European Economy Struggles in March

(Charts 1-12)

Europe is having a difficult time:

  • Most segments of the supply chain contracted in the first quarter (charts 1 and 2)
  • Industrial production plunged in March (chart 3)
  • April manufacturing PMI dropped to 33.4 from 44.5, well into contraction territory (chart 4)
  • Electronic equipment production dropped sharply in March (chart 5)
  • Motor vehicle output declined to its lowest point since February 2009 (chart 6)
  • Aerospace (chart 7) and instruments (chart 8) production dropped sharply, but electromedical output has rebounded (chart 9)
  • Components and boards (chart 10), loaded boards (chart 11) and bare boards (chart 12) all had sharp drops in production

Sources: www.markiteconomics.com and Eurostat

Japan Update

(Charts 13-19)

Japan’s PMI dropped sharply in April (chart 13).

JEITA released February domestic production data:

  • Domestic electronic equipment production was down 1.2 percent on both an annualized (12/12) and 3-month (3/12) basis (charts 14 and 15)
  • PCB production returned to zero growth (charts 16 & 17); the PCB market’s leading indicator points to further declines ahead (chart 18)
  • Passive component production has been declining since December (chart 19)

Sources: Markit Economics (www.markiteconomics.com and JEITA (www.jeita.or.jp)

U.S. Manufacturing Update: Revised Figures

(Charts 20-32)

On May 15, 2020, the U.S. Department of Commerce provided its annual update to its M3 series of monthly shipments, orders and inventories of domestically-manufactured goods. Although the revision was from 1992 to present, most of the changes were from 2017 to the present. See chart 20 which compares total monthly electronic equipment shipments before and after the revision.

All of the charts in this set have now been updated based on the revised M3 data. See www.census.gov for details of the update.

Here are some of the updated charts:

  • U.S. Electronic Equipment shipments – compares previous and revised shipments (chart 21)
  • U.S. Electronic Supply Chain Growth (charts 22 & 23)
  • Electronic Equipment 3-month average Book/Bill ratio (chart 24)
  • Electronic Equipment orders and shipments 3/12 growth rates (chart 25)
  • Electronic Equipment orders and shipments – monthly dollar values (chart 26)
  • Defense capital goods orders and shipments (chart 27)
  • Aircraft and parts shipments (chart 28) and orders (chart 29)
  • Military electronics orders and shipments (chart 30)
  • Electromedical, Measurement and Control Equipment (chart 31)
  • Computers and related products (chart 32)

Source: www.census.gov

European Semiconductor Distribution Market sales fell by 11.7% in Q1

(Chart 33)

Lack of demand, macroeconomic problems and coronavirus-related concerns drove lackluster performance in the components market, according to DMASS.

Slow demand, combined with general economic uncertainties, built a perfect basis for a weak beginning to 2020, only to be aggravated by the global COVID-19 pandemic

Consequently, the European electronic components market didn’t find the spark to get ignited for growth. Nor did distribution. According to DMASS Ltd., sales in the European Semiconductor Distribution Market fell by 11.7 percent to 2.19 billion euro in Q1 2020.

Georg Steinberger, chairman of DMASS, said that “while our expectation was clearly that Q1/2020 would not be a new record, we deemed it to be the end of the last down cycle. COVID-19 is not only assaulting the health of people around the world; it has created a situation where economies will suffer for some time.”

“The shutdown in many countries and the slowdown of industrial production is affecting the electronics industry quite severely, with the biggest impact yet to come in the next quarters,” Steinberger continued. “What it also did was distort the visibility in the supply chain, which makes it hard to predict what the industry might need in the next few quarters.”

Q1 results are quite diverse on a country-by-country basis. While France, UK, Nordic and Benelux show above average decline, Germany ended at average and eastern Europe did much better. UK sales in semi distribution ended at 129 million euro (-19.4 percent), Germany at 646 million euro (-11.8%), France at 140 million euro (-17.7 percent), Italy at 203 million euro (-6.5 percent), Nordic at 154 million euro (-38 percent) and Eastern Europe at 389 million euro (-4 percent). Only a few countries showed positive numbers.

“We have yet to see how 2020 unfolds; as usual there could be surprising effects,” Steinberger said. “Also, not to be forgotten should be the fact that some DTAM has been turned into direct business by manufacturers, strongly visible in the Nordic numbers.”

On the product side, the positive news is that some product areas (Programmable Logic, Opto, MCUs and Advanced Logic) were not as heavily affected as the others, while especially commodities (Discretes, Analog, Memories and Standard Logic) were impacted more.

As the biggest product group, Analog ICs declined by 12.2 percent to 647 million euro, MOS Micro by 9.9 percent to 427 million euro, Power Discretes by 10.3 percent to 247 million euro, Opto by 6.3 percent to 202 million euro, Memories by 18.2 percent to 186 million euro, Programmable Logic by 6.2 percent to 155 million euro, Advanced Logic by 8.6 percent to 119 million euro; and finally, Discretes by 24.9 percent to 114 million euro.

“After one quarter, the only indication of a slight trend is that commodities have struggled more than complex products, which is no surprise in a downturn and can easily change,” Steinberger said, adding that it may also be notable that MCUs have performed “significantly better” than DSPs or microprocessors.

“At the beginning of the crisis, it was the disruption of production in Asia that was a concern,” Steinberger said. “Now it is the other end of the supply chain – the customers and their uncertainties in their end markets. The loss of visibility both from a customer side and at the supplier end will undoubtedly lead to a few quarters of head scratching.”

“While governments jump to rescue the economy, it would be wise to look at the long-needed innovation of public infrastructures for a more sustainable basis, which in turn could drive a lot of growth for the digital industry,” Steinberger said.

Source: https://dmass.com

Webinar: Global Electronics Industry Outlook, with Emphasis on Europe

The directors of the European Institute for the PCB Community invite you to join a free webinar on Tuesday, June 9, 2020 at 16:00 hrs. Standard European Time [10 a.m. Eastern, 9 a.m. Central, 8 a.m. Pacific]. During this webinar, I’ll present the business outlook for the global electronics Industry, with particular emphasis on Europe.

This talk will be followed by a look at electronic industry supply chains, electronic equipment, process equipment, material and components, as well as a view of the PCB industry nationally and internationally. Specifically, I’ll be providing the current economic outlook including leading indicators that will predict the timing and magnitude of recovery.

Topics will include:

  • Current economic outlook, including leading indicators that will predict timing and magnitude of recovery of the electronics supply chain
  • Electronic equipment
  • Components including printed circuits
  • Process equipment
  • Materials
  • Forecasts

The webinar is limited to 50 registrants. Register free of charge online at www.eipc.org.

TSMC Planning Advanced Semiconductor Fab in Arizona

TSMC announced its intention to build and operate an advanced semiconductor fab in the U.S. with the mutual understanding and commitment to support from the federal government and the State of Arizona, according to a Digitimes report.

This facility, which will be built in Arizona, will utilize TSMC's 5nm technology for semiconductor wafer fabrication and will have a 20,000 semiconductor wafer per month capacity. TSMC said the plant will create over 1,600 high-tech professional jobs directly, with thousands of indirect jobs in the semiconductor ecosystem.

Construction is planned to start in 2021 with production targeted to begin in 2024. TSMC's total spending on this project, including capital expenditure, will be approximately USD$12 billion from 2021 to 2029.

TSMC said this US facility will not only enable the company to better support its customers and partners; it will also provide more opportunities to attract global talent.

“This project is of critical, strategic importance to a vibrant and competitive US semiconductor ecosystem that enables leading US companies to fabricate their cutting-edge semiconductor products within the U.S. and benefit from the proximity of a world-class semiconductor foundry and ecosystem,” TSMC said.

In the U.S., TSMC currently operates a fab in Camas, Washington and design centers in both Austin, Texas and San Jose, California. The Arizona facility would be TSMC's second manufacturing site in the U.S.

Source: www.digitimes.com

Gartner: Worldwide IT Spending Projected to Decline 8% from 2019 Due to COVID-19

(Chart 34)

Gartner forecasts worldwide IT spending to total $3.4 trillion in 2020, a decline of 8 percent from 2019. The coronavirus pandemic and effects of the global economic recession are causing CIOs to prioritize spending on technology and services that are deemed “mission-critical” over initiatives aimed at growth or transformation.

“CIOs have moved into emergency cost optimization which means that investments will be minimized and prioritized on operations that keep the business running, which will be the top priority for most organizations through 2020,” said John-David Lovelock, distinguished research vice president at Gartner. “Recovery will not follow previous patterns as the forces behind this recession will create both supply side and demand side shocks as the public health, social and commercial restrictions begin to lessen.”

All segments will experience a decline in 2020, with devices and data center systems experiencing the largest drops in spending. However, as the COVID-19 pandemic continues to spur remote working, sub segments such as public cloud services (which fall into multiple categories) will be a bright spot in the forecast, growing 19 percent in 2020. Cloud-based telephony and messaging and cloud-based conferencing will also see high levels of spending growing 8.9 percent and 24.3 percent, respectively.

“IT spending recovery will be slow through 2020, with the hardest-hit industries, such as entertainment, air transport and heavy industry, taking over three years to come back to 2019 IT spending levels,” said Lovelock. “Recovery requires a change in mindset for most organizations. There is no bouncing back. There needs to be a reset focused on moving forward.”

Source: www.gartner.com

U.S. Industrial Production Down 15.3% in Past 2 Months

(Chart 35)

This is the largest drop since recordkeeping began in 1919.

Source: www.federalreserve.gov/releases/g17/table1_2.htm

IMF: Growth Forecast Cuts “Very Likely”

International Monetary Fund Managing Director Kristalina Georgieva said it is “very likely” the Fund would cut global growth forecasts further as the coronavirus pandemic has been hitting many economies harder than previously projected. You can watch Georgieva’s May 19 update online via YouTube.

Source: www.imf.org

Report: Apple to Expand Investment in Taiwan

Apple Inc. is planning to expand its investment in Taiwan by building a new plant in the Longtan section of Hsinchu Science Park, the China Post reports.

According to investment application data obtained by CNA, the science park administration gave the greenlight to Apple’s Taiwan branch on Feb. 18 to set up a new plant in Longtan, Taoyuan, where the U.S. firm currently has operations.

According to the report, while financial terms or product details related to the new investment plan were not disclosed, the Taiwan-based Economic Daily News reported that the investment is expected to be about NT$10 billion (USD$334 million).

The newspaper cited unnamed sources as saying the Longtan investment plan has been listed as a classified top project by Apple, adding that the U.S. brand values the investment plan highly and has dispatched an R&D team to Taiwan to facilitate the investment.

Once constructed, the Longtan plant “is expected to become the third overseas R&D hub for Apple after Japan and South Korea,” according to the article.

Source: https://chinapost.nownews.com

Components Shortages Impacting Server, Notebook Makers

Digitimes reports that despite strong short-lead-time orders, the server supply chain is currently facing shortages of both components and labor, hindering shipments in the second quarter, according to industry sources.

Several Southeast Asian countries such as the Philippines, Malaysia and Singapore, have recently extended their lockdowns trying to contain the coronavirus, but such measures have undermined the supply of server components from these countries.

Labor shortages are the most serious issue for suppliers in Mexico. In addition to a COVID-19 lockdown, suppliers’ local production lines have been unable to recruit sufficient workers, even by offering extra wages. Server makers including Foxconn Technology Group (Hon Hai Precision Industry), Inventec and Wiwynn all have factories in Mexico to serve clients in North America.

Since workers in Mexico are all eligible to receive minimum wages without going to work after the lockdown, most workers are unwilling to take the risk of being infected. To attract workers, the server makers have given extra pay that is covered by clients, but the labor shortage continues, according to the report.

Source: www.digitimes.com

IDC: Total 5G and LTE Router/Gateway Market to Approach $3 billion by 2024

Driven by increasing demand from branch, mobile and Internet of Things (IoT) customers, International Data Corporation (IDC) expects LTE routers to experience double-digit growth in 2020.

5G wireless routers will add to this year’s forecast, supported by initial commercial deployments in select regions in the second half of 2020.

“Even with some downward pressure on enterprise network infrastructure spending from COVID-19, 2020 will be another year of growth for most LTE router and gateway vendors. The inclusion of 5G products will also contribute, but will not materially affect the total market until 2021,’ said Patrick Filkins, senior research analyst for IoT and Mobile Network Infrastructure at IDC.

Worldwide, IDC expects the total 5G and LTE router/gateway market to grow from approximately $979.3 million in 2019 to just under $3.0 billion in 2024 at a compound annual growth rate (CAGR) of 21.2 percent.

Regionally, North America will remain the largest consumer of LTE routers/gateways, but Asia/Pacific (including Japan) (APJ) will grow the fastest over the forecast period supported by continued expansion and/or densification of macro LTE networks in the region. Both the United States and certain countries in APJ, such as Australia, will be key proving grounds for 5G products as well.

Source: www.idc.com

DRAM Revenue Drops 4.6% in Q1 on COVID-19 Impacts; Rebound Expected in Q2

(Charts 36-38)

According to the DRAMeXchange research division of TrendForce, DRAM suppliers were able to successfully reduce their inventories in Q1 2020 with significantly lower inventory levels at the end of the quarter compared to the beginning of the year meaning suppliers are no longer under imminent pressure to slash prices.

However, the COVID-19 pandemic’s logistics disruptions affected DRAM bit shipment as well. Therefore, in spite of the minor rise in ASP, global DRAM revenue decreased by 4.6 percent QoQ, reaching US$14.8 billion.

TrendForce predicts that the backlog of orders in 1Q20 will be deferred to 2Q20. As the magnitude of QoQ increase in DRAM ASP expands and bit shipment rebounds, TrendForce forecasts a QoQ increase of more than 20 percent in overall DRAM revenue. DRAM suppliers are projected to continue improving their revenue and profitability.

Production and CAPEX Shifts

On matters of technology and production, Samsung continues to shift the wafer processing capacity at its Line 13 from DRAM production to CMOS image sensor production, but it intends to commence DRAM production at P2L in 2H20 to compensate for the shortfall of wafer input at Line 13 while expanding the share of the 1Z-nm production in its output, according to TrendForce.

Samsung remains conservative in its planning as the pandemic has severely weakened the overall demand; the amount of production capacity that it plans to add this year is thus quite limited.

SK Hynix is gradually shifting the wafer processing capacity of its fab M10 to CMOS image sensors, while DRAM production is being raised at its main memory plant M14. SK Hynix has also decided to slightly increase wafer starts at its Wuxi base in 2H20. Nevertheless, SK Hynix this year will be expanding its output primarily through its transition to the 1Y-nm production, without significantly increasing its overall production capacity.

Micron’s total DRAM production capacity will stay relatively constant from last year, since much of its CAPEX in 2020 is budgeted for moving its 1Z-nm process into the mass production phase and raising output. Mass production for Micron’s 1Z-nm products is expected to be realized soon, as OEMs are keen on testing the samples sent by Micron.

On the whole, the top three suppliers are making good progress in their technology migrations despite some delays in process development and deployment. None of them have encountered a serious quality issue that could set back the schedule. Total DRAM production capacity is not expected to show noticeable growth this year, and dominant DRAM suppliers are continuing to dial back their CAPEX. Hence, the growth of the DRAM industry’s bit output in 2020 will be mainly driven by suppliers’ 1Y-nm and 1Z-nm migrations instead of a rise in wafer starts.

Taiwanese Suppliers Focused on Advanced Processes

Nanya posted a QoQ increase of nearly 10 percent in its revenue for 1Q20 as it was able to raise its bit shipments by a double-digit percentage. Nanya’s operating margin also rebounded to 12.7 percent in 1Q20 from 11 percent in 4Q19, owing to the effective control of the R&D cost. In addition, Nanya is expected to see a further increase in its profitability in 2Q20 because its ASP will follow the general market trend and keep climbing.

Winbond’s quarterly DRAM revenue for 1Q20 was similar to the figure for the previous quarter as there were no major QoQ changes in the ASP and bit shipments. However, Winbond recorded a noticeable gain in its NAND Flash revenue for the same period.

Powerchip maintained the same product mix strategy that favors CMOS image sensors over DRAM because demand stayed high for the former during 1Q20. As a result, Powerchip’s DRAM revenue for the quarter slid by 3 percent (the calculation of Powerchip’s revenue covers the sales of the company’s own branded, in-house manufactured PC DRAM products and excludes foundry DRAM orders).

Although the three Taiwanese suppliers varied in their revenue performances, all of them will be concentrating on developing their most advanced processes during 2020. Nanya, for example, is focusing on the deployment of its in-house 1A-nm and 1B-nm processes after announcing that it will no longer use technologies licensed from Micron.

Meanwhile, Winbond is working on raising the yield rate of its new 25nm process and diversifying its memory offerings. As for Powerchip, it is improving its 25nm DDR4 memory products with respect to stability and compatibility.

Source: https://press.trendforce.com

Statements of fact and opinions expressed in posts by contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc. or the TTI Family of Companies.

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