Global Semiconductor Sales Up 9.8% Y/Y in November (Charts 1-6)

Year-to-date sales through November top annual total from 2017; month-to-month sales in November slip 1.1%

The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $41.4 billion for the month of November 2018, an increase of 9.8% from the November 2017 total of $37.7 billion and 1.1% less than the October 2018 total of $41.8 billion.

“The global semiconductor industry continues to post solid year-to-year sales increases, and year-to-date revenue through November has surpassed annual sales from all of 2017, but growth has slowed somewhat in recent months,” said John Neuffer, SIA president and CEO. “Year-to-year sales increased in November across all major regional markets, with the China market standing out with growth of 17%. Double-digit annual growth is expected for 2018 once December’s sales are tallied, with more modest growth projected for 2019.”

Source: www.semiconductors.org

Custer Comments:

  • Semiconductor shipment growth continues to slow (Chart 3) as all regions’ growth has peaked (Chart 4).
  • Semiconductor shipments to North America dropped sharply in November (Chart 5).

 

December PMI Leading Indicators

IHS Markit and ISM (Institute for Supply Management) have released their December Purchasing Managers Indices:

  • Chart 7 compares the PMIs in November vs. December for key countries.
  • Global PMI continued its decline (to 51.5) in December (Chart 8).  World manufacturing activity is still expending but a slowing pace.
  • In the USA both ISM and IHS Markit PMIs dropped sharply in December (Chart 9).
  • Eurozone PMI continued to decline (to 51.4) in December (Chart 10) as most European countries except Italy and the UK registered PMI declines (Chart 11).
  • Germany (Chart 12) continued to slow and France (Chart 13) moved to contraction (PMI<50).
  • ASEAN countries were mixed (Chart 14) with Vietnam slowing and China (Chart 15), South Korea (Chart 16) and Taiwan (Chart 17) contracting.
  • Japanese manufacturing activity improved slightly (Chart 18).

Source: www.markiteconomics.comwww.instituteforsupplymanagement.org

 

Vietnam PCB Industry

I can “smell the growth” of the PCB industry in Vietnam.  The very first large scale PCB manufacturing maker that invested in Vietnam (near Ho Chi Min) was Fujitsu Computer as an EMS company in 1998.  It then expanded into PCB manufacturing in 2001.  Its output remained flat until two years ago. Then the company was made into a JV with Mitani Industry, a Japanese EMS company, which Fujitsu has been dealing with for many years, and it spent about $100 million for expansion in the two years which followed.  Its main products are HDI for automotive (80% of the total).

Then came an FPC maker, Sakai Denshi, which was sold to Fujikura in 2011. Nitto Denko came, which was followed by two small, but high-end PCB makers (American-Vietnam venture Vector Fabrication and FAB-9.)  

There is one Taiwanese maker that is also located in Ho Chi Minh and is engaged mainly in the manufacture of single-sided boards – right next to FAB-9.

A larger concentration of high-end PCB makers is found in and around the Hanoi. Two large Japanese FPC makers (Sumitomo Electric Industry) and Mektec (a subsidiary of Nippon Mektron) are providing FPCs mainly for Apple products. Kyosha of Japan made an announcement to build a plant in Vietnam for manufacturing double-sided boards. Meiko is building a large HDI plant adjacent to their existing plant that is scheduled for completion in 2Q19, which will double its current production capacity.  Meiko’s second plant near Sumitomo is now qualified for MSAP.

In the north of Hanoi, in the vicinity of Bac Ning and Thai Gyeng, there are nine South Korean FPC makers that are serving gigantic Samsung Electronics’ smartphone factories with antenna, camera modules, matrix, etc. More South Korean plants may be coming to Vietnam, reducing S. Korea production.  SE’s estimated smartphone production is 200 million units annually. SE has shut down its Tianjin cellphone plant as it continues to lose share in China.

There are several other small “local” PCB makers.  With all these activities, the PCB production value in Vietnam will exceed that of Thailand, the longtime “king” of PCBs” in South East Asia.  The uncertainty of the Trade War outcome seems to accelerate Vietnam’s electronics production including PCBs in 2019 and thereafter. Its PCB production value already exceeds that of the US and Canada put together and far exceeds that in Europe.

All said, China will still be the king of PCBs.  Considering the current expansion, with or without the Trade War, China’s PCB production will account for 70%+ of the world in four to five years.

Source: Hayao Nakahara, N.T. Information Ltd

 

China to Impose Stricter Regulations on PCB Industry

China will implement a new set of strict regulations on the operations of the PCB industry on February 1, which may threaten the survival of small- to medium-size makers, according to sources from the related upstream supply chain.

In addition to having higher requirements concerning environmental matters, the new regulations will require makers to have technological patents for their products, to set aside at least 3% of their annual revenues for R&D, and to achieve annual utilization rates of over 50%.

The regulations impose specific requirements on different types of applications, but makers of PCBs for aerospace and military applications will not be affected by the new regulations.

The sources believe the China government is looking to strengthen the leading players’ dominance in the industry as the new regulations will accelerate the elimination of small- to medium-size players that give priority to shipment volumes over technology development.

At the end of 2015, the China government implemented regulations to reduce metal pollutions caused by the plating process, and since 2016, it has been tightening its control to protect the environment. Most of the top players have already installed facilities in compliance with the environmental regulations, but many smaller ones, unable to afford the high costs of such facilities, have quit.

Although over 50% of worldwide PCB manufacturing is conducted in China, only three of the global top-30 PCB makers were from China, according to research firm Prismark’s figures for 2017.

Without government support, most China-based small- to medium-size PCB makers are likely to have difficulties continuing their operations, which is expected to accelerate the consolidation of China’s PCB industry.

Source: www.digitimes.com

 

Worldwide Internet of Things (IoT) Spending Forecast to increase of 15.4% from $646 billion spent in 2018 to $745 billion in 2019

Worldwide spending on the Internet of Things (IoT) is forecast to reach $745 billion in 2019, an increase of 15.4% over the $646 billion spent in 2018, according to a new update to the International Data Corporation (IDC) Worldwide Semiannual Internet of Things Spending Guide. IDC expects worldwide IoT spending will maintain a double-digit annual growth rate throughout the 2017-2022 forecast period and surpass the $1 trillion mark in 2022.

“Adoption of IoT is happening across industries, in governments, and in consumers’ daily lives. We are increasingly observing how data generated by connected devices is helping businesses run more efficiently, gain insight into business processes, and make real-time decisions. For consumers, access to data is changing how they are informed about the status of households, vehicles, and family members as well as their own health and fitness,” said Carrie MacGillivray, vice president, Internet of Things and Mobility at IDC. “The next chapter of IoT is just beginning as we see a shift from digitally enabling the physical to automating and augmenting the human experience with a connected world.”

The industries that are forecast to spend the most on IoT solutions in 2019 are discrete manufacturing ($119 billion), process manufacturing ($78 billion), transportation ($71 billion), and utilities ($61 billion). IoT spending among manufacturers will be largely focused on solutions that support manufacturing operations and production asset management. In transportation, more than half of IoT spending will go toward freight monitoring, followed by fleet management. IoT spending in the utilities industry will be dominated by smart grids for electricity, gas, and water. The industries that will see the fastest compound annual growth rates (CAGR) over the five-year forecast period are insurance (17.1%), federal/central government (16.1%), and healthcare (15.4%).

“Consumer IoT spending will reach $108 billion in 2019, making it the second largest industry segment. The leading consumer use cases will be related to the smart home, personal wellness, and connected vehicle infotainment,” said Marcus Torchia, research director, Customer Insights & Analysis. “Within smart home, home automation and smart appliances will both experience strong spending growth over the forecast period and will help to make consumer the fastest growing industry segment overall with a five-year CAGR of 17.8%.”

The IoT use cases that will see the greatest levels of investment in 2019 are driven by the industry spending leaders: manufacturing operations ($100 billion), production asset management ($44.2 billion), smart home ($44.1 billion), and freight monitoring ($41.7 billion).

The IoT use cases that are expected to deliver the fastest spending growth over the 2017-2022 forecast period provide a picture of where other industries are making their IoT investments. These include airport facility automation (transportation), electric vehicle charging (utilities), agriculture field monitoring (resource), bedside telemetry (healthcare), and in-store contextualized marketing (retail).

IoT services will be the largest technology category in 2019 with $258 billion going toward traditional IT and installation services as well as non-traditional device and operational services. Hardware spending will be close behind at $250 billion led by more than $200 billion in module/sensor purchases. IoT software spending will total $154 billion in 2019 and will see the fastest growth over the five-year forecast period with a CAGR of 16.6%. Services spending will also grow faster than overall IoT spending with a CAGR of 14.2%. IoT connectivity spending will total $83 billion in 2019.

The United States and China will be the global leaders for IoT spending in 2019 at $194 billion and $182 billion respectively. They will be followed by Japan ($65.4 billion), Germany ($35.5 billion), Korea ($25.7 billion), France ($25.6 billion), and the United Kingdom ($25.5 billion). The countries that will see the fastest IoT spending growth over the forecast period are all located in Latin America: Mexico (28.3% CAGR), Colombia (24.9% CAGR), and Chile (23.3% CAGR).

The Worldwide Semiannual Internet of Things Spending Guide forecasts IoT spending for 14 technology categories and 82 named use cases across 20 industries in nine regions and 53 countries. Unlike any other research in the industry, the comprehensive spending guide was designed to help vendors clearly understand the industry-specific opportunity for IoT technologies today.

Source: www.idc.com

 

Datacenter Server Demand to see Sharp Growth after Sluggish 1H’19

Orders for datacenter servers are expected to slow down in the first half of 2019 but will resume sharp growth in the second half and grow even stronger in 2020, as many first-tier cloud computing service providers are turning to focus on raising the utilization of their new storage capacity established during the past year.

Wiwynn, a subsidiary of Wistron, currently sees over 90% of its revenues contributed by orders from US-based cloud computing datacenter players. The company generated a total of NT$134.4 billion for the first three quarters of 2018, up 146.7% on year. For 2019, Wiwynn expects its on-year shipment growth to weaken and will only reach below 30%.

Wiwynn president Emily Hong pointed out that the company’s two major US-based Internet service provider clients have been investing in datacenter establishment since 2017, allowing the company to enjoy robust shipment growths during the period from the second half of 2017 to 2018. However, since the second half of 2018, the clients have started making adjustments to the utilization of its storage capacity and the process is expected to continue in 2019.

The industry will still be in good shape in 2019, but Wiwynn is unlikely to more than double its revenues in the year as it did in 2018.

Digitimes Research’s latest special report on the global server industry also estimates that Wiwynn’s shipments will rise over 25% on year in 2019, allowing the company to get a hold of around 7% share in Taiwan’s overall volumes.

Fellow competitor Quanta Computer expects its server operation to continue enjoying a double-digit percentage on-year growth in 2019.

As for Inventec, the largest server motherboard supplier worldwide, some market watchers have pointed out that the ODM had 6-9% on-year growths in server shipments and revenues in 2018, while shipments to datacenter players went up 20% on year. Inventec’s shipments to datacenter players in China were up 30% on year. However, shipments to datacenter players are expected to see slower on-year growth at 10-15% in 2019.

For 2020, global demand for servers will see sharp growth as new applications including AI and Internet of vehicles (IoV) are expected to strongly stimulate the requirement of datacenter capacity.

Source: www.digitimes.com

 

Global Smartphone Shipments to exceed 1.5 billion units in 2020 & 1.7 billion units in 2023

China top-4 smartphone vendors to maintain lead in home market in 2019

China’s top-four leading smartphone vendors – Huawei, Xiaomi, Oppo and Vivo – are expected to be able to maintain their leaderships in their domestic market in 2019, as they will continue to enhance their competitiveness in the mid-tier to high-end smartphone segments, according to industry sources.

The top-four vendors accounted for over 80% of total smartphone shipments in China in 2018, and they are expected to be in the world’s top-10 vendors ranking list in the year, said the sources.

The four vendors’ dominance will make it even harder for second-tier local makers such as Gionee and Smartisan Digital, as well as other foreign brands including Samsung Electronics, Asustek Computer, and HTC, to survive in the China market in 2019, commented the sources.

Globally, Samsung, Apple, Huawei, and Xiaomi are likely to become the top-four smartphone vendors in 2019, with each one shipping over 100 million units in the year, according to Digitimes Research.

Oppo and Vivo may see their shipments retreat slightly in 2019 but still enough for them to stay in fifth and sixth positions in 2019 with their shipments reaching almost 90 million and 70 million units, respectively, Digitimes Research estimates.

Source: www.digitimes.com


Walt D. Custer

Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.

View other posts from Walt D. Custer. View other posts from Walt D. Custer.

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