Global Leading Indicators

Markit Economics and ISM released their November PMI leading indicators:

  • Global PMI climbed to its highest level since October 2014 (Chart 1) as all major regions/countries except South Korea were in expansion territory (Chart 2).
  • U.S. PMIs from Markit and ISM rose sharply (Chart 3).
  • Eurozone PMI reached its highest point since 2014 (Chart 4) as the manufacturing sectors of the key European countries all were expanding (PMI>50) (Chart 5).
  • Asia was mixed (Chart 6) with Thailand, Indonesia and South Korea (Chart 7) contracting, China (Chart 8) and Japan (Chart 9) expanding but at a slower pace and Taiwan (Chart 10) accelerating.


Taiwan/China November Financial Results

Based on “almost complete” November revenue results Taiwan-listed companies, many of which manufacture in China reported that:

  • Electronic equipment sales in November 2016 were down 2.9% compared to November 2015 but up sequentially 6.2% compared to October 2016. This large October to November increase was unusual based on prior year’s performance (Chart 11).
  • ODM revenues behaved similarly – November 2016 down 1.4% vs. November 2015 and up 2.5% sequentially from October 2016 (Chart 12).
  • PCB sales rose slightly in November (Chart 13).

These results are still preliminary but should be quite close to actual. A more detailed report will be provided next week.

Source: Financial results of Taiwan-listed companies analyzed by Custer Consulting Group

U.S. Electronic Supply Chain October Shipments, Orders and Inventories

New orders for U.S. factory goods recorded their biggest increase in nearly 1-1/2 years in October but domestically made electronic equipment growth was much less robust:

  • Electronic equipment book/bill ratio (although positive) dropped to its lowest level since January 2015 (Chart 14).
  • Electronic equipment order and shipment growth stagnated on a 3/12 basis (Chart 15) as sequential growth from September was minimal (Chart 16).
  • Vehicle shipments rebounded from September (Chart 17) but are still weak compared to 2015.
  • Defense capital goods shipments rose but orders weakened (Chart 18).
  • Aircraft sales were down from September (Chart 19) but non-defense aircraft orders spiked (Chart 20).
  • Military electronics orders and shipments continued to weaken from their early 2016 peaks (Chart 21).
  • The electromedical, instrument and control sector continued its steady, robust growth (Chart 22).
  • Passive component orders and shipments continued their multiyear climb (Chart 23).

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


October Global Semiconductor Sales (Charts 25-28)

SIA released global semiconductor sales data for the month of October 2016 and endorsed the latest World Semiconductor Trade Statistics (WSTS) organization's latest industry forecast.

Key points:

  • Worldwide sales of semiconductors reached $30.5 billion for the month of October 2016, an increase of 3.4% from last month’s total of $29.5 billion and 5.1% higher than the October 2015 total of $29.0 billion.
  • SIA endorsed the WSTS Autumn 2016 global semiconductor sales forecast, which projects the industry’s worldwide sales will be $335.0 billion in 2016, a 0.1% decrease from the 2015 sales total.
  • Beyond 2016, the semiconductor market is expected to grow at a modest pace across all regions. WSTS forecasts 3.3% growth globally for 2017 ($346.1 billion in total sales) and 2.3% growth for 2018 ($354.0 billion).

WSTS forecast projects flat annual sales in 2016, modest increases in 2017, 2018.

“The global semiconductor market has rebounded in recent months, with October marking the largest year-to-year sales increase since March 2015,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Sales increased compared to last month across all regional markets and nearly every major semiconductor product category. Meanwhile, the latest industry forecast has been revised upward and now calls for flat annual sales in 2016 and small increases in 2017 and 2018. All told, the industry is well-positioned for a strong close to 2016.”

Additionally, SIA endorsed the WSTS Autumn 2016 global semiconductor sales forecast, which projects the industry’s worldwide sales will be $335.0 billion in 2016, a 0.1% decrease from the 2015 sales total. WSTS projects a year-to-year increase in Japan (3.2%) and Asia Pacific (2.5%), with decreases expected in Europe (-4.9%) and the Americas (-6.5%). Among major semiconductor product categories, WSTS forecasts growth in 2016 for sensors (22.6%), discretes (4.2%), analog (4.8%) and MOS micro ICs (2.3%), which include microprocessors and microcontrollers.

Beyond 2016, the semiconductor market is expected to grow at a modest pace across all regions. WSTS forecasts 3.3% growth globally for 2017 ($346.1 billion in total sales) and 2.3% growth for 2018 ($354.0 billion). WSTS tabulates its semi-annual industry forecast by convening an extensive group of global semiconductor companies that provide accurate and timely indicators of semiconductor trends.


Worldwide Semiconductor Equipment 3Q’16 Bookings were $11.3 Billion and Billings Reached US$11.0 Billion (Chart 29)

SEMI, the global industry association representing more than 2,000 companies in the electronics manufacturing supply chain, today reported that worldwide semiconductor manufacturing equipment billings reached US$11.0 billion in the third quarter of 2016. The billings figure is 5% higher than the second quarter of 2016 and 14% higher than the same quarter a year ago. The data is gathered jointly with the Semiconductor Equipment Association of Japan (SEAJ) from over 95 global equipment companies that provide data on a monthly basis.

Worldwide semiconductor equipment bookings were $11.3 billion in the third quarter of 2016. The figure is 30% higher than the same quarter a year ago and 5% lower than the bookings figure for the second quarter of 2016.


Chip Orders for Entry-level 4G phones and 3G Devices Declining

Despite continued growth in chip orders for mid-range and high-end smartphones, orders for entry-level 4G phones and 3G devices are slowing down rapidly, said the sources. Inventories of related chips have increased to an excessive level already, the sources indicated.

The slowdown in chip orders for entry-level devices is being caused by a strengthening US dollar and falling demand in emerging markets, the sources said.

Sources at Taiwan-based LCD driver IC firms indicated orders for entry-level phones continue to drop. Customers based in South America, the Middle East, Eastern Europe, Southeast Asia and Africa have all slowed down their pace of orders, according to the sources.

Other handset related chip firms agreed that the visibility of orders for the fourth quarter is falling, but the scenario is “within expectations” and will have limited impact on sales for the rest of the year.

In addition, chip firms have seen their customers in China and other emerging markets pursue higher product ASPs and gross margins. Industry sources generally believe that the 3G phone and entry-level 4G handset market scale will shrink further in 2017.


Analog, LCD driver IC firms’ Orders Slow Down

Taiwan-based analog and LCD driver IC design specialists have seen their customers, mainly China-based ones, slow down their pace of orders which could result in lower revenues for December, according to industry sources.

Some analog and LCD driver IC firms will not be able to see their fourth-quarter revenues reach the high end of their guidance, as a result of disappointing December sales, said the sources. However, the scenario is likely to reverse if their China-based clients step up their pace of orders after the middle of December as they prepare for demand during the upcoming Lunar New Year holidays in 2017.

Nevertheless, China-based end-device vendors have become more aware of inventory issues, and take a more cautious approach to managing levels, the sources noted. Meanwhile, excess inventory levels of chips for entry-level smartphones and notebooks, as well as unfavorable macroeconomic developments, are also discouraging end-device manufacturers from placing additional orders, the sources said.

The slowdown in orders is also caused by customers' intention to work off their existing inventory at quarter-end to settle accounts, according to sources at analog IC firms.


Top 10 Predictions for Worldwide Robotics for 2017 and Beyond

IDC predicts 35% of leading organizations in logistics, health, utilities, and resources will explore the use of robots to automate operations by 2019

IDC Manufacturing Insights Worldwide Commercial Robotics program published its latest report titled “IDC FutureScape: Worldwide Robotics 2017 Predictions " and highlights the key drivers for robotics and how these are likely to shape the development of robotics in the planning horizon of 2017 through 2020.

“Technological development in artificial intelligence, computer vision, navigation, MEMS sensor, and semiconductor technologies continue to drive innovation in the capability, performance, autonomy, ease of use, and cost-effectiveness of industrial and service robots,” says Dr. Jing Bing Zhang, Research Director, Worldwide Robotics and Asia Pacific Manufacturing Insights, IDC Asia/Pacific.

Zhang also revealed the strategic top predictions and major robotics trends that are set to present opportunities and challenges to IT leaders in 2017 and beyond.

  1. Robot as a Service. By 2019, 30% of commercial service robotic applications will be in the form of a “Robot as a Service” business model, reducing costs for robot deployment.
  2. Chief Robotics Officer. By 2019, 30% of leading organizations will implement a chief robotics officer role and/or define a robotics-specific function within the business.
  3. Evolving Competitive Landscape. By 2020, companies will have a greater choice of vendors as new players enter the US$80-billion ICT market to support robotics deployment.
  4. Robotics Talent Crunch. By 2020, robotics growth will accelerate the talent race, leaving 35% of robotics-related jobs vacant while the average salary increases by at least 60%.
  5. Robotics Will Face Regulation. By 2019, the Government will begin implementing robotics-specific regulations to preserve jobs and to address concerns of security, safety, and privacy.
  6. Software Defined Robot. By 2020, 60% of robots will depend on cloud-based software to define new skills, cognitive capabilities, and application programs, leading to the formation of a robotics cloud marketplace.
  7. Collaborative Robot. By 2018, 30% of all new robotic deployments will be smart collaborative robots that operate three times faster than today's robots and are safe for work around humans.
  8. Intelligent RoboNet. By 2020, 40% of commercial robots will become connected to a mesh of shared intelligence, resulting in 200% improvement in overall robotic operational efficiency.
  9. Growth Outside Factory. By 2019, 35% of leading organizations in logistics, health, utilities, and resources will explore the use of robots to automate operations.
  10. Robotics for Ecommerce. By 2018, 45% of the 200 leading global ecommerce and omni-channel commerce companies will deploy robotics systems in their order fulfilment warehousing and delivery operations.

“Robotics will continue to accelerate innovation, thus disrupting and changing the paradigm of business operations in many industries. IDC expects to see stronger growth of robotics adoption outside the traditional manufacturing factory floor, including logistics, health, utilities and resources industries. We encourage end-user companies to embrace and assess how robotics can sharpen their company's competitive edge by improving quality, increasing operational productivity and agility, and enhancing experiences of all stakeholders,” ends Zhang.


Chip Demand for Apple's iPad slows; iPad Shipments Could Reach just 40 Million Units in 2016

Chip demand for Apple's iPad devices has been slow according to supply-chain sources. Shipments of the iPad-series for 2016 could reach just 40 million units or even below the mark, the sources indicated.

Shipments of Apple's iPad devices are set to continue their slide in 2017 and come to a record-low level, the sources said. Shipments are unlikely to pick up until 2018, when Apple is expected to update to OLED panels, the sources added.

Ming-Chi Kuo, analyst with KGI Securities, was quoted in various media reports such as MacRumors as saying shipments of Apple's iPads are forecast to fall 10-20% on year in 2017. The upcoming new iPads for 2017 are unlikely to drive shipment growth, said Kuo, which believes they will come in three models – a 12.9-inch iPad Pro 2, a 10.5-inch iPad Pro and a 9.7-inch iPad.

Apple is expected to bring “revolutionary” changes to its 2018 iPad lineup, such as the adoption of AMOLED panels, Kuo was quoted as saying.


Global Tablet Shipments will Decrease 21.5% y/y to 51.29 Million Units in 4Q’16 (Chart 30)

There will be 51.29 million tablets shipped globally in the fourth quarter of 2016, increasing 7.3% on quarter but decreasing 21.5% on year. Shipments will consist of 10.9 million iPads, up 17.2% sequentially, 24.4 million units launched by international vendors other than Apple, up 18.3%, and 16.0 million white-box units, down 10.6%, according to Digitimes Research.

7-inch models will account for 31.4% of shipments, 7.9-inch 14.3%, 8.0- to 8.9-inch 11.6%, 9.0- to 9.9-inch 20.3%, 10.0- to 10.9-inch 16.4%, and 11-inch and above 6.1%, Digitimes Research indicated.

In terms of application processors used in tablets, Apple will account for 30.9% of all tablets except white-box units, MediaTek 23.8%, Qualcomm 11.8%, Samsung Electronics 8.9% and Intel 8.5%.

Among vendors, Apple will be the largest accounting for 21.3% of shipments, followed by Samsung with 15.0%, Amazon 6.2%, Lenovo 6.1%, Huawei Technologies 5.9%, Asustek Computer 2.8%, TCL 2.7%, Microsoft 2.6%, LG Electronics 1.6% and Acer 1.2%.

Taiwan-based ODMs and OEMs will ship 15.1 million tablets in the quarter, with Foxconn Electronics to account for 66.8% of shipments, Pegatron 11%, Compal Electronics 10.9%, Quanta Computer 6.8%, Inventec 2.5%, Arima Communications 1.6% and Wistron 0.5%.


Worldwide Wearables Market Grew 3.1% y/y to 23 Million Units in 3Q’16 (Charts 31 & 32)

While the smartwatch market took a tumble this quarter, the overall wearables market grew 3.1% year over year in the third quarter of 2016 (3Q’16). Total wearables shipments reached 23 million in the quarter, according to International Data Corporation, (IDC).

Basic wearables, primarily comprised of fitness bands, accounted for 85% of the market and experienced double-digit growth. Much of the increase was attributed to the launch of newer models, an expanding user base, and an enticing summer season that allowed people to step out of their homes. IDC expects the momentum for basic wearables to continue for the remainder of 2016 as the holiday season is now in full swing. However, smart wearables capable of running third party apps will likely continue to struggle in the near term.

“It's still early, but we're already seeing a notable shift in the market,” said Jitesh Ubrani senior research analyst for IDC Mobile Device Trackers. "Where smartwatches were once expected to take the lead, basic wearables now reign supreme. Simplicity is a driving factor and this is well reflected in the top vendor list as four out of five offer a simple, dedicated fitness device. Meanwhile, from a design perspective, many devices are focusing on fashion first while allowing the technology to blend in with the background."

“Smart wearables have been down in recent quarters, but clearly not out,” noted Ramon Llamas, research manager for IDC's Wearables team. “As user tastes change, so will their needs. That's the opportunity for smart wearables with multi-functionality and third-party applications, both for consumers and business users. To get there, we need to see more intuitive user interfaces, seamless user experiences, standalone connectivity, and applications that go beyond health and fitness and into personal and professional productivity.”


Brazil Electronics Industry to Decrease 8% y/y in 2016

The turnover of Brazil's electronics industry should end 2016 at BRL 131.2 billion, a nominal decrease of 8% over the past year (BRL 142.5 billion). In real terms (excluding inflation), the result represents a reduction of 11%, according to data released by the Brazilian Electrical and Electronics Industry Association (Abinee).

For industrial production, Abinee projects a drop of 10% compared to 2015. Investments are expected to close the year down 25%, from BRL 3.2 billion in 2015 to BRL 2.4 billion in 2016. Exports will shrink by 5%, from BRL 5.9 billion to BRL 5.5 billion. Imports should decline by 20% from BRL 31.4 billion in 2015 to BRL 25.3 billion in 2016.

For 2017, companies in the electronics sector have projected a nominal growth of 1% in revenues compared to 2016.


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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