Weekly Global Update for January 11, 2017

2016 Growth & 2017 Outlook for Global Electronic Supply Chain

Charts 1 & 2 summarize recent 2016 & 2017 growth estimates of key portions of the global electronic equipment supply chain.

Source: www.semi.org
www.semiconductors.org
www.hendersonventures.com
www.custerconsulting.com

Worldwide Semiconductor Sales increased 7.4% y/y to $31.0 billion in November 2016 (Charts 3-5)

The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $31.0 billion for the month of November 2016, an increase of 7.4% compared to the November 2015 total of $28.9 billion and 2.0% more than the October 2016 total of 30.4 billion.

November marked the market's largest year-to-year growth since January 2015. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.

“Global semiconductor sales continued to pick up steam in November, increasing at the highest rate in almost two years and nearly pulling even with the year-to-date total from the same point in 2015,” said John Neuffer, president and CEO, Semiconductor Industry Association. “The Chinese market continues to stand out, growing nearly 16% year-to-year to lead all regional markets. As 2016 draws to a close, the global semiconductor market appears likely to roughly match annual sales from 2015 and is well-positioned for a solid start to 2017.”

Source: www.semiconductors.org
www.wsts.org

Strong December Leading Indicators

Markit Economics Global Purchasing Managers Index reached a 35 month high as virtually all regions/countries reported an increase in manufacturing activity in December (Chart 6)

• Chart 7 summarizes the December vs November PMIs of some key countries. All improved although South Korea remained slightly in contraction territory (PMI<50).
• The USA rebounded strongly based on the Markit Economics and ISM surveys (Chart 8).
• Eurozone’s December PMI reached its highest level in 68 months (Chart 9) with almost all European countries’ manufacturing activity increasing versus November (Chart 10).
• The Asian recovery (Chart 11) was mixed with Thailand; Japan (Chart 12); Taiwan (Chart 13 and China (Chart 14) in expansion territory and Indonesia, Vietnam and South Korea (Chart 15) contracting.

Source: www.markiteconomics.com
www.instituteforsupplymanagement.org/

U.S. Electronic Supply Chain Shipments, Orders and Inventories for November

The U.S. Department of Commerce released its November Factory Orders report.

• Chart 16 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain.
• Overall domestically produced electronic equipment shipments and orders remained flat (Chart 17)
• Vehicle shipment softened in November although they reported recovered in December (Chart 18).
• Aircraft sales are slumping with the strong dollar hurting domestic producers (Charts 19 & 20).
• Defense capital goods orders and shipments have been improving (Chart 21) but military electronics demand has slumped (Chart 22).
• Electromedical, measurement & control equipment orders and shipments continued to climb (Chart 23).
• Domestically produced passive component demand has weakened (Chart 24) as passives are “out of sync” with semiconductor shipments to North America on a 3/12 growth basis (Chart 25).

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

Branded Motherboard Shipments to drop 5-10% in 2017 due to weak demand from China

Weakening demand is also expected to affect upstream printed circuit board (PCB) and chip suppliers' shipment performances

Worldwide motherboard shipments are expected to drop 5-10% on year in 2017 with demand from China already starting to weaken, affecting most of the players' shipments, according to sources from the upstream supply chain.

The weakening demand will also affect upstream printed circuit board (PCB) and chip suppliers' shipment performances.

Source: www.digitimes.com

Internet of Things Spending Forecast to grow 17.9% in 2016 led by Manufacturing, Transportation, and Utilities Investments

Worldwide spending on the Internet of Things (IoT) is forecast to reach $737 billion in 2016 as organizations invest in the hardware, software, services, and connectivity that enable the IoT. According to a new update to the International Data Corporation (IDC) Worldwide Semiannual Internet of Things Spending Guide, global IoT spending will experience a compound annual growth rate (CAGR) of 15.6% over the 2015-2020 forecast period, reaching $1.29 trillion in 2020.

The industries forecast to make the largest IoT investments in 2016 are Manufacturing ($178 billion), Transportation ($78 billion), and Utilities ($69 billion). Consumer IoT purchases, the fourth largest market segment in 2016, will become the third largest segment by 2020. Meanwhile, Cross-Industry IoT investments, which represent use cases common to all industries, such as connected vehicles and smart buildings, will rank among the top segments throughout the five-year forecast. The industries that will see the fastest spending growth are Insurance, Consumer, Healthcare, and Retail.

Given Manufacturing's position as the leading IoT industry, it's no surprise that manufacturing operations is the IoT use case that will see the largest investment ($102.5 billion) in 2016. Other IoT use cases being deployed in Manufacturing include production asset management and maintenance and field service. The second largest use case, Freight Monitoring ($55.9 billion), will drive much of the IoT spending in the Transportation industry. In the Utilities industry, combined investments in Smart Grid for electricity and gas will total $57.8 billion in 2016. Smart Home investments by consumers will more than double over the forecast period, reaching more than $63 billion by 2020. In the Insurance industry, telematics will be the leading use case while remote health monitoring will see the greatest investment in the Healthcare industry. Retail firms are already investing in a variety of use cases, including omni-channel operations and digital signage.

“A fairly close relationship exists between high growth IoT use cases in consumer product and service oriented verticals like retail, insurance, and healthcare,” said Marcus Torchia, research manager, IoT, with IDC's Customer Insights and Analysis team. “In some cases, these are green field opportunities with tremendous room to run. In other verticals, like manufacturing and transportation, large market size and more moderate growth rate use cases characterize these verticals. As a whole, the IoT opportunity is a diverse developing market place for vendors and end users alike.”

From a technology perspective, hardware will remain the largest spending category throughout the forecast, followed by services, software, and connectivity. And while hardware spending will nearly double over the five-year timeframe, it represents the slowest growing IoT technology group. Software and services spending will both grow faster than hardware and connectivity. Hardware spending will approach $400 billion by 2020. Modules and sensors, that connect end points to networks, will dominate hardware purchases, while application software will represent more than half of all IoT software investments.

Asia/Pacific (excluding Japan)(APeJ) is the geographic region that will see the greatest IoT spending throughout the forecast, followed by the United States, Western Europe, and Japan. Nearly a third of IoT purchases in APeJ will be made by the manufacturing industry, while Utilities and Transportation will change places as the second and third largest IoT industries by the end of the forecast. In the United States, Manufacturing will be the industry with the largest IoT investments throughout the forecast but with a lower share (roughly 15%) of total spending. In Western Europe, Consumer IoT spending will overtake Transportation and Utilities to become the second largest IoT industry in 2020.

“It is great to see that the Internet of Things will continue to fuel both business transformation and innovation acceleration markets such as robotics, cognitive computing, and virtual reality,” said IoT Research Fellow and Senior Vice President Vernon Turner. “The investments by China and the United States in IoT solutions are driving these two countries to account for double-digit annual growth rates and over half of the IoT spending.”

Source: www.idc.com

Worldwide PCs, Tablets, Ultramobiles & Mobile Phones combined shipments projected to total 2.3 billion in 2017 (Chart 26)

Emerging Devices Can Enhance Conventional Device Sales

Worldwide combined shipments of PCs, tablets, ultramobiles and mobile phones are projected to remain flat in 2017, according to Gartner, Inc. Worldwide shipments for these devices are projected to total 2.3 billion in 2017, the same as 2016 estimates.

There were nearly 7 billion phones, tablets and PCs in use in the world by the end of 2016. However, Gartner does not expect any growth in shipments of traditional devices until 2018, when a small increase in ultramobiles and mobile phone shipments is expected.

“The global devices market is stagnating. Mobile phone shipments are only growing in emerging Asia/Pacific markets, and the PC market is just reaching the bottom of its decline," said Ranjit Atwal, research director at Gartner.

"As well as declining shipment growth for traditional devices, average selling prices are also beginning to stagnate because of market saturation and a slower rate of innovation,” added Mr. Atwal. “Consumers have fewer reasons to upgrade or buy traditional devices. They are seeking fresher experiences and applications in emerging categories such as head mounted displays (HMDs), virtual personal assistant (VPA) speakers and wearables.”

The embattled PC market will benefit from a replacement cycle toward the end of this forecast period, returning to growth in 2018. Increasingly, attractive premium ultramobile prices and functionality will entice buyers as traditional PC sales continue to decline. The mobile phone market will also benefit from replacements. There is, however, a difference in replacement activity between mature and emerging markets. “People in emerging markets still see smartphones as their main computing device and replace them more regularly than mature markets,” said Atwal.

Device vendors are increasingly trying to move into faster-growing emerging device categories. “This requires a shift from a hardware-focused approach to a richer value-added service approach,” said Atwal. “As service-led approaches become even more crucial, hardware providers will have to partner with service providers, as they lack the expertise to deliver the service offerings themselves.”

Source: www.gartner.com

Global High-brightness LED chips production value will reach US$13.18 billion in 2017

Global production value for high-brightness LED chips in 2017 will reach US$13.18 billion, growing 2.8% on year, according to Digitimes Research.

Source: www.digitimes.com