Global Summary

Source: Custer Consulting Group

Taiwan/China Update

January 2015 sales of Taiwan listed companies have just been released. Many of these firms manufacture in China.

Source: Company financial reports

Europe Update

December European electronic supply chain results were just released:

Chart 30 summarizes 4Q’14 vs 4Q’13 growth by sector of the European electronic supply chain.

Source: Eurostat

European Semiconductor Distribution Industry Sales Grew 10.3% Y/Y to 1.57 Billion Euro in Q4/CY14 (Charts 31 & 32)

The European semiconductor distribution industry displayed unusual strength in low-season Q4/CY14 and ended 2014 at a healthy growth rate. According to DMASS (Distributors' and Manufacturers' Association of Semiconductor Specialists) semiconductor distribution sales in Q4/CY14 grew by 10.3% to 1.57 billion euro. The full year closed with sales of 6.34 billion euro, 7.7% up on 2013 and close to record 2011.

Georg Steinberger, chairman of DMASS, commented: "It is always good to see predictions being beaten by the reality. DMASS members did well in an increasingly steady business year and leveraged their regional strength. The 2014 results show healthy growth across the board, with very few problem zones."

From a regional perspective, the highlights were set by Eastern Europe, Austria, Iberia, the UK and Israel, all of which grew more than the DMASS average. Slightly down: Belgium, Norway, Sweden and Russia, the latter one showing effects of the sanctions applied by the EU. The major regions in Q4 in detail: Germany grew 8.5% to 474 million euro, Eastern Europe by 23.7% to 192 million euro, Nordic by 6.8% to 161 million euro, Italy by 6.7% to 139 million euro, UK and Ireland by 12.3% to 135 million euro and France by 6.5% to 122 million euro. On an annualized basis, Germany remains the biggest market with over 2 billion euro of sales, representing 32% of DMASS.

Georg Steinberger: "What is important to notice is that the distribution industry has proven resilient to the overall economic slowdown in Western and Southern Europe. Which means there are a lot of market dynamics driven by innovation rather than macro-economic effects. What is also important is the fact that currency effects are becoming more critical again. The drop of the euro versus the dollar within the last 12 months is staggering."


World Silicon Wafer Area Shipments Increased 11% Y/Y to 10,098 Million Square Inches in 2014 (Chart 33)

Worldwide silicon wafer area shipments increased 11% in 2014 when compared to 2013 area shipments according to the SEMI Silicon Manufacturers Group (SMG) in its year-end analysis of the silicon wafer industry. However, worldwide silicon revenues increased by just 1% in 2014 compared to 2013.

Silicon wafer area shipments in 2014 totaled 10,098 million square inches (MSI), up from the 9,067 million square inches shipped during 2013. The previous market high for silicon area shipments was 9,370 MSI in 2010. Revenues totaled $7.6 billion slightly up from $7.5 billion posted in 2013; yet 2014 silicon revenues remain 37% below their peak set in 2007. "After three consecutive flat years, annual semiconductor silicon shipment levels achieved respectable growth last year to reach a market high," said Hisashi Katahama, chairman of SEMI SMG and director, Technology of SUMCO Corporation. "However, industry revenues did not experience the same magnitude of recovery."

All data cited in this release is inclusive of polished silicon wafers, including virgin test wafers, epitaxial silicon wafers, and non-polished silicon wafers shipped by the wafer manufacturers to the end-users.


DRAM Bit Volume Forecast to Increase 24% in 2015; Averaged 67% per Year Volume Growth from 1995-2005 (Chart 34)

Market Dynamics, Technology Hurdles Reduce DRAM Bit Volume Growth

IC Insights’ recently released 2015 edition of The McClean Report shows that DRAM bit volume grew by an average of 67% per year from 1995-2005. In the 10 years since then, however, bit volume growth has averaged 43% per year.


Worldwide NAND Flash Memory Market Revenues Increased 2% Sequentially to US$8.75 Billion in 4Q’14 (Chart 35)

The worldwide NAND flash memory market posted revenues of US$8.75 billion in the fourth quarter of 2014, up 2% sequentially, according to DRAMeXchange. Samsung Electronics remained the largest supplier, but its share slid 1.8pp to 27.9%.

Samsung's NAND bit shipments increased 5% on quarter while ASP fell nearly 10%, said DRAMeXchange. Samsung's NAND revenues amounted to about US$2.44 billion in the fourth quarter of 2014, down 4.2% sequentially.

Toshiba came in second place with a 21.9% share of the NAND flash market in the fourth quarter, followed by SanDisk with a 18.2% share, Micron Technology with 13.7% and SK Hynix 11.4%.

In addition, with seasonal factors dragging down demand, the global supply of NAND flash memory will exceed demand in the first quarter of 2015, DRAMeXchange predicted.

DRAMeXchange also observed that falling NAND flash prices will encourage chipmakers to speed up their technology transitions for a better cost structure.


Worldwide Tablet and 2-In-1 Device Shipments Declined 3.2% Y/Y to 76.1 Million in 4Q’14 (Chart 36)

Shipments for FY14 Increased 4.4% to 229.6 Million Units.

Worldwide tablet shipments recorded a year-over-year decline for the first time since the market's inception in 2010. Overall shipments for tablets and 2-in-1 devices reached 76.1 million in the fourth quarter of 2014 (4Q’14) for -3.2% growth, according to preliminary data from the International Data Corporation. Although the fourth quarter witnessed a decline in the global market, shipments for the full year 2014 increased 4.4%, totaling 229.6 million units.

"The tablet market is still very top heavy in the sense that it relies mostly on Apple and Samsung to carry the market forward each year," said Jitesh Ubrani, Senior Research Analyst, Worldwide Quarterly Tablet Tracker. "Although Apple expanded its iPad lineup by keeping around older models and offering a lower entry price point of $249, it still wasn't enough to spur iPad sales given the excitement around the launch of the new iPhones. Meanwhile, Samsung's struggles continued as low-cost vendors are quickly proving that mid- to high-priced Android tablets simply aren't cut out for today's tablet market."

Apple's lead over other vendors has yet to be truly challenged as it shipped 21.4 million tablets, accounting for over a quarter of the market with 28.1% volume share. Despite Samsung's woes, it managed to hold on to the second place with 11 million units shipped. Lenovo (4.8%), ASUS (4%), and Amazon (2.3%) rounded out the top 5 although only Lenovo managed to grow annually when compared to Q4 2013. Lenovo maintained its tight grip on the Asia/Pacific market thanks to its massive scale in the PC business and the success of its low-cost tablet offerings.

"Despite an apparent slow-down of the market, we maintain our forecast about tablet growth in 2015," said Jean Philippe Bouchard, Research Director, Tablets. "Microsoft's new OS, a general shift towards larger screen form factor and productivity focused solutions, and technology innovations such as gesture interface that could be introduced in tablets will help the market maintain positive growth in 2015."


Labor Cost Savings Realized by Adopting Advanced Industrial Robots (Chart 37)

"For many manufacturers, the biggest reasons for not replacing workers with robots have been pure economics and technical limitations," Michael Zinser, a manufacturing expert at The Boston Consulting Group (BCG) said. "But the price and performance of automation are improving rapidly."

BCG found that global industrial robots sales leaped 23% last year, and deliveries could double to 400,000 a year by 2018.

A new report estimates that by 2025 the average manufacturing employer will pay 16% less on labor by replacing human employees with robots. Industrial robots are costing less and are more dexterous as their predecessors, allowing them to be employed by smaller companies to do more complex repetitive tasks.

The report estimates that a decade from now the global average labor-cost savings of replacing people with robots will be 16%, thanks to the lower costs of manufacturing the mechanical manufacturers. Companies like Boston-based Rethink Robotics are already offering agile factory robots for as little as $25,000, which is equivalent to paying a full-time human worker $4 an hour over the lifetime of the machine, according to a Stanford University study. That’s a price low enough to lure smaller manufacturers.


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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