Global Electronic Supply Chain – Still Growing but at Slower Pace
Growth by Sector
- 3Q’18 vs. 3Q’17 growth by sector of global electronic supply chain is given in Chart 1. Electronic equipment growth declined from 11.1% in Q2 to 6.6% in Q3 when compared to the same quarters a year earlier.
- Chart 1 is based on the consolidated financial results for multiple companies in each sector producing similar goods. All values were converted to U.S. dollars at third quarter exchange rates for consolidation.
- Quarterly electronic equipment sales by type are given in Chart 2.
- Chart 3 shows annualized (12/12) and 3-month (3/12) electronic equipment growth rates. Electronic equipment growth is slowing but is still positive.
Geographic Growth
Custer Consulting group also calculates regional growth rates using monthly data from the U.S. Department of Commerce, Eurostat for Europe, JEITA for Japan plus Korean and Taiwan/China financial information. Charts 4 and 5 summarize this regional monthly data.
Comparison of Sector vs. Regional Results
Chart 6 compares the results of the two approaches (growth by sector base on consolidated company financial reports versus regional data). The results are similar and show slowing electronic equipment growth.
Non-Electronic Equipment Sectors
Chart 1 also shows the growth for EMS/ODM companies, active and passive electronic component suppliers, materials, PCB laminate and PCB and SEMI process equipment.
Electronic Equipment Growth by Type
Quarterly data for key electronic equipment sectors in both dollars and in most cases annualized (12/12) and 3-month (3/12) growth rates are as follows:
- Automotive electronics (Charts 7 & 8).
- Military electronics (Charts 9).
- Instruments and control equipment (Charts 10 & 11)
- Medical equipment (Charts 12 &13).
- Communication equipment (Charts 14 & 15).
- Datacom equipment (Charts 16 & 17).
- Computer equipment (Charts 18 & 19).
- Data storage equipment (Charts 20 & 21).
- SEMI fab, test and measurement equipment (Charts 22 & 23).
Note how the 3/12 growth rates for most sectors peaked in the second quarter.
While not all companies referenced in the charts have reported their 3Q’18 financial results, most have and we believe the results are now complete enough to reflect third quarter performance.
Source: Custer Consulting Group based upon company financial data and regional information.
5G Subscriptions to hit 1.5 billion by end 2024
Ericsson predicts that there will be 1.5 billion 5G subscriptions by the end of 2024.
It predicts that 5G will reach more than 40% global population coverage by this time, making it the fastest generation of cellular technology to be rolled out worldwide.
Northeast Asia and North America are expected to lead 5G uptake, with 5G expected to account for 43% all mobile subscriptions in North East Asia and 55% in North America by the end of 2024.
Meanwhile it predicts that there will be 4.2 billion cellular IoT connections by this time.
Source: www.questex.asia
Supply Chain Partners see Mixed Impacts from iPhone Order Cuts
Taiwan Semiconductor Manufacturing Company (TSMC) has been little affected by a cutback in chip orders for Apple’s new iPhones as many of its other fabless clients are queuing for its 7nm process capacity, according to industry sources.
But most other iPhone supply chain partners are expected to see their revenues decline starting November on Apple reducing orders amid lackluster sales performance for its new devices, the sources said.
The sources continued though its shipments of A12 chips for the three new iPhone models may decrease quarter by quarter, TSMC has seen its 7nm process capacity fully booked by major clients. Now busy delivering 7nm Kirin 980 chips for Huawei Mate 20 smartphones, the foundry giant is slated to start volume production of Qualcomm’s Snapdragon 8150 chips on 7nm node in the first quarter of 2019 after the new mobile AP is released in mid-December, the sources said.
AMD is set to release its Radeon Instinct M160 and M150 server accelerator chips by the end of 2018 and in the first quarter of 2019, respectively, which will also be fabricated on 7nm process at TSMC. AMD’s EPYC server processor, codenamed “Rome,” will also be launched in 2019 and built by TSMC with 7nm node.
Other first-tier clients including Broadcom, Xilinx and Nvidia have also placed orders with TSMC for 7nm process production. TSMC expects to complete more than 100 tape-outs for 7nm and 7nm EUV processes in 2019, with its revenue ratio for 7nm process to surge to over 20% from 10% in 2018.
On another front, as Apple has reportedly enforced a second wave of order reduction in the wake of weaker-than-expected sales for its new iPhones, many other Taiwan supply chain partners are beginning to feel the pinch in November.
iPhone camera lens supplier Largan Precision, for instance, has estimated its November revenues will fall from October. Career Technology, a supplier of flexible PCBs for iPhones, has recently laid off 110 dispatched workers to cope with order cuts by Apple.
An iPhone assembler has also advanced its workforce trimming project, seeking to reduce personnel cost and other expenses to counter the greater-than-expected reduction of orders.
Source: www.digitimes.com
Pure-play Foundry Market Low Visibility for 1H’19
Order visibility for the pure-play IC foundry sector for the first half of 2019 appears to be low. Taiwan Semiconductor Manufacturing Company (TSMC) has started negotiating with its fabless clients on orders for next year, while other foundries are likely to lower their quotes to attract orders during the slow season, according to industry sources.
TSMC is encouraging its fabless clients to place orders in advance for their peak seasons next year so that the foundry will be able to assist them in meeting their shipment schedules for the year, the sources said. TSMC has also requested its clients to place orders for their core products with more than one of its fabs to avoid congestion usually seen during the peak season, the sources noted.
With TSMC actively vying for orders, United Microelectronics (UMC), Semiconductor Manufacturing International (SMIC) and Vanguard International Semiconductor (VIS) may end up cutting their quotes to strive for orders during the first half of 2019, the sources said.
UMC, SMIC and VIS are likely to suffer from low utilization rates at their fabs in the first half of 2019, as fabless chipmakers usually regard TSMC as their preferred foundry partner, the sources said.
In addition, 8-inch foundry house VIS has reportedly decided to discontinue its partnership with TSMC in the second quarter of 2019. TSMC has been transferring orders such as those for LCD driver ICs demanding 8-inch wafer process capacity to VIS when its own 8-inch fabs are fully occupied.
While anticipating more available capacities at their foundry partners, Taiwan-based MCU and analog chip suppliers have expressed concerns about whether improvement in their gross margin performance can carry on in 2019, according to sources at Taiwan-based IC design houses.
Unlike MOSFET companies, which have had relatively insufficient support from the foundry partners since 2018, MCU and analog chipmakers may encounter inventory issues prompting them to lower their chip quotes in the first half of 2019, the sources indicated. Many of the MCU and analog chip specialists have managed to improve their gross margins in 2018. However, price-cut competition among them is likely to take place in the first half of 2019 putting their gross margins under downward pressure again, the sources said.
On the other hand, the book-to-bill ratio for MOSFETs has begun to drop and is approaching one since the second half of 2018, thanks to more foundry support, according to sources at Taiwan-based MOSFET chipmakers. The MOSFET chip providers saw their supply become extremely tight in the first half of the year, when 8-inch foundries utilized 100% and even over 100% of their production capacities, according to the sources.
Source: www.digitimes.com
Advanced IC Packaging Revenues to grow at 9.7% CAGR from $24 billion in 2017 to $38 billion in 2022
New Venture Research Report Breaks Down Advanced IC Packaging Technologies, Materials New Venture Research (NVR) announces the publication of its latest market research report, the “Advanced IC Packaging Technologies, Materials, and Markets – 2018 Edition.”
More than ever before, IC packaging technology is being challenged by two distinct, yet closely linked product trends. On the one hand, consumers demand more powerful electronics products from computers to tablets to smartphones – that provide more features and greater functionality; on the other hand, they want their products to be smaller and more lightweight and ergonomic. Meeting this demand requires manufacturers to develop advanced IC packages that combine devices with smaller form factors and ever-greater silicon integration.
This new strategic report from NVR provides a comprehensive analysis of the latest advanced technologies in IC packaging, assembly techniques and materials. The report explores the important trends in multichip packaging, including vertically stacked packages – TSOP, FBGA, QFN and WLP - and complex system-in-package (SiP) solutions: multichip modules (MCMs), package-in-packages (PiPs) and package-on-packages (PoPs). Also discussed are advances in substrate materials and technology that embed passive and active components directly into the substrate, helping SiPs to pack more complexity into the same or smaller packages.
Other advanced packages covered in this report include fan-out wafer level packages (FOWLPs), the currently the fastest growing segment of the IC packaging market. Similarly, a new generation of multi-row quad flat-pack, no lead packages (MRQFNs) have nearly doubled the I/O capacity of traditional QFNs and greatly expanded their target applications. In addition to specific types of IC packages, the analysis in this report digs deeper into the interconnection methods and the materials used in assembling packages. Interconnection topics include: New advances in wire bonding techniques and the metal materials used in the process. How flip chip assembly is enabling manufacturers to improve on everything from assembly cycle times to thermal dissipation and the all-important package size.
The role of through-silicon vias (TSVs) in 2.5D and 3D packaging technologies. Advanced IC packaging products still make up a relatively small share of the total annual shipments of IC packages, but because they are more complex and therefore more expensive, the advanced packaging market segment generates a much greater share of revenues. The figure below shows revenues for advanced packaging for 2016 and 2017, as well as NVR’s forecast for the market through 2022. In 2017, revenues totaled nearly $24 billion, which was more than a third of the revenues generated by the worldwide IC packaging market. By 2022, that share is expected to rise to nearly 42%, based on annual revenues of almost $38 billion. Between 2017 and 2022, the compound annual growth rate (CAGR) for the advanced packaging market will be 9.7%.
MCPs (multichip packages) are by definition densely packed and highly integrated chips, and are useful in a wide range of applications. MCPs are working their way in increasing numbers into cellular telephones, base stations, PDAs, MP3 players, camcorders, digital video recorders, digital cameras, notebook computers, PCs, Internet routers and switches, servers and workstations, and more. They are also key products for specialized medical applications, where companies are looking for highly miniaturized packages that can be used for insertion into the body, such as cochlear hearing aids.
The table below summarizes the application markets that are expected to utilize MCPs for the years 2016 through 2022. The rapid spread of smartphones across the globe has made these devices among the most dominant of all electronics products. Yet, significant numbers of applications are being used for other mobile devices, in particular tablets. Moreover, transportation applications are a significant market segment and are growing almost as rapidly as cell phones. This expansion is driven largely by mobile applications, to enable greater safety and convenience—features that require an expanding number of sensors and monitoring devices throughout the ecosystem. Medical needs include imaging, diagnostics, monitoring and surgical applications. Even greater applications involve aerospace/defense navigation, weapons and surveillance.
2022 Rank CAGR
Package Units (M)
Cellular Phones 1 12.70%
Automotive/Aerospace 2 11.90%
Medical/Industrial 3 10.80%
Servers/Workstations 4 10.40%
Internet Routers/Switches/Controllers 5 9.40%
Laptop and Notebook Computers 6 8.60%
Wireless Base Stations 7 7.30%
Tablets and PDAs 8 6.80%
Set-top Boxes/DVRs 9 6.70%
Digital Cameras 10 5.10%
Camcorders 11 4.40%
Desktop PCs 12 3.40%
MP3/MP4 Players 13 -0.30%
Other n/a 9.80%
Total Multichip Packages 18,560 10.10%
Source: newventureresearch.com
Global Smartphone Production grew 8% q/q to 380 million in 3Q’18 (Chart 24)
Production Volume expected to Remain Flat in 4Q’18 Due to Sluggish Demand
TrendForce’s latest report on smartphone production, the total volume for 3Q’18 grew by 8% from 2Q’18 to around 380 million. The growth was attributed to a gradual recovery of demand in 2Q’18 and the stock-up of inventories related to releases of new devices and holiday sales events. Although the latest products from Apple and Huawei continue to generate demand in the smartphone market, the sales of new iPhone XR/XS/XS Max turned out to fall short of expectation, resulting in lower shipments of iPhones. Therefore, DRAMeXchange estimates that the total production volume for 4Q’18 will be roughly similar to that of 3Q’18, coming to around 380 million units.
Since the general development of the smartphone market has reached the mature stage, and smartphone brands are struggling to differentiate their new products, many of which lack breakthrough features to stimulate purchases. Thus, consumers are less active than before with respect to replacing their existing devices. For many smartphone makers, they have to work harder to highlight their brand values in the midst of the fierce competition. Some of them are committing more resources in developing their high-end models, while others are raising hardware specifications to show that they are offering greater value and better performance for the cost. Nevertheless, these efforts also put the squeeze on their profit margins.
There are also other variables that will make the maintenance of profitability very challenging. In addition to the fluctuations in exchange rates and rising costs of components, the uncertainties produced by the ongoing US-China trade dispute are also going to impact their operation. At the same time, major smartphone brands will continue to enlarge their market shares at the expense of the smaller brands.
Apple will compete with Samsung for the top position in the production volume ranking for 4Q’18. Among the world’s top six smartphone brands by production volume, Samsung again topped the ranking in 3Q’18 with a quarterly total of 74.5 million units, which also amounted to a market share of almost 20%. While Samsung grew its sales by releasing its flagship Galaxy Note 9 ahead of schedule, the device was not a significant upgrade from last year’s Note 8 and made limited contribution to the brand’s total volume in 3Q’18. The Galaxy J series, on the other hand, was still instrumental in sustaining the brand’s overall production. In this fourth quarter, Samsung has been promoting the Galaxy A devices, emphasizing their improved cost-to-performance ratios and their cameras (i.e. the triple camera on A7 and the quad rear camera on A9). Samsung’s total production volume in 4Q’18 is estimated to reach around 75 million units, which will be similar to the 3Q’18 result and in line with the company’s target for the period. The strong channel demand for its latest devices caused Huawei’s total smartphone production volume in 3Q’18 to surge by 44% YoY to a new high of 55.5 million units. Huawei is currently the world’s second largest smartphone brand, surpassing Apple in volume for two consecutive quarters. Huawei’s in-house R&D capabilities and extensive product lines across all market segments have benefitted its expansions in the overseas markets during the recent years. Huawei also continues to innovate on hardware and manufacture its own mobile SoCs via its subsidiary HiSilicon.
Going forward, Huawei will keep expanding its global presence. Driven by the sales of its latest devices, Huawei’s total production volume in the 4Q’18 is estimated to be on the similar level as the result of 3Q’18. And the brand’s total volume for the whole year of 2018 is currently projected to hit 200 million units, which would meet the company’s target. However, there are now warnings that inventories across channels are going to be too high. The future development of this situation warrants attention as it may affect Huawei’s smartphone production in 4Q’18 and 1Q’19.
Apple was behind Huawei for the second consecutive quarter as the world’s third largest brand in 3Q’18, with its iPhone production volume for the period totaling 47.1 million units. Apple’s iPhone devices for this year again intended to push the upper limit of the acceptable price range for high-end smartphones. And consumers appear to be less willing to pay for the two new AMOLED models - iPhone XS and XS Max, which are priced too high to be accepted. The economically priced LCD model, iPhone XR, may take over as the sales driver, but the ramp-up of its production had been scheduled to take place in 4Q’18. Furthermore, factors such as the US-China trade dispute and the appreciation of the US dollar have been constraining iPhone sales outside the US. Consequently, iPhone XR did not contribute significantly to the iPhone production in 3Q’18.
Looking ahead, Apple can further lower the prices of its older iPhone models to spur sales. Also, 4Q’18 is expected to be the year’s peak iPhone production period, as Apple has scheduled the ramp-up of its latest models during this time. Thus, the total iPhone production volume in 4Q’18 is estimated to reach around 76 million units, which would allow Apple to surpass Huawei and compete with Samsung for the top position in the ranking.
Xiaomi’s total smartphone production volume in 3Q’18 came to 31.7 million units. This result was relatively on par with that of 2Q’18, and the brand this time did not register a double-digit YoY growth as before. The flat growth can be attributed to the slowdown in demand in China and India, which are Xiaomi’s two largest smartphone markets. And because of this, Xiaomi has also scaled back its stock-up demand so as to prevent its inventory of all devices from becoming too high and put pressure on the company’s cash flow. Xiaomi’s total smartphone production volume in 4Q’18 is estimated to be within 30 million units, and its total volume for the whole year is currently projected to come to around 120 million units.
Regarding its sales strategy, Xiaomi still prioritizes volume over margin. Besides tightly controlling the costs of key components, Xiaomi is going to localize production in the overseas markets in order to further lower the assembly cost and evade tariff barriers. For instance, the company is making procurements and building manufacturing facilities in India. The drawback of maintaining a very thin profit margin, however, is that external factors related to the wider economic environment can cause sudden increases in production cost and adversely affect the company’s entire operation.
OPPO’s and Vivo’s total smartphone volumes in 3Q’18 both topped 30 million units, registering slight increases from their respective results for 2Q’18. The two Chinese brands were able to raise their production on the back of the new flagship releases and the stock-up demand from the retail channels. The strategy of OPPO and Vivo during the recent years have been to focus on improving hardware, especially memory specifications, so as to gain recognition in the market. OPPO and Vivo currently depend on China and Southeast Asia for much of their sales. However, these markets are experiencing a slowdown in demand and have limited room for further growth. This, along with the longer replacement cycle, will raise challenges for the two brands as they try to maintain their production levels in the future. OPPO’s total volume is projected to fall by 23% QoQ in 4Q’18 to 24.5 million units, while Vivo’s total volume is projected to fall by 20% QoQ in 4Q’18 to 24.1 million units.
Source: www.trendforce.com
Samsung’s 2-year Capex Spending of $46.8 billion Nearly Matches Combined 2-year Capex Spending of $48.4 by Intel & TSMC (Charts 25 & 26)
IC Insights revised its outlook for total semiconductor industry capital spending.
Samsung is expected to have the largest capex budget of any IC supplier again in 2018. After spending $24.2 billion for semiconductor capex in 2017, IC Insights forecasts that Samsung’s spending will edge slightly downward, but remain at a very strong level of $22.6 billion in 2018. If it comes in at this amount, Samsung’s two-year semiconductor capital spending will be an astounding $46.8 billion.
Samsung’s semiconductor capital outlays from 2010, the first year the company spent more than $10 billion in semiconductor capex, through 2016 averaged $12.0 billion per year. However, after spending $11.3 billion in 2016, the company more than doubled its 2017 capex budget. The fact that Samsung’s continued its strong capex spending in 2018 is just as impressive.
IC Insights believes that Samsung’s massive spending outlays in 2017 and 2018 will have repercussions far into the future. One effect that has already begun is a period of overcapacity in the 3D NAND flash market. This overcapacity situation is due not only to Samsung’s huge spending for 3D NAND flash, but also from spending by competitors (e.g., SK Hynix, Micron, Toshiba, Intel, etc.) that attempt to keep pace in this market segment.
With the DRAM and NAND flash memory markets showing strong growth through the first three quarters of 2018, SK Hynix ramped up its capital spending this year. In 1Q’18, SK Hynix said that it intended to increase its capex spending by “at least 30%” this year. In the November Update, IC Insights forecasts that SK Hynix will see a 58% surge in its semi capex spending. The increased spending by SK Hynix this year is focused primarily on bringing new capacity online at two of its large memory fabs-M15, a 3D NAND flash fab in Cheongju, South Korea, and the expansion of its huge DRAM fab in Wuxi, China. The Cheongju fab is being pushed to open before the end of this year. The Wuxi fab is also targeted to open by the end of this year, a few months earlier than its original start date of early 2019.
Overall, IC Insights’ now forecasts total semiconductor industry capital spending will climb 15% to $107.1 billion this year, the first time that annual industry capex is expected to top $100.0 billion. Following the industry-wide growth this year, semiconductor capex is expected to decline 12% in 2019.
Given that the current softness in the memory market is expected to extend into at least the first half of next year, the combined capital spending by the three largest memory suppliers-Samsung, SK Hynix, and Micron-is forecast to drop from $45.4 billion in 2018 to $37.5 billion in 2019, a decline of 17%.
In total, the top five spenders, which are expected to represent 66% of total outlays this year, are forecast to cut their capital spending by 14% in 2019 with the remaining semiconductor industry companies registering a 7% decline.
Source: www.ICInsights.com
Wearabales Forecast - Shipments of Smartwatches to Total 74 Million Units in 2019 (Chart 27)
Gartner, Inc. forecasts that worldwide shipments of wearable devices will reach 225 million in 2019, an increase of 25.8% from 2018. End-user spending on wearable devices is forecast to reach $42 billion in 2019. Of that, $16.2 billion will be on smartwatches. “At the moment, the smartwatch market is bolstered by the relatively stable and higher average selling price (ASP) of the Apple Watch,” said Alan Antin, senior director at Gartner. “But the overall ASP of smartwatches is expected to slowly decline from $221.99 in 2018 to $210 in 2022, due to lower-priced competitors and as higher volumes lead to reductions in manufacturing and component costs, while strong brands like Apple and traditional watch brands try to keep pricing stable.”
In 2019, 74 million smartwatches will be shipped, which makes smartwatches the top segment of all wearable device form factors. However, Gartner predicts that by 2022, ear-worn devices (“hearables”) shipments will take over as the top wearables segment with 158 million units shipped compared with 115 million smartwatch shipments in 2022.
As the smartwatch segment continues to mature, it will subdivide into four main types of providers: leading consumer electronics brands, fashion and traditional watch brands, children's watches, as well as special-purpose brands and startups that cater to niche audiences such as people with medical issues that need to be monitored. While the consumer electronic brands such as Apple, Fitbit and Samsung have a comfortable lead, other brands are gearing up.
“Traditional watch brands such as Fossil and Casio will gain market share by offering more style and choice in their portfolio than the technology brands,” said Antin. “We think that fashion and traditional watch brands are likely to account for up to 20% of unit shipments by 2022.”
Strong Growth Expected in Ear-Worn Devices
Gartner predicts that by 2022, ear-worn devices, such as Apple AirPods, Samsung’s IconX and Plantronics’ BackBeat FIT, will account for more than 30% of all shipped wearables, as their capabilities expand beyond communication and entertainment. Currently, the main use cases for ear-worn wearables are fitness and health coaching, communications and entertainment, hearing aids/medical devices, and professional.
Future generations of ear-worn devices will be able to accommodate virtual personal assistants and subsequently be used for a multitude of tasks such as queries and hands-free directions. Moving forward, advanced ear-worn devices can reduce smartphone use, as they will take over many tasks that users solve with the help of their smartphones today.
Head-Mounted Displays Become More Expensive
Immersive head-mounted displays (HMDs) are primarily used to experience augmented reality (AR) or virtual reality (VR). Mainstream consumer use has been limited due to availability, cost, ergonomics, unfashionable design and other factors. The main driver for AR HMDs is enterprise usage, where they are used internally as hands-free tools for business process improvement and training.
The main use case for VR HMDs is entertainment and gaming. However, there continues to be a mismatch between expectations and what the current technology can deliver. This will change, but for a price.
“Contrary to what we see in other segments, the ASP for HMDs will increase by 19.2% until 2022, as better content demands better technology,” said Antin.
Source: www.gartner.com
U.S. GDP Grew at Unrevised 3.5% Pace in Third Quarter (Chart 28)
The U.S. economy slowed in the third quarter as previously reported, but the pace was likely strong enough to keep growth on track to hit the Trump administration’s 3% target this year, even as momentum appears to have moderated further early in the fourth quarter.
Gross domestic product increased at a 3.5% annualized rate, the Commerce Department said in its second estimate of third-quarter GDP growth. That was unchanged from its estimate in October and well above the economy’s growth potential, which economists estimate to be about 2%.
The economy grew at a 4.2% pace in the second quarter. While businesses accumulated inventory at a faster pace and spent more on equipment than initially thought in the third quarter, that was offset by downward revisions to consumer spending and exports.
Source: U.S. Department of Commerce
