2Q’16 World Electronic Supply Chain Growth by Sector

With almost all of the companies in our survey now having reported their calendar 2Q’16 financials, here are the results:

  • Chart 1 summarizes the 2Q’16 vs.2Q’15 growth of the individual sectors of the global electronic supply chain.
  • Electronic equipment growth was +0.9% (Charts 2-4).
  • Individual companies’ historical revenues, net income and inventory levels are available on an ongoing basis for the over 700 firms used in our data collections. Contact walt@custerconsulting.com for details.

Source: Company financial reports

August PMI Leading Indicators

IHS Markit Economics and the Institute for Supply Management have just released their August Purchasing Managers’ Indices.

  • Chart 5 summarizes the July vs. August PMIs for key electronics producing countries. PMI values greater than 50 indicate an expansion. Of the countries in this chart only Taiwan and Japan improved.
  • The global PMI (Chart 6) declined in August and is just barely in expansion territory.
  • The USA PMIs (collected separately by both Markit Economics and ISM) declined in August (Chart 7).
  • European results were mixed. The UK rebounded from its”Brexit” plunge in July, Eastern Europe improved slightly but many Western European countries saw contraction or slower growth (Chart 8).
  • Eurozone’s overall manufacturing sector is still expanding but at a slower rate (Chart 9).
  • Many Asian PMIs expanded in August however China’s and South Korea’s performances were disappointing (Chart 10).
  • After an improved July, China slipped back into “no growth status” in August (Chart 11).
  • Taiwan improved (Chart 12) but South Korea fell further into contraction (Chart 13).
  • Japan’s PMI improved (Chart 14) and appears to be headed back to the “breakeven value” of 50 in the near term.

Source: www.markiteconomics.com

U.S. July Electronic Supply Chain Shipments, Orders & Inventories

The U.S. Department of Commerce just released its July “Factory Orders” report.

  • Electronic equipment shipment growth improved slightly on a 3/12 basis but order growth eased (Chart 15) - although revenues for both series expanded in July (Chart 16).
  • The medical, instrument and control equipment sectors remained strong (Charts 17 & 18).
  • Vehicle shipments were flat (Chart 19). According to a recent Reuters news release “U.S. auto sales fell about 3.5% in August, and some major automakers said a long-expected sales decline has begun or, at best, that sales have hit a plateau, which may spark a shift to juicer customer incentives and slowed production.”
  • Aircraft sales were little change from June to July (Chart 20).
  • Military electronics orders have weakened from their April peak (Chart 21).
  • Passive component growth has slowed (Chart 22 & 23).

Chart 24 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain.

Source: www.census.gov/indicator/www/m3/

Worldwide Semiconductor Market expected to be down in 2016, returning to growth in 2017 and 2018 (Charts 25 & 26)

WSTS has published the Q2 2016 semiconductor market figures and re-calculated the Spring 2016 Forecast using the actual figures of the second quarter 2016.

The Worldwide semiconductor market is forecasted to be down 3.2% to US$325 billion in 2016 and up 2.0% to US$331 billion in 2017. The year 2018 is forecasted to be up another 2.2% to US$338 billion.

During 2016 the largest growth is expected across sensors, discrete semiconductors and analog with the largest declines expected in memory and optoelectronics. All major product categories and regions, except logic, are forecasted to return to growth in 2017, under the prerequisite of a stable economic market environment throughout the forecast period.

Source: www.wsts.org

North American PCB Sales Growth Continues; Orders Decline in July (Charts 27-29)

IPC announced the July 2016 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Compared to the same month last year, PCB sales growth continued in July, while order growth was negative, causing the book-to-bill ratio to slip to 0.94.

Total North American PCB shipments in July 2016 were 1.2% above the same month last year. Year-to-date as of July, shipment growth is up 5.4%. Compared to the preceding month, July shipments were down 18.0%.

PCB bookings in July decreased 16.3% year-on-year, bringing year-to-date bookings growth down to a negative 1.1%. Orders in July 2016 were down 26.1% from the previous month.

“While year-on-year sales growth continued in the North American PCB industry in July, it was the decline in orders for the second consecutive month that pushed the book-to-bill ratio farther down,” said Sharon Starr, IPC’s director of market research. “Growth rates have been mixed for different segments of the industry,” she added, “with some extreme differences between rigid PCB and flexible circuit producers, and between company size tiers.”

Source: www.ipc.org

Worldwide Smartphone Shipments Expected to Expand 1.6% y/y to 1.46 billion units in 2016 (Charts 30-35)

Flat Smartphone Growth Projected for 2016 as Mature Markets Veer into Declines, According to IDC

Worldwide smartphone shipments are expected to reach 1.46 billion units with a year-over-year growth rate of 1.6% in 2016 according to the latest forecast from the International Data Corporation (IDC). Although growth remains positive, it is down significantly from the 10.4% growth in 2015. Much of the slowdown is attributed to the decline expected in developed regions in 2016, while emerging markets continue with positive growth. Developed markets as a whole (United States, Canada, Japan, and Western Europe) are expected to see a compound annual growth rate (CAGR) of -0.2%, while emerging markets (Asia/Pacific excluding Japan, Central and Eastern Europe, Middle East and Africa, and Latin America) will experience a CAGR of 5.4% over the 2015-2020 forecast period.

“Growth in the smartphone market is quickly becoming reliant on replacing existing handsets rather than seeking new users,” said Jitesh Ubrani, senior research analyst with IDC’s Worldwide Quarterly Mobile Device Trackers. “From a technological standpoint, smartphone innovation seems to be in a lull as consumers are becoming increasingly comfortable with 'good enough' smartphones. However, with the launch of trade-in or buy-back programs from top vendors and telcos, the industry is aiming to spur early replacements and shorten lifecycles. Upcoming innovations in augmented and virtual reality (AR/VR) should also help stimulate upgrades in the next 12 to 18 months.”

Consumer preference for larger screens is expected to continue and the growing interest in AR/VR will only drive that forward as phablets (5.5 inches and larger) go from roughly one quarter of the smartphone market to one third by 2020.

“As phablets gain in popularity, we expect to see a myriad of vendors further expanding their portfolio of large-screened devices but at more affordable price points compared to market leaders Samsung and Apple,” said Anthony Scarsella, research manager, Mobile Phones.

“Over the past two years, high-priced flagship phablets from the likes of Apple, Samsung, and LG have set the bar for power, performance, and design within the phablet category. Looking ahead, we anticipate many new 'flagship type' phablets to hit the market from both aspiring and traditional vendors that deliver similar features at considerably lower prices in both developed and emerging markets. Average selling prices (ASPs) for phablets are expected to reach $304 by 2020, down 27% from $419 in 2015, while regular smartphones (5.4 inches and smaller) are expected to drop only 12% ($264 from $232) during the same time frame.”

Source: www.idc.com

Global Automotive Display Panel Shipments to rise at a 7.2% CAGR from 157 million panels in 2015 to 207 million units in 2019

Due to increasing use of display panels in cars, global shipments of automotive display panels will increase from 157 million panels in 2015 to 207 million units in 2019, equivalent to a CAGR of 7.2%, according to Digitimes Research.

Automotive displays consist of CID (central information displays), dashboard displays, rear-view mirror displays, back-seat entertainment displays and heads-up displays, Digitimes Research indicated.

CID takes up the largest portion of automotive display shipments, with mainstream specifications shifting from 7- to 8-inch WVGA (840 by 480) or WXGA (1280 by 720) to 10-inch Full HD.

Due to demand for larger sizes, higher resolutions and more power-savings, LTPS (low-temperature poly-Si) TFT-LCD or IGZO TFT-LCD panels have replaced a-Si TFT-LCD panels for high-end automobile models. Currently, Japan Display and Sharp dominate the supply of LTPS TFT-LCD and IGZO TFT-LCD automotive panels.

Source: www.digitimes.com

Worldwide Tablet Market Shipments expected to rebound in 2018 to 194.2 million units after declining in 2016 11.5% y/y to 183.4 million units (Charts 36 & 37)

Windows opens doors for growth and iPads come out of a slump

The decline of the worldwide tablet market is set to continue for the remainder of 2016 as year-over-year growth reaches an all-time low of -11.5% and shipments of 183.4 million units, according to forecast data from International Data Corporation (IDC). Positive growth is set to return in 2018 and continue through 2020 with shipments reaching 194.2 million tablets as detachable tablets continue to steal share from traditional PCs.

“Appealing to the commercial audience will be key as detachable tablets aim to take a larger piece of the traditional PC market,” said Jitesh Ubrani, senior research analyst with IDC’s Worldwide Quarterly Mobile Device Trackers. "Windows and iOS already have solid detachable offerings and with the latest version of Android, Google will also have a horse in the race as they finally offer better multitasking support and added security features.”

With the shift towards detachable tablets, IDC also expects small tablets to cede share to larger devices. In 2016, 55% of all tablets will be 9 inches or smaller. By 2020, however, this share is forecast to drop to 40%. “We see smaller slate tablets being offered at very aggressive price points, leaving little room for revenues outside of a pure volume or platform play like for Amazon for instance,” said Jean Philippe Bouchard, research director at IDC. “The price pressure combined with a healthier demand on larger screen sizes and detachable tablets will eventually result in an increased portfolio offering from tablet and PC manufacturers.”

Although detachable tablets capture the spotlight, slate tablets will continue to account for the majority of shipments throughout the forecast. In 2016, 85% of all tablets shipped will be slates and this will decrease to 68% by 2020. Most of these will be destined for emerging markets where consumers seek out any low cost computing device.

Source: www.idc.com

Worldwide Production Printer Market Shipments grew 10.0% y/y in 2Q’16 (Charts 38 & 39)

The worldwide production printer market maintained its growth streak in the second quarter of 2016, recording a 10.0% increase in shipments year over year. Unit shipment value also increased 3.4% to more than $1.1 billion in the same time period, according to International Data Corporation (IDC).

Additional highlights from the worldwide production printer market in 1Q’16 include the following:

  • High-speed inkjet production devices saw 66% growth in system shipments on an annual basis. Canon found good demand for its sheetfed solution, the Océ VarioPrint i300, while Ricoh ramped up sales for its new Pro VC60000 platform with high image quality.
  • A combined view of mid-production and full production segments showed a positive story for color laser in the quarter as well. Inkjet might be taking some of the “big iron” laser share but laser vendors are broadening their portfolios downstream.
  • Konica Minolta Group outperformed all other vendors in the Top 5 by posting 30.4% year-over-year growth in units shipped.

“Successful IT suppliers can offer both inkjet and laser technologies at a variety of price points to the end-user, protecting the base while expanding into new markets,” said Amy Machado, research manager, Imaging, Printing, and Document Solutions.

Source: www.idc.com

Worldwide Large Format Printer Shipments grew 3.9% y/y in 2Q’16 (Chart 40)

International Data Corporation (IDC) found that worldwide large format printer (LFP) shipments grew 3.9% year-over-year in the second quarter of 2016 (1Q’16) while hardware revenue grew by more than 7%.

“On a worldwide basis the second quarter is often the slowest quarter of the year for large format printer shipments. If that holds true then 2016 should be a very good year for the large format printer market,” said Tim Greene, research director, U.S. Large Format Printer Tracker.

“Recovery in technology categories like eco-solvent and toner-based printers have run counter to some of the market trends over the past few quarters to create a bit of a surprisingly strong Q2.”

Segment Highlights

  • Shipments in the large format CAD/Technical printer market segment grew by more than 7.5% in 1Q’16 compared to 2Q15, and are now up by over 4.5% for the first half of 2016. Shipment growth in North America and the Europe, Middle East and Africa (EMEA) more than offset lower sales in Asia/Pacific (excluding Japan) through the first half of the year.
  • On the large format graphics side total shipments were almost 2% lower in 1Q’16 compared to 2Q15, but revenue actually grew a modest 0.8% over that time as the market shifts towards more productive large format graphics printing systems.

Source: www.idc.com

Domestic Service Robot Market Shipments forecast to grow at 17% CAGR, from 5 million units in 2015 to more than 12 million units in 2020 (Chart 41)

Growth spurred by improved navigation technologies and connected devices

The domestic service robot market is forecast to grow at a compound annual growth rate of 17%, from 5 million units shipped in 2015 to more than 12 million units in 2020, according to IHS Markit. Domestic service robots are devices that autonomously carry out indoor and outdoor household chores, and they include vacuum cleaners, floor cleaners, window cleaners, lawn mowers, pool cleaners, as well as robots used for social and edutainment purposes and robotic kitchen/chefs.

The following three critical factors will affect adoption of domestic service robots:

Robotic vacuum and floor cleaners are not only cleaning and mopping devices, but they have also become fashionable status symbols,” said Dinesh Kithany, Principal Analyst for IHS Markit. “Younger consumers and working couples with busy lifestyles are major targets for robotic vacuums and other such products. Plus, with added connectivity features, users will soon be able to remotely control their smart connected robotic devices and monitor their home through cameras built inside high-end smart connected robotic floor cleaners.

Navigation and Mobile Connectivity Invigorates Robot Market

Navigation and obstacle avoidance technology in domestic service robots has evolved over the past decade. The latest development in mapping and navigation technology using a 360-degree laser or an image sensor (e.g. Neato Robotics’ Botvac connected robotic vacuum, Dyson’s 360 Eye robotic vacuum, and iRobot’s Roomba 980 robotic vacuum) enables the robots to move around the house smoothly into tighter and dense spaces.

In earlier generations of these products, the rudimentary mapping technology meant the robots bumped along walls and featured a few preset cleaning patterns that determined the cleaning time of each room. With improved technology in newer devices on the market, the camera sensor or a laser scans the room and the furniture in it, so the device knows the exact location to resume its job even after its battery is recharged.

Connecting robotic devices to mobile devices is an additional feature that is expected to spur growth in the domestic service robot market. Connectivity allows users to remotely track the status of their appliances using cameras -- in some cases, they can also be used as home-security cameras. Wireless local area network (WLAN) or Wi-Fi will remain the most popular connectivity technology over the next five years. Low-power single-chip Wi-Fi is expected to become the main connectivity technology for the connected domestic service robot market in the future.

Current high prices are considered to be one of the key barriers to growth in the domestic service robot market, even though the supplier market is very fragmented. Leading suppliers are also constantly looking to reduce the cost of their products and differentiate them by adding more features and adopting innovative designs.

“Many appliance manufacturers are collaborating with research institutes to showcase their ideas and product concepts in almost every robotics- and technology-oriented industry event,” Kithany said. “iRobot, Dyson, Samsung, LG, Bosch, Moley Robotics, Robomow, Maytronics and Moneual are the few major players in their respective product categories.”

Source: www.ihs.com

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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