March PMI Leading Indicators

With the exception of Japan the PMI leading indicators improved for most major countries in March (Chart 1).

  • The Global PMI increased modestly (Chart 2) with the U.S. (Chart 3), China (Chart 4) and the Eurozone (Chart 5) supporting this global upturn
  • European performance was mixed with Germany, the UK, Italy and Sweden improving and France, Spain, the Czech Republic and Russia reporting weaker results (Chart 6).
  • In Asia (Chart 7), China (Chart 4), Taiwan (Chart 8), South Korea (Chart 9), Vietnam and Indonesia all reported stronger PMIs while Japan experienced a sharp downturn (Chart 10).

PMI values greater than 50 indicate manufacturing growth and below 50 a contraction.


Exchange Rates versus U.S. Dollar

The U.S. dollar weakened slightly versus most global currencies in March (Chart 11). Historical data for some key currencies include:

  • Euro (Chart 12)
  • Canada (Chart 13)
  • Mexico (Chart 14)
  • Japan (Chart 15)
  • China (Chart 16)
  • Taiwan (Chart 17)
  • S Korea (Chart 18)


North American PCB Sales Rebound (Charts 19 & 20)

IPC announced the February 2016 findings from its monthly North American Printed Circuit Board Statistical Program. Sales rebounded in February, outpacing orders and reducing the 3-month average book-to-bill ratio to 1.02.

Total North American PCB shipments in February 2016 came in 8.9% above the same month last year, bringing the year-to-date growth rate up to 3.6%. Compared to the preceding month, February shipments were up 10.1%.

PCB bookings increased 2.7% year-on-year. This growth rate was not quite high enough to cancel out the preceding month’s negative year-on-year order growth, but it brought year-to-date order growth up to -0.5%. Orders in February 2016 were down 2.3% from the previous month.

“The February rebound in sales was the best news this month, following flat growth in 2015 and a slump in January,” said Sharon Starr, IPC’s director of market research. “Also, the decrease in the book-to-bill ratio is not bad news, because it was driven by strong sales growth, and it remained in positive territory, which is an indicator for continued sales growth in 2016,” she added.


Worldwide Combined Shipments for Devices (PCs, Tablets, Ultramobiles and Mobile Phones) to increase 0.6% y/y to 2.4 billion units in 2016 (Charts 21-23)

  • Global Smartphone Sales to Only Grow 7% in 2016
  • Smartphone Sales in China and North America Will Be Flat in 2016
  • PC Shipments to Bottom Out in 2016, Return to Growth Expected in 2017

Gartner, Inc. said global smartphone sales will for the first time exhibit single-digit growth in 2016. Global smartphone sales are estimated to reach 1.5 billion units in 2016, a 7% growth from 2015. The total mobile phone market is forecast to reach 1.9 billion units in 2016.

Worldwide combined shipments for devices (PCs, tablets, ultramobiles and mobile phones) are expected to reach 2.4 billion units in 2016, a 0.6% increase from 2015. End-user spending in constant U.S. dollars is estimated to decline by 1.6% year-on-year.

Note: The Ultramobile (Premium) category includes devices such as Microsoft's Windows 10 Intel x86 products and Apple's MacBook Air.

The Ultramobile (Basic and Utility Tablets) category includes devices such as, iPad, iPad mini, Samsung Galaxy Tab S 10.5, Nexus 7 and Acer Iconia Tab 8.

"The double-digit growth era for the global smartphone market has come to an end," said Ranjit Atwal, research director at Gartner. "Historically, worsening economic conditions had negligible impact on smartphone sales and spend, but this is no longer the case. China and North America smartphone sales are on pace to be flat in 2016, exhibiting a 0.7% and 0.4% growth respectively."

Emerging Markets Continue to Grow, but at a Slower Rate
While smartphone sales will continue to grow in emerging markets, the growth will slow down. Gartner predicts that, through 2019, 150 million users will delay upgrades to smartphones in emerging Asia/Pacific, until the functionality and price combination of a low-cost smartphone becomes more desirable.

"Prices did not decline enough to drive upgrades from low-end feature phones to low-end smartphones," said Annette Zimmerman, research director at Gartner. "Vendors were not able to reduce the price of a 'good enough to use' smartphone lower than $50."

Countries such as India will help generate new mobile phone user growth. Sales of smartphones in India are on pace to reach 29% in 2016 and will continue to exhibit double-digit growth in the next two years.

Mature Markets to Increase Mobile Phone Lifetimes
In the mature markets of North America, Western Europe, Japan and mature Asia/Pacific, Gartner analysts expect to see an extension of phone lifetimes among users.

"As carriers' deals become more complex, users are likely to hold onto phones, especially as the technology updates become incremental rather than exponential," said Zimmermann. "In addition, the volumes of users upgrading from basic phones to premium phones will slow, with more basic phones being replaced with the same type of phone."

PC Shipments to Bottom Out in 2016
The global PC shipment market is expected to total 284 million units in 2016, a decline of 1.5% year on year. Traditional PCs are on pace to decline 6.7% in 2016. "In 2016, the PC market will reach its last year of decline before returning to growth in 2017," said Atwal. "The biggest challenge, and potential benefit for the PC market, is the integration of Windows 10 with Intel's Skylake architecture. It has the potential for new form factors with more attractive features."

In addition, the frustration with the capabilities in tablets will drive some consumers and businesses to review new form factors. "However, to draw their interest the PC manufacturers need to ensure that they meet demand with the right products at the right price," added Atwal.

Demand for ultramobiles (basic and utility tablets) will continue to weaken, with a decline of 3.4% in 2016. Users are not only extending lifetimes, but also some will fail to replace these devices at all through 2016.


Tablet Market to Sink Below 140 Million Unit Shipments in 2021

Tablet shipment volumes are tumbling, with ABI Research attributing the general decline over the past two years to two culprits.

  • Demand for branded tablets in advanced market economies is decreasing due to saturation, slow replacement cycles, greater influence of business purchases, and substitution.
  • China and other Asian markets are also seeing decreased demand for white box tablets due to shifts to branded tablets, as well as reliance on smartphones and phablets.

While the total tablet volume in 2015 was more than 207 million, ABI Research expects this to sink below 140 million global shipments in 2021.

“China is evolving, moving away from white box products to support local and global brand manufacturers,” says Jeff Orr, Research Director at ABI Research. “As this behavior continues across other markets in Southeast Asia, Central and Eastern Europe, and Latin America, the potential for white box tablets to remain viable will all but go away.”

Global Weighting of Total Tablet Shipments (%)
  2015 2016 2021
Branded 67.8% 70.6% 88.5%
White Box 32.2% 29.4% 11.5%

Future tablet shipments show an interesting shift in market dynamic, with major advanced economies taking a back seat in shipment totals. “The major, advanced economies of the world represented close to 63% of branded tablet shipments in 2015,” concludes Orr. “This will soon flip. We predict that, by 2021, 57% of branded tablet shipments will come from emerging and developing economies.”


Taiwan-based ODMs/OEMs accounted for 91% of the volume of 9.68 million servers and server motherboards shipped globally in 2015

There were 9.68 million servers and server motherboards shipped globally in 2015 and Taiwan-based ODMs/OEMs accounted for 91% of the volume, according to IDC.

The shipments consisted of 8.05 million units shipped by international vendors and 1.63 million shipped by ODMs directly to clients, IDC said.

Hewlett-Packard Enterprise accounted 24.3% of total shipments, Dell 20.9%, Lenovo 9.7%, Huawei Technologies 3.7% and Cisco Systems 3.6%.

Taiwan-based ODMs/OEMs include Inventec, Quanta Computer, Foxconn Electronics, Wistron, Mitac International, Gigabyte Technology, Pegatron, Compal Electronics, ASRock, Micro-Star International and Elitegroup Computer Systems.

Taiwan-based ODMs shipped 1.5 million servers on a direct-sale basis in 2015, taking up 92% of global direct-sale shipments, IDC said.

Global server shipments in 2016 will grow 5% on year, IDC noted.


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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