Sales of Taiwan listed companies (many of which manufacture in China) increased significantly in September. A combination of normal seasonality and Apple’s introduction of its new iPhone were key drivers.
- Electronic equipment revenues in September 2015 were up 7.5% compared to September 2014 and up sequentially 35.2% compared to August 2015 (Chart 1).
- ODM sales (driven by Apple suppliers Foxconn and Pegatron) rose 4.0% vs. September 2014 and 29% sequentially from August 2015 (Chart 2). Combined ODM revenues were up 5.1% in 3Q’15 vs. 3Q’14 (Chart 3).
- In contrast, wafer foundry sales dropped significantly in September. Since they "lead" global semiconductor shipments it is likely that chip sales will also decline short term on a 3/12 growth basis (Chart
- Solar/photovoltaic suppliers continued their revenue increases (Chart 5).
- Rigid and flex printed circuit shipments rebounded (Chart 6) as rigid "CCL" laminate sales held steady (Chart 7).
Source: Company financials analyzed by Custer Consulting Group
Global Semiconductor Sales Decrease Slightly in August
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $27.7 billion for the month of August 2015, a decrease of 0.5% from July 2015. Global sales from August 2015 were 3.0% lower than the August 2014 (Chart 8). Regionally, sales in the Americas increased slightly compared to last month, but were down somewhat compared to August 2014 (Chart 9).
"The global semiconductor market has endured a slight softening of demand in recent months, which has combined with currency devaluation and regular market cyclicality to slow sales somewhat," said John Neuffer, president and CEO, Semiconductor Industry Association. "Despite recent market sluggishness, the global industry has posted higher cumulative sales through August this year than it did through the same point last year, which was a record year for semiconductor revenues."
- Global shipments declined on a 3-month average basis but increased slightly in September (1-month basis) due to seasonality. They were down 4.3% for the month of September alone compared to September 2014 (Chart 10).
- Custer Consulting Group’s semiconductor leading indicator points to further declines ahead (Chart 11).
- Asia/Pacific continues to dominate semiconductor consumption (Chart 12) as it represented almost 60% of the chip usage in September (Chart 13).
Worldwide Semiconductor Sales Expected to Decline 0.8% in 2015 (Chart 14)
Weakness in Key Electronic Equipment Segments, Including Smartphones and PCs, Causes Revenue to Shrink
Worldwide semiconductor revenue is forecast to total $337.8 billion in 2015, a decline of 0.8% from 2014, according to Gartner, Inc. This is the first decline in revenue since 2012 when the market declined 2.6%. This forecast is down from the previous quarter's forecast of 2.2% growth.
"Once again the outlook for the major applications that drive the semiconductor market, including PCs, smartphones and tablets, has been revised downward," said Andrew Norwood, research vice president at Gartner. "This, combined with the continuing impact of the strong dollar on demand in key markets outside of the U.S., has resulted in a decline in our forecast and a negative growth rate for 2015.
"Not only did the year start badly, but we are not seeing the typical ramp up in sales of semiconductors in many areas of the market in anticipation of the holiday season," Norwood continued. "As a result, sales are not going to recover enough in the second half to halt an annual decline in semiconductor revenue for 2015."
This will be the first time worldwide semiconductor sales have contracted since 2012. Global economic headwinds, such as the slowing Chinese economy and the strong dollar, are pushing up the cost of electronic equipment in regions including Western Europe and Japan. This is leading to a reduction in outright sales and also encouraging buyers to shift to lower-cost equipment in these markets.
Gartner predicts a more positive outlook for 2016 and is forecasting semiconductor revenue will increase 1.9% to $344.1 billion. However, Gartner forecasts an oversupply in DRAM in 2016.
"While 2015 has already seen an oversupply in the PC segment of the DRAM market, we believe that 2016 will see a more widespread oversupply that will also impact the server and low-power sectors of the DRAM market. DRAM revenue is forecast to decline 12.2% in 2016 due to oversupply and resulting weak pricing," said Norwood.
World Fab Capacity - including Discretes (Chart 15)
Chart 15 lists fab capacity by major country as reported by SEMI in 2015
Worldwide PC Shipments declined 7.7% y/y to 73.7 Million Units in 3Q’15 (Charts 16-19)
Higher Prices Due to U.S. Dollar against Local Currencies Slows PC Sales; but Analysts See Some Signs for Future Stabilization and Growth
Worldwide PC shipments totaled 73.7 million units in the third quarter of 2015, a 7.7% decline from the third quarter of 2014, according to preliminary results by Gartner, Inc. Desktop PCs continued to show weakness with a high-single-digit decline, while the segment that combines notebook PCs and premium ultramobiles (such as the MacBook Air and Microsoft Surface Pro) recorded a low-single-digit decline.
"This change in consumer preferences toward PCs was visible in the preliminary data, as we saw positive growth in U.S. notebook and premium ultramobile shipments"
"The global PC market has experienced price increases of around 10% throughout the year, due to the sharp appreciation of the U.S. dollar against local currencies. In the third quarter of 2015, this continued to be a major cause for weaker demand in those regions," said Mikako Kitagawa, principal analyst at Gartner. "These impacted regions, which include EMEA, Japan and Latin America, posted double-digit declines in the third quarter. Asia/Pacific and the U.S. were more stable."
Windows 10 was launched in the third quarter of 2015, but it had a minimal impact on shipments in the quarter. Gartner analysts said the focus of the Windows launch in the quarter was to upgrade to Windows 10 on existing PCs, rather than ship on new PCs. The Windows 10 rollout will ramp up in 4Q’15 holiday sales.
While 3Q’15 results illustrated gloomy market conditions for the PC market, there is a positive aspect in the results. According to Gartner's 2015 personal technology survey, 50% of consumers expressed intention to purchase a PC in the next 12 months, compared with 21% for tablet purchase intention.
"This change in consumer preferences toward PCs was visible in the preliminary data, as we saw positive growth in U.S. notebook and premium ultramobile shipments," Kitagawa said. "Soft recovery is expected to start in 4Q’15, as Windows 10 product refreshes start to appear. In the meantime, PC manufacturers should adjust configurations for 2016 without the impact of price hikes seen in 2015, which will lead into more stable market conditions in the upcoming year."
Lenovo secured the top position in worldwide PC shipments, as its market share increased to 20.3%, despite a 4% decline in shipments in the third quarter of 2015. EMEA and Japan were two challenging regions for Lenovo with double-digit declines, but they were offset by 22% growth in the U.S. Lenovo introduced a variety of hybrid laptops, both detachable and from a wide range of price points.
In the U.S., PC shipments totaled 17 million units in the third quarter of 2015, a 1.3% increase from the same period last year. Similar to worldwide market trends, the U.S. market experienced growth in notebooks and premium ultramobiles, which was offset by desktop PC shipment declines.
HP maintained the top position in the U.S. market, accounting for 27.8% of PC shipments. Lenovo showed the strongest growth among the top five vendors in the U.S. market, as its PC shipments grew 22%, due to its strong hybrid growth.
PC shipments in EMEA totaled 20 million units in the third quarter of 2015, a decline of 15.7% over the same period last year. The currency devaluation continued to be a major contributor of stagnation in EMEA, as prices remained high. The inventory buildup from the first half of 2015 started showing some improvement during the third quarter. The back-to-school sales season was weak in Western Europe, as the introduction of many new products was delayed until the end of September due to the clearing of high inventory.
Asia/Pacific PC shipments reached 26.3 million units in the third quarter of 2015, a 1.7% decline from the third quarter of 2014. Consumer spending continues to be cautious due to weak economies and currency fluctuations. Asia/Pacific mobile PC shipments grew 2.2% in the third quarter, while desk-based PC shipments declined 4.9%.
PC, Communications, Consumer Electronics and Car Industries working off Excess Inventories
Auto and industrial chip orders have seen a dramatic fall in the fourth quarter of 2015, according to industry sources in Taiwan.
Chip orders coming from the auto and industrial sectors are usually stable with visibility reaching as long as more than one year. However, starting the fourth quarter of 2015, there has been a cutback in orders.
An analog IC vendor has pointed out that clients across the PC, communications, consumer electronics and car industries have all been engaged in inventory adjustments since the second quarter of 2015, and are still working off their excess inventories.
With orders from both the auto and industrial sectors becoming less stable, upstream chipmakers are concerned about overall weakness in aggregate demand, the sources noted. Many of them have turned cautious about their business outlook for 2016.
U.S. 3D Print Hardware Revenues expected to approach $1.5 billion by 2019
U.S. Opportunity Drives 3D Printer Market Growth
The U.S. 3D print market remains white hot, fueled by the explosion of 3D print manufacturers from around the world who are setting their sights squarely on the United States. According to new research from International Data Corporation (IDC), the United States is the world's largest market for 3D printers with hardware revenues expected to approach $1.5 billion by 2019.
The increasing demand to reduce manufacturing cycle times and to reduce prototyping costs are major drivers of 3D printing. "The technologies that enable 3D printing continue to develop and expand in nearly every direction," said Tim Greene, Research Director, Hardcopy Solutions. "These technologies can help deliver larger, more accurate, and more solidly built models in a fraction of the time."
In terms of shipments, fused deposition modeling (FDM/FFF) is the largest technology within the 3D printing market, and there has been some explosive growth among suppliers of FDM/FFF printers. Additionally, the emergence of dual-extrusion printing, offered by an increasing number of suppliers, is gaining significant traction as this technology can effectively double the build speed.
Additional findings from IDC's research include:
- With key patents expiring in 2014, stereolithography (SLA) technologies, which offer the potential to increase speed and build size, are being more widely explored.
- FDM/FFF and SLA are by far the two largest 3D printer segments in terms of shipments.
- The entry of new players like HP in the MultiJet/PolyJet technology segment will fuel a growth rate of more than 30% per year between 2014 and 2019.
- The smallest but the fastest-growing technology segment is selective laser sintering (SLS).
Global Large-size TFT Capacity to reach Record High in 2016
Global capacity for TFT applications sized 9-inch and above will increase 7.1% on year in 2016, the highest on-year increase since 2011, according to Digitimes Research.
Large-size LCD panel capacity in China specifically will drive the overall global growth, increasing 28.2% on year in 2016 and 17.7% on year in 2017. The expected growth will come mainly as China and Korea panel makers expand 8.5G production in China.
In 2016, China will account for 26% of global large-size LCD panel capacity and 29% in 2017. By 2018 when China unveils new capacity at 10.5G and 8.5G fabs the country is expected to hold the number two position globally in large-size LCD production.