September “Flash” Purchasing Managers Data

IHS Markit has released preliminary (flash) PMI data for select countries (chart 1): 

  • U.S. manufacturing activity improved slightly based on the ISM flash PMI (chart 2)
  • Europe dropped further into contraction (chart 3) with Germany continuing to plunge (chart 4) and France also declining (chart 5)
  • Japan saw its PMI drop further into manufacturing contraction in September (Chart 6)

Complete manufacturing PMIs for most major countries will be provided in early to mid-October. 

Source: www.markiteconomics.com

August U.S. Electronics Shipments and Orders

The U.S. Department of Commerce released its August Durable Goods report with preliminary shipments, orders and inventories for select domestically manufactured goods:

  • Electronic equipment book/bill declined sequentially from July to 1.003 on a 3-month average basis (chart 7)
  • Electronic equipment growth dropped to near zero (3/12 = 1.006) and bookings declined -0.7 percent (3/12 = 0.993) (chart 8)
  • On a US$ basis, both electronic equipment orders and shipments have flattened (chart 9)
  • Defense capital goods orders recovered from their July plunge (chart 10), although their 3-month average book/bill remained below parity (chart 11)
  • Aircraft shipments remain depressed (chart 12) as non-defense aircraft orders weakened (chart 13)
  • Communication equipment orders weakened (chart 14) as did computer orders and shipments (chart 15)

Source: www.census.gov

Japan Update

JEITA just released July Japanese domestic electronics production for electronic equipment, components and devices:

  • Electronic equipment production was relatively flat sequentially from June to July (charts 16 & 17)
  • Electronic component and electronic device production growth remains negative (3/12<1) (chart 18)
  • PCB production rebounded from June (chart 19), but its 3/12 growth remains in contraction territory (chart 20)
  • Semiconductor shipments from all regions to Japan continue to drop on a 3/12 basis, although electronic equipment production growth is near parity (chart 21)
  • IC and discrete semiconductor domestic production increased slightly from June to July (chart 22)
  • Passive component production has rebounded (chart 23)

Source: www.jeita.or.jp

PC Vendors Brace for Intel CPU shortages again

PC vendors are bracing for a repeat of the Intel CPU shortages that plagued the market for several quarters since mid-2018. Supply might have been improving earlier in the third quarter, but the latest news coming from the supply chain is that Intel’s 14nm CPU manufacturing capacity is falling short of demand again. 

But PC vendors may have alternative CPU supplies from China. At least one China-based CPU developer is ready to volume-ship its ARM processors for the domestic desktop market.

Intel has seen its 14nm chip manufacturing capacity fall short of demand again recently, which may force many notebook vendors to postpone their new model launches to next year, according to industry sources.

China’s homegrown processor makers will be ready for commercial shipments of their newly-developed CPUs and GPUs in 2020, according to industry sources.

Source: www.digitimes.com

North American PCB Industry Returns to Positive Growth (Charts 24-27)

IPC announced the August 2019 findings from its North American Printed Circuit Board (PCB) Statistical Program. The book-to-bill ratio strengthened to 1.02 as sales and order growth rebounded in August.

Total North American PCB shipments in August 2019 were up 0.6 percent compared to the same month last year. Year-to-date sales growth as of August remained positive at 7.4 percent. Compared to the preceding month, August shipments increased 11.4 percent.

PCB bookings in August increased 7.6 percent year-over-year, pulling year-to-date order growth up to 1.9 percent. Bookings in August were up 19.8 percent from the previous month.

“After a lackluster summer for the North American PCB industry, the August results brought welcome news,” said Sharon Starr, IPC’s director of market research. “Sales and order growth have both returned to positive territory and orders outpaced sales, which brought the book-to-bill ratio back to the positive range after a three-month slump.”

“Recent book-to-bill ratios indicate the probability of flattening sales growth but with some hope for positive growth rates in the next two quarters,” Starr said.

Source: www.ipc.org

Industrial Robots: Robot Investment Reaches Record $16.5 billion (Chart 28)

The new World Robotics report shows an annual global sales value of $16.5 billion in 2018, a new record. 422,000 units were shipped globally in 2018 – an increase of 6 percent compared to the previous year. 

IFR forecasts shipments in 2019 will recede from the record level in 2018, but expects an average growth of 12 percent per year from 2020 to 2022. 

Among the topics explored in the report:

  • Chinese manufacturers gain domestic market share
  • U.S. robot installations rose by 22 percent
  • Europe´s robot installations rose by 14 percent

“We saw a dynamic performance in 2018 with a new sales record, even as the main customers for robots – the automotive and electrical/electronics industry – had a difficult year,” said Junji Tsuda, President of the International Federation of Robotics. 

“The US-China trade conflict imposes uncertainty to the global economy – customers tend to postpone investments. But it is exciting that the mark of 400,000 robot installations per year has been passed for the first time,” Junji Tsuda said. 

The IFR’s longer-term outlook shows that the ongoing automation trend and continued technical improvements will result in double digit growth – with an estimate of about 584,000 units in 2022.

Source: ifr.org

Gartner: Global Device Shipments to Decline 3.7% in 2019 (Chart 29)

Worldwide shipments of devices (PCs, tablets and mobile phones) will decline 3.7 percent to 2.155 billion units, according to the latest forecast from Gartner, Inc.

Gartner estimates there are more than 5 billion mobile phones in use around the world. After years of growth, the worldwide smartphone market has reached a tipping point. Sales of smartphones will decline by 3.2 percent in 2019, which would be the worst decline the category has seen.

“This is due to consumers holding onto their phones longer, given the limited attraction of new technology,” said Ranjit Atwal, senior research director at Gartner.

The lifetimes of premium phones (for example, Android and iOS phones) continue to extend through 2019. Their quality and technology features have improved significantly and have reached a level today where users see high value in their device beyond a two-year timeframe.

“Unless the devices provide significant new utility, efficiency or experiences, users do not necessarily want to upgrade their phones,” Atwal said.

The share of 5G-capable phones will increase from 10 percent in 2020 to 56 percent by 2023.

“The major players in the mobile phone market will look for 5G connectivity technology to boost replacements of existing 4G phones,” Atwal said. “Still, less than half of communications service providers (CSPs) globally will have launched a commercial 5G network in the next five years.

“More than a dozen service providers have launched commercial 5G services in a handful of markets so far,” Atwal said. “To ensure smartphone sales pick up again, mobile providers are starting to emphasize 5G performance features, like faster speeds, improved network availability and enhanced security. As soon as providers better align their early performance claims for 5G with concrete plans, we expect to see 5G phones account for more than half of phone sales in 2023. As a result of the impact of 5G, the smartphone market is expected to return to growth at 2.9 percent in 2020.”

5G will impact more than phones 

The recent Gartner IoT forecast showed that the 5G endpoint installed base will grow 14-fold between 2020 and 2023, from 3.5 million units to 48.6 million units. By 2028, the installed base will reach 324.1 million units, although 5G will make up only 2.1 percent of the overall Internet of Things (IoT) endpoints.

“The inclusion of 5G technology may even be incorporated into premium ultramobile devices in 2020 to make them more marketable to customers,” said Atwal.

PC Device Trends in 2019

While worldwide PC shipments totaled 63 million units and grew 1.5 percent in the second quarter of 2019, unclear external economic issues still cast uncertainty over PC demand this year. PC shipments are estimated to total 256 million units in 2019, a 1.5 percent decline from 2018. 

The consumer PC market will decline by 9.8 percent in 2019, reducing its share of the total market to less than 40 percent. The collective increase in consumer PC lifetimes will result in 10 million fewer device replacements through 2023. With the Windows 10 migration peaking, business PCs will decline by 3.9 percent in 2020 after three years of growth.

“There is no doubt the PC landscape is changing,” Atwal said. “The consumer PC market requires high-value products that can meet specific consumer tasks, such as gaming. Likewise, PC vendors are having to cope with uncertainty from potential tariffs and Brexit disruptions. Ultimately, they need to change their business models to one based on annual service income, rather than the peaks and troughs of capital spending.”

Source: www.gartner.com

World Converged Systems Market Revenue Increased 10.9% Y/Y to $3.9 Billion in 2Q’19 (Chart 30)

According to the International Data Corporation (IDC) Worldwide Quarterly Converged Systems Tracker, worldwide converged systems market revenue increased 10.9 percent year-over-year to $3.9 billion during the second quarter of 2019. 

“The value proposition of converged infrastructure solutions has evolved to align with the needs of a hybrid cloud world,” said Eric Sheppard, research vice president, Infrastructure Platforms and Technologies at IDC. 

“Modern converged solutions are driving growth because they allow organizations to leverage standardized, software-defined, and highly automated datacenter infrastructure that is increasingly the on-premises backbone of a seamless multi-cloud world.” 

IDCs converged systems market view offers three segments: certified reference systems and integrated infrastructure, integrated platforms, and hyperconverged systems. The certified reference systems integrated infrastructure market generated nearly $1.5 billion in revenue during the second quarter, which represents 10.5 percent year-over-year growth and 37.5 percent of total converged systems revenue. 

Integrated platforms sales declined 14.4 percent year-over-year during the second quarter of 2019, generating $626 million worth of sales. This amounted to 16.0 percent of the total converged systems market revenue. Revenue from hyperconverged systems sales grew 23.7 percent year-over-year during 2Q’19, generating $1.8 billion worth of sales. This amounted to 46.6 percent of the total converged systems market. 

Source: www.idc.com

World Smart Home Device Market Expected to Grow 23.5% Y/Y in 2019 to 815 million device shipments (Charts 31 & 32)

The worldwide market for smart home devices is expected to grow 23.5 percent year-over-year in 2019 to nearly 815 million device shipments, according to the International Data Corporation (IDC). Worldwide shipments are forecast to be more than 1.39 billion in 2023 with a five-year compound annual growth rate (CAGR) of 14.4 percent. 

“Driving the market’s growth over the next few years is a combination of downward pressure on prices from intensifying competition; rising adoption of smart assistants; and rising consumer awareness of the conveniences, costs savings, and energy reductions that smart home devices provide,” said Adam Wight, senior research analyst for consumer IoT.

The United States will represent the lion’s share of unit shipments in each year and will grow at a compound annual growth rate of 9.5 percent over the forecast period, reaching more than 560 million units shipped in 2023. 

China is the second-largest country by shipment volume in each year but represents the highest growth rate at a CAGR of 22.6 percent between 2019 and 2023, followed by Canada with a CAGR of 19.9 percent and Western Europe with a CAGR of 14.7 percent. 

“Content and services are going be at the forefront for the smart home market as video entertainment products such as the Fire TV or Chromecast will serve as an on-ramp for consumers entering the world of connected home products,” said Jitesh Ubrani, research manager for IDC’s Mobile Device Trackers. 

Video entertainment devices are expected to maintain the largest volume of shipments, accounting for 29.9 percent of all shipments in 2023 as falling prices and advances in functionalities – such as 8K, higher refresh rates, HDR, larger sizes and integration with smart assistants and streaming platforms – lead many consumers to upgrade their sets. 

Home monitoring/security devices like smart cameras and smart locks will account for 22.1 percent of the shipments in 2023 with a CAGR of 18.4 percent. Growth in smart speakers and displays is expected to slow to single digits in the next few years with 8.7 percent year-over-year growth in 2022 and 4.7 percent in 2023 as the installed base of these devices approaches saturation and consumers look to other form factors to access smart assistants in the home, such as thermostats, appliances and TVs, to name a few. 

Ongoing concerns about security and privacy, consumers’ price sensitivity to upfront and ongoing costs of devices and services, and the rising economic uncertainty stemming from the volatility of financial markets across the world are likely to inhibit the market’s growth over the next several years.

Source: www.idc.com

World IT Infrastructure Products for Cloud Declined in 2Q’19 (Chart 33)

According to the International Data Corporation (IDC) vendor revenue from sales of IT infrastructure products (server, enterprise storage, and Ethernet switch) for cloud environments, including public and private cloud, declined 10.2 percent year-over-year in the second quarter of 2019, reaching $14.1 billion. 

IDC also lowered its forecast for total spending on cloud IT infrastructure in 2019 to $63.6 billion, down 4.9 percent from last quarter’s forecast and changing from expected growth to a year-over-year decline of 2.1 percent. 

Vendor revenue from hardware infrastructure sales to public cloud environments in 2Q’19 was down 0.9 percent compared to the previous quarter (1Q’19) and down 15.1 percent year-over-year to $9.4 billion. This segment of the market continues to be highly impacted by demand from a handful of hyperscale service providers, whose spending on IT infrastructure tends to have visible up and down swings. 

After a strong performance in 2018, IDC expects the public cloud IT infrastructure segment to cool down in 2019 with spend dropping to $42.0 billion, a 6.7 percent decrease from 2018. 

Although it will continue to account for most of the spending on cloud IT environments, its share will decrease from 69.4 percent in 2018 to 66.1 percent in 2019. In contrast, spending on private cloud IT infrastructure has showed more stable growth since IDC started tracking sales of IT infrastructure products in various deployment environments. 

In the second quarter of 2019, vendor revenues from private cloud environments increased 1.5 percent year-over-year reaching $4.6 billion. IDC expects spending in this segment to grow 8.4 percent year-over-year in 2019. 

Overall, the IT infrastructure industry is at crossing point in terms of product sales to cloud vs. traditional IT environments. In 3Q’18, vendor revenues from cloud IT environments climbed over the 50 percent mark for the first time but fell below this important tipping point since then. 

In 2Q’19, cloud IT environments accounted for 48.4 percent of vendor revenues. For the full year 2019, spending on cloud IT infrastructure will remain just below the 50 percent mark at 49.0 percent. Long-term, however, IDC expects that spending on cloud IT infrastructure will grow steadily and will sustainably exceed the level of spending on traditional IT infrastructure in 2020 and beyond. 

Spending on the three technology segments in cloud IT environments is forecast to deliver growth for Ethernet switches while compute platforms and storage platforms are expected to decline in 2019. Ethernet switches are expected to grow at 13.1 percent, while spending on storage platforms will decline at 6.8% and compute platforms will decline by 2.4 percent. Compute will remain the largest category of spending on cloud IT infrastructure at $33.8 billion. 

Sales of IT infrastructure products into traditional (non-cloud) IT environments declined 6.6% from a year ago in Q219. For the full year 2019, worldwide spending on traditional non-cloud IT infrastructure is expected to decline by 5.8 percent, as the technology refresh cycle driving market growth in 2018 is winding down this year. 

By 2023, IDC expects that traditional non-cloud IT infrastructure will only represent 41.8 percent of total worldwide IT infrastructure spending (down from 52.0 percent in 2018). 

Source: www.idc.com

Global AMOLED TV Display Revenue Will Expand to $7.5 billion in 2025 (Chart 34)

Driven by falling prices and rising consumer demand for thinner, lighter and more colorful television sets, market revenue for active matrix organic light-emitting-diode (AMOLED) displays used in TVs is expected to more than double during the next six years, according to IHS Markit | Technology, now a part of Informa Tech.

Global revenue for AMOLED TV displays will expand to $7.5 billion in 2025, up from $2.9 billion in 2019, as reported by the IHS Markit Technology AMOLED & Flexible Display Intelligence Service. Although AMOLED TVs have only been on the market since 2013, they are rapidly gaining share, with these types of sets expected to account for 20.6 percent of the $36 billion TV display market in 2025, up from just 8.6 percent in 2019.

“Despite carrying a much higher average selling price (ASP) than LCD TVs, AMOLED TVs are extremely appealing to consumers because of their slim form factor, light weight and wide color gamut,” said Jerry Kang, associate director at IHS Markit | Technology. “Starting in 2020, AMOLED TV ASPs are expected to begin to decline due to increases in manufacturing capacity spurred by the adoption of a more advanced production process. This will pave the way for much more widespread adoption of AMOLED TVs.”

The AMOLED TV ASP currently is about four times more than the LCD TV ASP, based on a comparison of 65-inch panels with a 3840 by 2160 resolution. Because of this, TV brands are eager to reduce AMOLED prices to make them more attractive to consumers.

One development expected to result in major price declines is the use of multi-model glass (MMG) substrates in Gen 8 display manufacturing fabs. With its capability to support multiple display sizes on a single substrate, MMG can improve the efficiency of manufacturing, reduce product costs and help diversify product line-ups.

LG Display recently ramped-up a new Gen 8 MMG factory in Guangzhou, China. This represents the company’s second Gen 8 facility after its factory in Paju, South Korea established in 2013. 

As a result of its extensive investments in cutting-edge display facilities with MMG, LG Display is expected to expand its lead in the AMOLED TV display market.

Other display suppliers are aiming to compete with LG Display’s advanced white OLED technology. These firms are offering alternative technologies that soon could also be leveraged for manufacturing AMOLED TV displays, including ink-jet printing, RGB OLED and quantum dot color-converting OLED.

Source: technology.ihs.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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