1Q’16 Global Electronics Growth by Sector
Enough companies have released their first quarter 2016 financial results to allow a reasonable estimate of 1Q’16/1Q’15 growth by sector of the global electronic supply chain:
- First quarter electronic equipment sales declined 3.4% compared to a 5.1% decline in 4Q’15/4Q’14 (Charts 1 and 2). Since companies’ financial results are reported at actual (fluctuating) exchange rates the strong dollar has had a major impact when consolidating non-dollar currencies to a U.S. dollar total.
- Coincidently this exchange rate impact was also about 3.4% (Chart 3) suggesting that real first quarter growth (at constant exchange) was near zero.
- The U.S. dollar has recently weakened slightly versus most non-dollar currencies (Chart 4). If this trend continues the exchange rate impact on dollar denominated growth rates may be minimal later this year.
- Growth by sector of the electronic supply chain is given in Chart 5. Again these sector growth rates are impacted by currency exchange so an adjustment of a +3 to +4% may be in order to show real growth.
- Chart 6 shows the annualized (12/12) and 3-month (3/12) growth of global electronic equipment revenues. It would appear that this current downturn has reached a low point however real growth will likely not return until the third or fourth quarter of this year (when the 3/12 exceeds 1.0).
Keep in mind that the above comments are based on a combination of actual 1Q’16 company financial reports and some Custer estimates for not yet reporting firms. We will issue updates later this month as more company data are available.
Source: Company financial reports with Custer Consulting Group analysis
Global Semiconductor Sales Increase Slightly in March (Charts 7-9)
Month-to-month sales up for first time in five months; Q’1 sales down nearly 6%
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $26.1 billion for the month of March 2016, a slight increase of 0.3% compared to the previous month’s total of $26.0 billion. Sales from the first quarter of 2016 were $78.3 billion, down 5.5% compared to the previous quarter and 5.8% lower than the first quarter of 2015.
“Global semiconductor sales increased in March for the first time in five months, but soft demand, market cyclicality, and macroeconomic conditions continue to impede more robust growth,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Q1 sales lagged behind last quarter across nearly all regional markets, with the Americas showing the sharpest decline.”
“Eighty-three percent of U.S. semiconductor industry sales are into markets outside the U.S., so access to overseas markets is imperative to the long-term strength of our industry,” Neuffer said. “The Trans-Pacific Partnership (TPP) is a landmark trade agreement that would tear down myriad barriers to trade with countries in the Asia-Pacific. The TPP is good for the semiconductor industry, the tech sector, the American economy, and the global economy. Congress should approve it.”
- Custer Consulting Group’s semiconductor leading indicator points to ongoing growth (3/12 >1) in the second half of 2016 ((Chart 10).
- Semiconductor shipments to N. America have plummeted but may have now passed their recent low point (Chart 11). A major cause of this sharp decline was likely excess ordering or inventory building in 2015 when semiconductor shipment growth far exceeded N. American electronic equipment growth. A “correction” appears to now be in process.
April Global and Regional PMI Leading Indicators
Manufacturing growth has stalled in many areas of the world:
- Markit Economics Global PMI leading indicator dropped to 50.1 in April, just barely in expansion territory (Chart 13).
- Regionally Europe and the U.S. are still expanding but Asian manufacturing growth remains nil or contracting (Chart 14).
- U.S. growth has been slowing since early 2015 (Chart 15). Note that Markit Economics (red line) and the Institute for Supply Management (blue line) publish separate PMIs for the USA.
- The Eurozone PMI growth has remained positive (Chart 16) but results vary significantly by country (Chart 17).
- China remains in a contraction mode (Chart 18) as do Japan and Taiwan (Chart 19). In April S. Korea was at zero growth while India, Indonesia and Vietnam were expanding.
April U.S. Electronics Activity
The Department of Commerce “Factory Orders” report for April was just released. This provides more information than the Durable Goods report published a week earlier.
- Electronic equipment orders and shipments have weakened since their November 2015 highs (Chart 20).
- Based on product mix the medical, measuring and control sector is the largest (and growing) domestic electronic equipment sector (Chart 21)
- Automotive shipments weakened sequentially from February to March (Chart 22).
- Military electronics orders and shipments also declined from February (Chart 23).
- Electromedical, measurement and control equipment orders and shipments expanded (Chart 24).
- Passive component growth has slowed (Chart 25 & 26).
- Chart 27 shows the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain and Chart 28 compares 1Q’16 versus 1Q’15 growth by sector.
Worldwide CMOS Image Sensor Revenue by End Market (Charts 29 & 30)
- CMOS Image Sensors Expected to Set Record-High Sales for Another Five Years
- Automotive, security, medical, and image-recognition systems are replacing smartphones and digital cameras as growth drivers in CMOS image sensors.
CMOS image sensors are in the middle of an unprecedented string of record-high annual sales thanks to the rapid spread of embedded digital-imaging technology into a wide range of end-use applications that go far beyond smartphones and stand-alone cameras. According to IC Insights’ new 2016 O-S-D Report—A Market Analysis and Forecast for Optoelectronics, Sensors/Actuators, and Discretes, automotive systems are forecast to be the fastest growing application for CMOS image sensors with worldwide sales rising by a compound annual growth rate (CAGR) of 55% in the next five years to $2.2 billion in 2020, or about 14% of the market’s projected $15.2 billion total.
After the automotive segment, the highest growth rates for CMOS image sensor sales in the next five years are expected to be in security and surveillance (a CAGR of 36% to $912 million), medical/scientific applications (a CAGR of 34% to $867 million), toys/video games (a CAGR of 32% to $274 million), and industrial systems (a CAGR of 18% to $897 million), according to the 360-page 2016 O-S-D Report, which contains a detailed five-year forecast of sales, unit shipments, and average selling prices (ASPs) for more than 30 individual product types and device categories in optoelectronics, sensors/actuators, and discretes. Imaging applications in automotive electronics are the next major market opportunity for CMOS image sensors because more automated safety features are being loaded into new vehicles. Over a dozen image sensors could eventually be used in vehicles to watch passengers, look outside for potential accidents, or record video of crashes or other incidents on the road. Image sensors have already seen strong growth in cars, primarily for rearview backup cameras, but they are also increasingly being used in new collision detection and automatic-braking systems. Efforts to create self-driving cars will accelerate the growth potential for image sensors in the automotive market, says the new O-S-D Report.
Today’s largest CMOS image sensor application—camera phones—is expected to grow by a CAGR of just 1% to $7.3 billion in 2020, or 48% of the market total versus 70% in 2015. Revenues for CMOS image sensors in camera modules used in PCs and tablet computers are projected to rise by a CAGR of about 6% to $973 million in 2020, while sensor sales for stand-alone digital cameras are expected to shrink by a CAGR of -2% to 623 million in five years, according to IC Insights’ new O-S-D Report.
Worldwide CMOS image sensor revenue grew 12% in 2015 to $9.9 billion, which was the fifth consecutive record-high annual sales volume achieved by this optoelectronics product category since 2011. The 2016 O-S-D Report’s forecast shows CMOS image sensors continuing to set record-high sales levels for at least another five years in a row, growing by a CAGR of 9.0% from 2015 to 2020. In the previous five-year period (2010-2015), CMOS image sensor sales increased by a CAGR of 17.0% with much of that strong annual growth rate being driven by the market’s recovery from the severe economic recession in 2008-2009 and the emergence of new embedded camera applications and image-recognition system interfaces, which are now fueling the next wave of growth in imaging devices.