2Q’16 Global Electronic Supply Chain Growth – Updated
With more companies now having reported their 2Q’16 financial results we now have a more positive estimate of second quarter growth.
Although still preliminary and based on a combination of actual and estimated results by sector:
Global electronic equipment U.S. dollar denominated revenues grew 1.6% in 2Q’16 versus 2Q’15. A combination of improved demand and a weaker dollar (thus inflating non-dollar currency contributions) drove this modest second quarter increase (Chart 1).
This is the first positive dollar denominated global electronic revenue growth since 4Q’14 (Chart 2).
Growth by sector of the world electronic supply chain is given in Chart 3. These estimates are still very preliminary and are likely to change as more companies in our sector samples report their second quarter results. However these growth results are big improvement over 1Q’16/1Q’15! (Chart 4).
We will continue to publish sector growth estimates updates on a weekly basis through August as more companies report their second quarter financial results.
Source: Company financial reports with analysis by Custer Consulting Group
U.S. June Durable Goods Report – Domestic Electronic Supply Chain Shipments, Orders and Inventories
The U.S. Department of Commerce just released its June “Durable Goods” report with preliminary data on domestic shipments, orders and inventories
The electronic equipment 3-month average book/bill was 1.04 (Chart 5) but only 1.02 for the month of June alone. June orders declined (Chart 6).
3/12 growth rates for both electronic equipment orders and shipments improved but remained very near “no growth” territory (Chart 7).
Defense capital goods orders dropped sharply (Chart 8).
Commercial and defense aircraft shipments dropped sequentially from May (Chart 9) and non-defense aircraft orders plunged (Chart 10).
Communication equipment orders and shipments improved modestly (Chart 11) but computer equipment demand continued to weaken (Chart 12).
As noted last week and based on the July PMI results Japan’s manufacturing sector is still contracting (PMI <50) but the rate of contraction has slowed (Chart 13).
The yen exchange rate versus the U.S. dollar is at its strongest point since mid-2014 (Chart14).
JEITA just published Japanese domestic electronic production by sector for May:
May electronic equipment production was at a historic low based on available JEITA data beginning in January 2000 (Chart 15).
Integrated and discrete semiconductor production both weakened in May (Chart 16).
Passive component production resumed it sharp drop (Chart 17).
Electronic component and device production growth is negative (Chart 18).
Printed circuit production was at its lowest level in over 25 years (Chart 19) and Japan’s PMI leading indicator points to further PCB declines ahead (Chart 20).
North American PCB Sales Up, Orders Down in June (Charts 21-23)
IPC announced the June 2016 findings from its monthly North American Printed Circuit Board Statistical Program. Compared to the same month last year, PCB sales growth was strong while orders were down, causing a decline in the book-to-bill ratio to 0.98.
Total North American PCB shipments in June 2016 were 9.7% above the same month last year. Year-to-date growth is up 6.1% for the first six months of the year. Compared to the preceding month, June shipments were up 18.9%.
Conversely, PCB bookings in June decreased 9.7% year-on-year, bringing year-to-date bookings growth down to a positive 1.3%. Orders in June 2016 were up 18.2% from the previous month.
“Sales growth in the North American PCB industry was strong in June, while orders continued to decline,” said Sharon Starr, IPC’s director of market research. “The book-to-bill ratio has been trending downward since April and the divergence between June’s sales and order growth pushed the ratio below parity” she added, “signaling the likelihood of slowing sales growth in the third quarter.”
Custer comment: The U.S. PMI leading indicator predicts improved domestic PCB growth ahead in the short term (Chart 24).
Worldwide Silicon Wafer Area Shipments increased 6.6% q/q to record 2,706 million square inches in 2Q’16 (Chart 25)
Worldwide silicon wafer area shipments increased during the second quarter 2016 when compared to first quarter 2016 area shipments according to the SEMI Silicon Manufacturers Group (SMG) in its quarterly analysis of the silicon wafer industry.
Total silicon wafer area shipments were 2,706 million square inches during the most recent quarter, a 6.6% increase from the 2,538 million square inches shipped during the previous quarter. New quarterly total area shipments are 0.1% higher than second quarter 2015 shipments and are at their highest recorded quarterly level.
“Silicon shipment growth continues to gain momentum resulting in a quarterly volume shipment high,” said Dr. Volker Braetsch, chairman SEMI SMG and senior vice president of Siltronic AG. “Although year-to-date shipments are effectively flat relative to the same period as last year.”
Worldwide Smartphone Shipments increased 0.3% y/y to 343 million units in 2Q’16 (Chart 26)
According to preliminary results from International Data Corporation (IDC) vendors shipped a total of 343.3 million smartphones worldwide in the second quarter of 2016. This was relatively flat, up 0.3% from 2Q’15 when vendors shipped 342.4 million units. The market did show greater sequential growth as shipments were up 3.1% from 333.1 million in the first quarter of 2016.
“We continue to see a number of changing dynamics in the smartphone market and many vendors are readjusting their business strategy and portfolio to take advantage of these market movements," said Ryan Reith, program vice president with IDC's Worldwide Quarterly Mobile Device Trackers. "Mature markets continue the transition away from pure subsidy and over to EIP programs and Apple is beginning to put more emphasis on 'Device as a Service' to try to prevent lengthening replacement cycles. This is a growing theme we have heard more about from PCs to smartphones. Additionally, the overall China market slowdown continues to ramp up competition in other high growth markets like India, Indonesia, and Middle East. Interestingly enough, our early findings show low-end Chinese OEMs that predominantly built their business domestically in China are having success penetrating non-China markets, despite low-end competition from local brands already in place.”
The top five list remained intact from last quarter with Samsung remaining in front while also gaining share thanks to strong Galaxy S7 and S7 Edge performance. For Apple, the second quarter is seasonally its lowest of the year as consumers hold off on purchases in anticipation of the next big launch in the third quarter. Apple shipped 40.4 million units in 2Q’16, which marked the lowest quarterly volume in seven quarters, despite the mid-cycle introduction of the iPhone SE. In the face of declining shipments, Apple did witness strong sales in both established and emerging markets thanks to the launch of the more affordable iPhone SE.
“Outside of Samsung's Galaxy S7 flagship, a majority of vendors, including Apple, have found success with more affordable models compared to their flagship handsets,” said Anthony Scarsella, research manager, Mobile Phones. “As smartphone prices continue to drop and competition escalates at the high-end, vendors will need to continue to push 'flagship-type' devices at affordable price points to encourage upgrading on a more frequent basis. Chinese brands such as Huawei, OPPO, vivo, and Xiaomi have witnessed success with this strategy by shipping premium styled devices that focus on the features that matter most to consumers, such as imaging, sound quality, and design.”
Global Tablet Shipments fell 8% y/y to 46.7 million units in 2Q’16 as ASPs climbed 9% (Chart 27)
46.7 million Tablets shipped in during the quarter, down 8% year-on-year, flat sequentially.
Global Tablet shipments fell 8% year-on-year in Q2 2016 to 46.7 million units while average selling prices (ASPs) went the other way, climbing 9% during the same period. Consumers and enterprises alike are buying more Pro Slates (e.g., iPad Pro, Surface Pro 4) than ever before as prices reach tolerable levels and as computing behaviors and needs shift toward more mobility and touchscreen interfaces, according to the new “Preliminary Global Tablet Shipments and Market Share: Q2 2016” report from Strategy Analytics' Tablet and Touchscreen Strategies (TTS) service.
Peter King, Service Director, Tablet and Touchscreen Strategies service said, "iPad has marked 10 quarters of annual shipment declines but some light is now visible at the end of the tunnel. In the same way that Windows tablets gained market share with a wide range of premium to low tier 2-in-1 Tablets, Apple is riding consumer and enterprise demand for 2-in-1s with multiple price tiers of buy-in to its vision of what a converged computing device can achieve. Meanwhile, Android has not been able to break out of its cost-conscious, entertainment-focused roots and until true multi-tasking is available across the installed base, this perception will remain reality. Still, low-cost traditional slate tablets devoted to entertainment do hold value for consumers, reflected in Android's 64% share."
Eric Smith, Senior Analyst, Tablet and Touchscreen Strategies service added, “Mobile-first vendors are putting pressure on the industry to release more reasonably priced, yet still powerful, 2-in-1 Tablets. Apple, Huawei, and Samsung are just the latest companies to join the segment at a time when consumers and enterprises are more receptive to the functionality and affordability of these converged computing devices. In return, higher average selling prices of 2-in-1 Tablets, compared to traditional slates, have returned more profit back to tablet vendors across the spectrum as people around the world begin making the choice between upgrading their PCs, Tablets, or just going with one converged 2-in-1 device for the home and business.”
Global OLED panel shipments will grow 42.7% y/y to 36.7 million units in 2016
There will be 36.69 million OLED panels shipped globally in 2016, growing 42.7% on year, with Samsung Display to monopolize the supply. Shipments will increase to 73.36 million units in 2020, according to IHS.
U.S. GDP increased at 1.2% Rate y/y in 2Q’16 (Chart 28)
“Once the impact of a downward inventory adjustment is considered, the underlying pace of growth looks healthier than the headline number,” said Chris Williamson, chief economist at Markit Economics.