3Q’16 Global Electronic Supply Chain – Updated Growth Estimates
With now over 50% of the companies in our surveys reporting their third quarter financials here are some new growth estimates:
- Electronic equipment (OEM) sales rose 1% in 3Q’16 vs. 3Q’15 (Chart 1.
- A group of five large U.S. EMS companies saw a 5% sales decline in the third quarter of this year compared to the same quarter last year (Chart 2).
- By comparison a group of Taiwan-listed ODM companies reported a combined +2% revenue increase in 3Q’16 vs 3Q’15 in NT$ (Chart 3).
- Chart 4 is a preliminary estimate of third quart growth by sector of the glob al electronic supply chain. Automotive, medical and SEMI capital equipment are the strong equipment sectors while passive components and PCB related process equipment lead the component and printed circuit support areas.
Let me caution that these are still very preliminary results with many large companies still not reporting their recent quarter’s financials. We will continue updates over the next few weeks.
Source: Company financial reports with Custer Consulting Group analysis.
Global Semiconductor Sales increased 11.5% q/q to US$88.3 billion in 3Q’16 (Charts 5-10)
Industry posts highest-ever quarterly sales; market still behind 2015’s year-to-date total
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $88.3 billion for the third quarter of 2016, marking the industry’s highest-ever quarterly sales and an increase of 11.5% compared to the previous quarter. Sales for the month of September 2016 were $29.4 billion, an increase of 3.6% over the September 2015 total of $28.4 billion and 4.2% more than the previous month’s total of $28.2 billion.
“The global semiconductor market has rebounded markedly in recent months, with September showing the clearest evidence yet of resurgent sales,” said John Neuffer, president and CEO, Semiconductor Industry Association. “The industry posted its highest-ever quarterly sales total, with most regional markets and semiconductor product categories contributing to the gains. Indications are positive for increased sales in the coming months, but it remains to be seen whether the global market will surpass annual sales from last year.”
“China stood out in September, leading all regional markets with growth of 5% month-to-month and 12% year-to-year,” Neuffer said. “Standouts among semiconductor product categories included NAND flash and microprocessors, both of which posted solid month-to-month growth in September.”
- Custer Consulting Group’s semiconductor leading indicator points to accelerating growth ahead near-term (Chart 6).
- Chip shipments to China were especially strong in September driving Asia/Pacific-bound semiconductors to a record monthly high (Chart 7).
- N. American chip shipments are rebounding (Chart 8). Their growth now matches U.S. electronic equipment however they will likely surpass end market demand again based on historical over ordering tendencies, ultimately leading to another downward correction (Chart 9)
U.S. September Electronic Supply Chain Shipments, Orders and Inventories
The U.S. Department just released is September “Factory Orders” report:
- Domestically produced electronic demand remains flat (Chart 11) as both shipment and order growth rates are nil (Chart 12).
- Electromedical, measurement and control equipment remains dominant although orders slipped in September (Charts 13 & 14).
- Vehicle shipments remain well below this time last year (Chart 15).
- Military electronics orders and shipments weakened slightly from August to September (Chart 16).
- Electromedical, measurement and control equipment orders remain strong although they dipped in both July and August (Chart 17).
- Electronic component (excluding semiconductor) orders and shipment are at a 15-year high (Chart 18) and their growth are accelerating (Chart 19).
- Charts 20 and 21 summarize the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain.
PMI Leading Indicators for October
Markit Economics and ISM (Institute for Supply Management) have released their October Purchasing Managers Indices. Manufacturing activity accelerated in most areas of the world.
- Global PMI rose to its highest level since October 2014 (Chart 22).
- Of the major electronics producing areas only S. Korea was contracting in October (Chart 22).
- Both the Markit Economics and ISM purchasing managers indices signaled a significant upturn in U.S. manufacturing activity (Chart 24).
- Europe PMI increases were broadly positive (Chart 25) as the Eurozone composite PMI reached its highest point since July 2014 (Chart 26).
- Asia performance was mixed but China’s return to manufacturing expansion is especially notable (Charts 27-31).
North American PCB Sales and Orders Up in September (Charts 32-37)
IPC — Association Connecting Electronics Industries announced the September 2016 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Solid order growth moved the book-to-bill ratio up to 1.03.
Total North American PCB shipments in September 2016 were 2.7% ahead of the same month last year. Year-to-date as of September, shipment growth is up 4.0%. Compared to the preceding month, September shipments increased 17.8%.
PCB bookings in September increased 6.3% year-on-year, returning year-to-date bookings growth to positive territory at 0.1%. Compared to the previous month, orders in September 2016 were down by 5.3%.
“Solid year-on-year growth in orders drove September’s increase in the North American PCB industry’s ¬¬book-to-bill ratio, while sales were also up in September,” said Sharon Starr, IPC’s market research director. “Sales growth rates again differed markedly for different segments of the industry, with flexible circuits driving most of the month’s sales growth,” she added.
Foxconn to enter Digital Signage Market
Foxconn Electronics (Hon Hai Precision Industry) is planning to nurture an internal team to create a new startup to push into the digital signage market. The team recently established Linkooh and will focus on developing digital signage hardware, software, content and services.
Linkooh has cooperated with Taiwan Railways Administration to install several different-sized public displays at Taipei Main Station and uses its augmented reality (AR) technologies and multimedia platform to enhance the ways that advertisements are displayed.
The company has also used 200 55-inch Sharp-made Ultra HD-quality displays to improve consumers' virtual experience.
Linkooh is a subsidiary wholly owned by Foxconn and in addition to railway stations, the company is also looking to partner with exhibition halls, airports, department stores and bus stations.
Global LCD Monitor Shipments to decline 2.6%/year from 2017 to 2021
Global LCD monitor shipments will decrease from 120.060 million units in 2017 to 108.033 million in 2021 or a CAGR of negative 2.6% mainly due to progressively shrinking global demand for desktops, according to Digitimes Research.
Worldwide Tablet Market Shipments declined 14.7% y/y to 43 million units in 3Q’16
Low-Cost Detachables and Slates in the Lead as Tablet Market Slump Persists in the third Quarter
The worldwide tablet market continued its slump as vendors shipped 43 million units in the third quarter of 2016 (3Q16), a year-over-year decline of 14.7%, according to preliminary data from the International Data Corporation (IDC) Worldwide Quarterly Tablet Tracker. In contrast to the annual decline, 3Q16 shipments were up 9.8% over the second quarter of 2016 as the larger vendors prepared for the holiday quarter.
Low-cost (sub-$200) detachables also reached an all-time high as vendors like RCA flooded the market. “Unfortunately, many low-cost detachables also deliver a low-cost experience,” said Jitesh Ubrani, senior research analyst with IDC's Worldwide Quarterly Mobile Device Trackers. “The race to the bottom is something we have already experienced with slates and it may prove detrimental to the market in the long run as detachables could easily be seen as disposable devices rather than potential PC replacements.”
“Beyond the different end-user experience delivered by low- and high-end tablets, we're witnessing real tectonic movements in the market with slate companion devices sold at the low-end serving a broader platform strategy, like Amazon is doing with Alexa on its Fire Tablets, and more expensive productivity tools closer to true computing and legitimate notebook replacement devices that should manage to keep average prices up,” said Jean Philippe Bouchard, research director, Tablets at IDC.
Total tablet market includes slate tablets plus detachable tablets. References to “tablets” in this release include both slate tablets and detachable devices.
Global Notebook Shipments expected to fall 4.3% y/y to 157 million units
Despite the launch of the new MacBook series by Apple Inc. earlier this month, Taiwan-based PC vendor Asustek Computer Inc. is expected to surpass the U.S. consumer electronics giant in notebook computer shipments in 2016, according to market advisory firm TrendForce Corp.
Citing a research report, the Taipei-based advisory firm said that Asustek will likely ship 16.80 million notebook computers to take a 10.6% share in the global market, while Apple's shipments could hit only 13 million units to take an 8.2% share.
As a result, Apple, which is unlikely to see a significant boost from its new MacBook series, will see its global position fall one notch to fifth place this year, while Asustek will stay in fourth place.
Last year, shipments of Apple and Asustek each stood at 17 million units, according to the market advisory firm. Each of the two grasped a 10.3% share in the global market in 2015 to tie for the fourth place.
On Oct. 27, Apple introduced the new MacBook series to the global market. Among the new models is the new MacBook Pro featuring a “touch bar”, which is expected to improve users' computing experience.
However, the research report said that both Apple and Asustek continued to feel the pinch from a slowdown in the global PC market. TrendForce said that the U.S. firm is expected to witness a steeper shipment decline than Asustek.
In terms of overall global shipments, TrendForce said that 157 million notebook computers are expected to be sold worldwide in 2016, down 4.3% from 164 million units shipped last year.
TrendForce said the top three vendors – U.S.based HP Inc., China's Lenovo Group, and Dell Inc. of the – are estimated to ship 35.10 million units, 33.60 million units and 23.70 million units, respectively, in 2016.
The advisory firms that the top three vendors are expected to take a 22.3%, 21.4% and 15.0 per share, respectively, in the global market.
Meanwhile, Acer Inc., another leading PC brand in Taiwan, is expected to ship 13 million notebook computers in 2016, down from 14.70 million units seen in 2015, TrendForce said. That will give Acer an 8.2% share in the market, and put it in the same position as Apple as the 5th biggest notebook computer vendor in the global rankings, the advisory firm said.