“Flash” February Purchasing Managers Indices
Markit Economics just released its flash PMI leading indicators for select countries (Chart 1)
- USA remained solidly in expansion territory although its Manufacturing PMI dropped slightly to 54.3 in February from 55.0 in January (Chart 2).
- The Eurozone PMI is at its highest level in six years (Chart 3).
- Japan’s PMI hit a 3-year high (Chart 4)
Global Electronic Supply Chain 4Q’16 Growth Update
With the vast majority of companies in our sample now having reported their calendar fourth quarter 2016 financial results here is an update:
- Electronic equipment revenues were up 3.3% in 4Q’16 vs 4Q’15 for the 213 OEMs in our sample (Chart 5). Lower than expected sales for HP and HP Enterprise pulled the composite growth rate down from the 3.5% we estimated last week. We still await Dell’s result which won’t be available until early March.
- Global electronic equipment sales growth was positive on an annualized basis (12/12) for total 2016 and up for the last 3 quarters (3/12) versus the same quarters in 2015 per Chart 6.
- Chart 7 summarizes our current estimate of fourth quarter growth by sector for the global electronic supply chain. Standouts are SEMI capital equipment and automotive.
While these 4Q’16 results are still preliminary (mix of mostly actual and some estimated revenues) they should be fairly close to final values.
Source: Company financial result analyzed by Custer Consulting Group
JEITA just released December results for Japanese domestic production of its electronic supply chain.
- Electronic equipment production remains on a generally declining trend (Chart 8).
- Chart 9 summarizes 4Q’16 vs. 4Q’15 growth by sector of the domestic Japanese supply chain.
- Bare printed circuit board production was down 10.8% in total 2016 vs. total 2015 and was declining further in December (Chart 10) as the PCB 3/12 growth curve remained well in contraction territory (Chart 11).
- Chart 12 shows 2016 Japanese domestic PCB production by board type.
- Component and device production growth was also declining at year end (Chart 13) but the rate of decline was easing.
- Chart 14 summarizes electronic component and device domestic production by type in 2016.
European Semiconductor Distribution Market Sales grew 5.8% y/y to 1.79 Billion Euros in 4Q’16 and FY'16 increased 3.8% y/y to 7.4 Billion Euros (Charts 15 & 16)
- Growth of semiconductor distribution accelerates during Q4
- Driving forces in Eastern Europe.
- Technically, MOS Micro and Logic stand out
2016 started as a dynamic year and petered out over summer, but turned back into growth mode with an unusually strong Q4 for the European semiconductor industry. According to DMASS Ltd., the quarter ended with 1.79 Billion euro in sales, 5.8% higher than Q4/CY15. The full year ended at sales of 7.4 billion euro, which represents an increase of 3.8% over 2015.
Georg Steinberger, chairman of DMASS: "Surely, there were also slight technical effects at work in Q4, like a few more working days. However 80% of the growth of almost 6% seems organic. An encouraging sign for 2017, as we are looking at strong bookings. What is still of concern is the fact that the overall semiconductor market does not really grow and that the pressure on the distribution channel remains unprecedented. Higher growth has definitely been prevented by price and margin pressure."
Regionally, the major economies trailed the positive trend in Q4. The growth drivers were predominantly countries in Eastern Europe, Israel, Russia, Turkey and Rest of EMEA, while Germany, the UK and France grew slightly below average. Nordic, Benelux and Italy even went backwards. Germany grew by 3.1% to 533 million euro, Italy shrunk by 1.7% to 147 million euro, the UK and Ireland grew by 4.3% to 135 million euro and France by 4% to 128 million euro. The Nordic countries shrunk by 14.6% to 151 million euro, while at the same time Eastern Europe grew by 16.7% to 281 million euro.
Steinberger said, "There isn't a lot of news in the regional development, except maybe the increased shift from Northern Europe to the East and the fact that Russia seems to have somehow overcome the effects of the sanctions. With the German economy being in full swing, it is strange that the growth in high-tech products like semiconductors is rather moderate. However, on an annual basis, Germany stayed at the DMASS average, so warning signs may not really be applicable. We are pretty sure that other growth regions and countries as mentioned above experienced currency gains as they mainly invoice in US Dollars."
Product-wise, last quarter the tune of growth was certainly digital, with MOS Micro, Programmable Logic and Other Digital Logic leading the way by double-digit increases of revenue. MOS Micro grew by over 13.2%, mainly driven by Microprocessors (non PC) and high-End MCUs, to 395 million euro, Programmable Logic by 17.2% to 137 million euro and Other Logic by 15.7% to 100 million euro. Other products standing out as double-digit growth areas were Fibre-Optics, Other Opto, DRAMs and NAND-Flash. The by far biggest product group in distribution - Analog Products - grew by a mere 3% to 516 million euro.
Georg Steinberger: "The danger with products would be to look at quarterly results too seriously, as you can see with above numbers. What grows double-digit in one quarter, could be still trailing the market on an annual basis, like Logic in general. And again, it is quite apparent that some areas of strong growth in the recent path, which seem to have lost steam - like Power, Low-End-MCUs and Analog - are linked tightly to the German market. It remains to be seen if that is a trend or just an occurrence that will disappear in 2017. The only thing clear to us is that 2017 will become a very interesting year, with many changes of structure and policy becoming effective over the next quarters."
Worldwide Semiconductor Market Expected to be up over 6% in 2017 after a record year in 2016 (Charts 17 & 18)
WSTS has published the 2016 semiconductor market figures and re-calculated the fall 2016 Forecast using the actual figures of the fourth quarter 2016.
The Worldwide semiconductor market was up 1.1% in 2016 to US$338.9 billion, an all-time high. The year 2017 is forecast to be strong with 6.5% growth to US$361 billion. 2018 is forecasted to be up another 2.3% to US$369 billion.
During 2017 the largest growth is expected across sensors, analog, and memory with all products contributing to positive growth. All regions are forecasted to return to growth in 2017 as well.
WSTS Forecast Summary (Chart 17 & 18)
By replacing the Q4 2016 forecast figures with Q4 2016 actual results, the forecast of the annual growth rates is updated from the 2016 Fall Forecast, published on November 29, 2016.
Taiwan Maintains Largest Share of Global IC Wafer Fab Capacity (Chart 19)
South Korea narrows gap with Taiwan; China shows biggest increase, accounts for nearly 11%.
IC Insights recently released its new Global Wafer Capacity 2017-2021 report that provides in-depth detail, analyses, and forecasts for IC industry capacity by wafer size, by process geometry, by region, and by product type through 2021.
Chart 19 splits the world’s installed monthly wafer production capacity by geographic region (or country) as of December 2016. Each regional number is the total installed monthly capacity of fabs located in that region regardless of the headquarters location for the companies that own the fabs. For example, the wafer capacity that South Korea-based Samsung has installed in the U.S. is counted in the North America capacity total, not in the South Korea capacity total. The ROW “region” consists primarily of Singapore, Israel, and Malaysia, but also includes countries/regions such as Russia, Belarus, and Australia.
As shown, Taiwan led all regions/countries in wafer capacity with 21.3% share, a slight decrease from 21.7% in 2015 when the country first became the global wafer capacity leader. Taiwan was only slightly ahead of South Korea, which was in second place. The Global Wafer Capacity report shows that South Korea accounted for 20.9% of global wafer capacity in 2016, slightly more than the 20.5% share it held in 2015. Two companies in Taiwan and two in South Korea accounted for the vast share of wafer fab capacity in each country. In Taiwan, TSMC and UMC held 73% of the country’s capacity while in South Korea, Samsung and SK Hynix represented 93% of the IC wafer capacity installed in 2016.
Japan remained firmly in third place with just over 17% of global wafer fab capacity. Micron’s purchase of Elpida several years ago and other recent major changes in manufacturing strategies of companies in Japan, including Panasonic spinning off some of its fabs into separate companies, means that the top two companies (Toshiba and Renesas) accounted for 64% of that country’s wafer fab capacity in 2016.
China showed the largest increase in global wafer capacity in 2016, rising 1.1 percentage points to 10.8% from 9.7% in 2015. China’s gained market share came mostly at the expense of North America’s share, which slipped 0.9 percentage points in 2016. With a lot of buzz circulating about new ventures and wafer fabs in China in the coming years, it will be interesting to watch how quickly China’s installed wafer capacity grows. It is worth noting that China first became a larger wafer capacity holder than Europe in 2010. The two companies with the largest portion of wafer fab capacity in China were SMIC and HuaHong Grace (including shares from joint ventures).
In total, the top five wafer capacity leaders accounted for more than half of the IC industry’s wafer fab capacity, having increased from 2009, when the top five wafer capacity leaders accounted for approximately a third of global capacity.
North America-based Semiconductor Equipment Manufacturers' worldwide billings grew 52.3% y/y (3-month average basis) to $1.86 billion in January 2017 (Chart 20)
North America-based manufacturers of semiconductor equipment posted $1.86 billion in billings worldwide in January 2017 (three-month average basis), according to the January Equipment Market Data Subscription (EMDS) Billings Report published today by SEMI.
SEMI reports that the 3-month average of worldwide billings of North American equipment manufacturers in January 2017 was $1.86 billion. The billings figure is 0.5% lower than the final December 2016 level of $1.87 billion, and is 52.3% higher than the January 2016 billings level of $1.22 billion.
“Global billings reported by the North American equipment makers begin the New Year at high levels," said Denny McGuirk, president and CEO of SEMI. “We expect strong spending growth in 2017 based on investments in leading-edge memory and foundry fabs.”
SEMI ceased publishing the monthly North America Book-to-Bill report in January 2017. The decision to discontinue the Book-to-Bill report was based on changes in reporting by some participants where the reporting of orders/bookings into the data collection program is no longer considered a necessary component of their industry analysis.
SEMI will continue publish a monthly North American Billings report and issue the Worldwide Semiconductor Equipment Market Statistics (WWSEMS) report in collaboration with the Semiconductor Equipment Association of Japan (SEAJ). The WWSEMS report currently reports billings by 24 equipment segments and by seven end market regions. Beginning with the January 2017 WWSEMS report, bookings information will only be available for the back-end equipment segments of the industry.
Custer Comment: Chart 21 compares North American SEMI equipment shipments to the U.S. PMI leading indicator on a 3/12 growth basis. The PMI “leads” SEMI shipments by about six months and points to continued SEMI equipment growth through early 2017.
Japan aims at 20% of cars to be self-driving in 2030
Japan-based automobile makers have been developing self-diving cars and the Japan government will allow self-driving cars to run on some designated roads around the 2020 Tokyo Olympic Games and aims at 20% of cars to be self-driving models in 2030, according to Digitimes Research.
Smartphone AMOLED penetration is estimated to rise from over 27% in 2017 to 50% in 2020
Along with increasing adoption of AMOLED panels for smartphones, the proportion of smartphones with AMOLED panels is estimated at over 27% in 2017 and may rise to 50% in 2020, according to industry sources.
China Smartphone Market to sit back and digest inventory in 1Q17; shipments are expected to fall 2% y/y to 100 million units
After seeing record shipments in the fourth quarter of 2016, the China smartphone will ease up and try to digest inventory in the first quarter of 2017. Smartphone shipments in the China market are expected to see a year-on-year dip in the quarter, marking the first on-year quarterly decline since the second quarter of 2015, according to data from Digitimes Research.
Shipments in the China market are forecast to total 100 million units in the first quarter, representing a slight 2% drop from the same period one year earlier, Digitimes Research noted.
In its recently published China smartphone market and industry tracker, Digitimes Research noted how telecom carriers are continuing to push the China market to 4G. China Mobile continued to encourage users to switch from 2G/3G to 4G with subsidies on procuring new 4G devices in December 2016 while small-size brands and white-box makers (mostly in the Southern China region) and even some larger brands continued to develop a price-friendly and entry-level 4G device market.
However, inventories starting running high in the local sales channel at the end of 2016, so shipments in the first quarter of 2017 will show an on-quarter drop of almost 20% as inventory is digested.
The top three vendors in the first quarter are expected to be Oppo, BBK, and Huawei, according to the report.