over-year. Within APeJ, China's cloud IT revenue almost doubled year over year, growing at 96.4%, while the rest of Asia/Pacific (excluding Japan and China) grew 50.4%. Other regions among the fastest growing in 2Q18 included Latin America (47.4%), USA (44.9%), and Japan (35.8%).
Long-term, IDC expects spending on cloud IT infrastructure to grow at a five-year compound annual growth rate (CAGR) of 11.2%, reaching $82.9 billion in 2022, and accounting for 56.0% of total IT infrastructure spend. Public cloud datacenters will account for 66.0% of this amount, growing at an 11.3% CAGR. Spending on private cloud infrastructure will grow at a CAGR of 12.0%.
Source: www.idc.com/
China Forecast to Account for 90% of Pure-Play Foundry Market Growth in 2018 (Charts 9 & 10)
Driver by cryptocurrency device demand, TSMC's China sales are expected to surge by 79% this year.
IC Insights’ September Update to The McClean Report shows that as a result of a 51% forecasted increase in the China pure-play foundry market this year. China’s total share of the 2018 pure-play foundry market is expected to jump by five percentage points to 19%, exceeding the share held by the rest of the Asia-Pacific region. Overall, China is forecast to be responsible for 90% of the $4.2 billion increase in the total pure-play foundry market in 2018.
With the recent rise of the fabless IC companies in China, the demand for foundry services has also risen in that country. In total, pure-play foundry sales in China jumped by 26% last year to $7.5 billion, almost triple the 9% increase for the total pure-play foundry market. Moreover, in 2018, pure-play foundry sales to China are forecast to surge by an amazing 51%, more than 6x the 8% increase expected for the total pure-play foundry market this year.
Although all of the major pure-play foundries are expected to register double-digit sales increases to China this year, the biggest increase by far is forecast to come from pure-play foundry giant TSMC. Following a 44% jump in 2017, TSMC’s sales into China are forecast to surge by another 79% in 2018 to $6.7 billion. As a result, China is expected to be responsible for essentially all of TSMC’s sales increase this year with China’s share of the company’s sales more than doubling from 9% in 2016 to 19% in 2018.
As shown in Chart 10, much of TSMC’s sales surge into China has come over the past year, with 2Q18 sales into the country being almost double what they were in 3Q17. A great deal of the company’s recent sales surge into China has been driven by increased demand for custom devices going into the cryptocurrency market. It turns out that many of the large cryptocurrency fabless design firms are based in China and most of them have been turning to TSMC to produce their advanced chips for these applications. It should be noted that TSMC includes its cryptocurrency business as part of its High-Performance Computing segment.
While TSMC has enjoyed a great ramp up in sales for its cryptocurrency business over the past year, the company has indicated that a slowdown is expected for this business in the second half of this year. It appears that the demand for cryptocurrency devices is highly dependent upon the price for the various cryptocurrencies (the most popular of which is Bitcoin). As a result, the recent plunge in the price for Bitcoins (going from over $15K per Bitcoin in January of this year to less than $7K in September), and other cryptocurrencies as well, is lowering the demand for these ICs. Moreover, since TSMC realized from the beginning that the cryptocurrency market was going to be volatile, the company did not adjust its capacity plans based on the recent strong cryptocurrency demand and does not incorporate cryptocurrency business assumptions into its forecasts for future long-term growth.
Source: www.icinsights.com/
MCU Market to Reach $20 Billion in 2019 (Chart 11)
A broad uptake of microcontrollers (MCUs) for embedded control, for use with sensors, and with the Internet of Things (IoT) is propelling the market forward and it is expected to be worth $18.6 billion in 2018 and $20.4 billion in 2019, according to IC Insights.
In 2017 unit shipments surged by 22% and strong growth has continued in 2018. Annual unit growth is expected to be 18.5% in 2018 with the unit volume reaching nearly 30.6 billion, while market value will increase by 10.5%, reflecting diminishing average selling price (ASP). Revenue growth in 2019 is expected to be 9.4% to about $20.4 billion.
The market research firm has also raised its five-year growth projection of MCU sales to a compound annual growth rate (CAGR) of 7.2% over the period 2017 to 2022, with unit shipments increasing by a compound annual growth rate of 11.1% to about 43.8 billion in the final forecast year.
About 40% of total MCU shipments are currently for smartcard applications, IC Insights estimates.
Excluding smartcard MCUs, sales of general microcontrollers for embedded systems, automated control, sensing applications, and IoT-connected things are forecast to grow 11% in 2018 to $16.4 billion after rising 14% in 2017.
The estimates of the MCU market will be deeply affected by whether researchers include machine learning processors in the category or exclude them.
Source: www.icinsights.com
Worldwide Converged Systems Revenue Increased 9.9% Year-over-Year during 2Q’18 with Vendor Revenue Reaching $3.5 Billion (Charts 12 & 13)
According to the International Data Corporation (IDC) worldwide converged systems market revenue increased 9.9% year-over-year to $3.5 billion during the second quarter of 2018 (2Q18).
"Datacenter infrastructure convergence remains an important investment driver for companies around the world," said Sebastian Lagana, research manager, Infrastructure Platforms and Technologies at IDC. "HCI solutions helped to drive second quarter market expansion thanks, in part, to their ability to reduce infrastructure complexity, promote consolidation, and allow IT teams to support an organization's business objectives."
Converged Systems Segments
IDC's converged systems market view offers three segments: certified reference systems and integrated infrastructure, integrated platforms, and hyperconverged systems.
The certified reference systems and integrated infrastructure market generated $1.3 billion in revenue during the second quarter, which was a year-over-year decline of 13.9% and represented 38.1% of total converged systems revenue. Dell Inc. was the largest supplier in this market segment with $639.8 million in sales and a 47.5% share. Cisco/NetApp generated $481.0 million in sales, representing the second largest share of 35.7%. HPE generated $108.4 million in sales, representing 8.1% market share.
Integrated platforms sales declined 12.5% year over year during the second quarter, generating revenues of $729.4 million. This amounted to 20.7% of the total converged systems market revenue. Oracle was the top-ranked supplier of integrated platforms during the quarter, generating revenues of $440.6 million and capturing a 60.4% share of this market segment.
Revenue from hyperconverged systems sales grew 78.1% year over year during the second quarter of 2018, generating $1.5 billion worth of sales. This amounted to 41.2% of the total converged systems market.
IDC offers two ways to rank technology suppliers within the hyperconverged systems market: by the brand of the hyperconverged solution or by the owner of the software providing the core hyperconverged capabilities. Rankings based on a branded view of the market can be found in the first table of this press release and rankings based on the owner of the hyperconverged software can be found in the second table. Both tables include all the software and hardware revenues, summing to the same market size.
As it relates to the branded view of the hyperconverged systems market, Dell Inc. was the largest supplier with $418.7 million in revenue and a 28.8% share. Nutanix generated $275.3 million in branded revenue with the second largest share of 18.9%. Cisco and HPE were statistically tied for the quarter, with $77.7 million and $72.0 million in revenue, or 5.3% and 4.9% in market share, respectively.
From the software ownership view of the market, systems running Nutanix's hyperconverged software represented $497.7 million in total second quarter vendor revenue, or 34.2% of the total market. Systems running VMware's hyperconverged software represented $495.8 million in second quarter vendor revenue, or 34.1% of the total market. Both amounts represent all software and hardware revenue, regardless of how it was ultimately branded.
Source: www.idc.com
3D NAND Accounts for over 60% of Global NAND Flash Bit Output
Major NAND flash chip vendors have had over 60% of their production capacities utilize 64/72-layer 3D NAND process technology, helping 3D NAND become a mainstream technology, according to industry observers.
Samsung Electronics has boosted its 3D NAND manufacturing to 85% as a proportion of its total NAND chip output, the observers said. Toshiba with its technology partner Western Digital also has as high as 75% of output using 3D NAND process technology, the observers indicated.
Micron Technology and SK Hynix have had 90% and 60%, respectively, of their total NAND chip output built using 3D NAND technology, the observers said.
In addition, these major NAND chip vendors will have new production lines come online in 2019, while China-based startups such as Yangtze Memory Technologies (YMTC) will also start running their new fabs, the observers suggested. As a result, the global NAND flash bit output will continue growing to drag down memory prices further, the observers said.
NAND flash prices have fallen over 40% since 2018, when major chip vendors migrate to 3D NAND manufacturing, the observers added.
The ramp-up of 3D NAND chips will also encourage device makers to raise the memory content of their devices. For example, smartphone makers are set to upgrade the storage specs of their flagship models to 512GB in 2019, the observers noted.
In addition to embedded storage devices for use in handsets, SSDs will be another major market for NAND flash chips. NAND chip demand for SSDs for use in consumer electronics, data centers and mobile devices will continue to stay robust in 2019, the observers said.
Source: www.digitimes.com/
U.S. Consumer Confidence Continued to Improve in September (Chart 14)
The Conference Board said its consumer confidence index climbed to 138.4 in September from an upwardly revised 134.7 in August.
Source: www.conference-board.org