Weekly Global Update for August 28, 2019

Flash August PMI Leading Indicators

IHS Markit released its Flash August PMI indicators for select countries (chart 1). All but the U.S. showed improvement; however, only France showed a manufacturing expansion (PMI > 50).

• U.S. declined to a contraction level for the first time since 2009 (chart 2)
• Eurozone (chart 3) and Germany (chart 4) remained solidly in manufacturing contraction
• France edged back into expansion (chart 5)
• Japan‘s PMI remained slightly below 50 (chart 6)

Source: www.markiteconomics.com

Top 15 Semiconductor Suppliers’ Sales fell 18 percent in 1H’19 (Chart 7)

IC Insights released its August update to the 2019 McClean Report earlier this month. This Update included Part 1 of an in-depth analysis of the foundry industry, an updated forecast for semiconductor capital spending this year and a ranking of the top 25 1H ’19 semiconductor suppliers and their 3Q ’19 sales outlook.

The top 15 worldwide semiconductor – IC and Optoelectronic, Sensor, and Discrete (OSD) – sales ranking for 1H ’19 is shown in chart 7, including six suppliers headquartered in the U.S., three in Europe, and two each in Taiwan, South Korea and Japan.

Intel replaced Samsung as the number one quarterly semiconductor supplier in 4Q ’18 after losing the lead spot to Samsung in 2Q ’17. While Samsung held the full-year number one ranking in 2017 and 2018, Intel is forecast to easily recapture the number one ranking for the full year of 2019 – a position it previously held from 1993 through 2016.

With the collapse of the DRAM and NAND flash markets over the past year, a complete switch has occurred.  In 1H ’18, Samsung had 22 percent more total semiconductor sales than Intel, but Intel had 20 percent more semiconductor sales than Samsung in 1H ’19!

In total, the top 15 semiconductor companies’ sales dropped by 18 percent in 1H ’19 compared to 1H ’18, four points worse than the total worldwide semiconductor industry’s 1H’19 – 1H’18 decline of 14 percent. 

Illustrating the extremely volatile nature of the memory market, the Big 3 memory suppliers – Samsung, SK Hynix and Micron – each registered year-over-year revenue declines of at least 33 percent in 1H ’19 just one year after each company had posted greater than 36 percent year-over-year growth in 1H’18. 

Nine of the top 15 companies had semiconductor sales of at least $5 billion in 1H ’19, one company less than in 1H ’18. As shown, it took about $3.7 billion in first-half sales just to make it into the 1H ’19 top-15 semiconductor supplier list.

There were two new entrants into the top-15 ranking in 1H ’19 as compared to 1H ’18.  Fabless IC supplier MediaTek moved up one spot from 16th to 15th, and IDM Sony  (which was the only top 15 supplier to register year-over-year growth) jumped up five positions to rank as the 14th largest semiconductor supplier in 1H’19.  As shown, 90 percent of Sony’s total semiconductor sales are from O-S-D devices, primarily image sensor components for smartphones.

The 1H ’19 top-15 ranking includes one pure-play foundry (TSMC) and four fabless companies.  If TSMC was excluded from the ranking, China-based fabless IC supplier HiSilicon ($3.5 billion) would have been ranked 15th.  HiSilicon’s sales surged 25 percent in 1H ’19 as compared to 1H ’18. 

However, since over 90 percent of HiSilicon’s IC sales are internal transfers to Huawei, Huawei’s “blacklisting” by the U.S. government is likely to slow HiSilicon’s sales growth rate in the second half of this year. 

IC Insights includes foundries in the top 15 semiconductor supplier ranking since it has always viewed the ranking as a top supplier list, not a market-share ranking, and realizes that in some cases the semiconductor sales are double-counted.  With many of IC Insights’ clients being vendors to the semiconductor industry (supplying equipment, chemicals, gases, etc.), excluding large IC manufacturers like the foundries would leave significant “holes” in the list of top semiconductor suppliers. 

As shown in the listing, the foundries and fabless companies are identified.  In the April update to The McClean Report, market share rankings of IC suppliers by product type were presented and foundries were excluded from these listings. Overall, the top 15 list shown in chart 7 is provided as a guideline to identify which companies are the leading semiconductor suppliers, whether they are IDMs, fabless companies or foundries.

Many of the major semiconductor companies have provided their sales guidance for 3Q ’19, which was discussed in more detail in the August update. Overall, the 3Q ’19 / 2Q ’19 revenue growth expectations for the top 25 major semiconductor suppliers varies widely by company and currently spans a range of 23 percentage points, from +21 percent to -2 percent.

Source: www.icinsights.com

North America-based Manufacturers of SEMI Equipment Posted $2.03 billion in Billings Worldwide in July 2019 (Chart 8)

North America-based manufacturers of semiconductor equipment posted $2.03 billion in billings worldwide in July 2019 (3-month average basis), according to SEMI. The billings figure is 0.4 percent higher than the final June 2019 level of $2.03 billion, and is 14.5 percent lower than the July 2018 billings level of $2.38 billion.

“Total billings of North American equipment manufacturers for July were slightly up over June billings,” said Ajit Manocha, president and CEO of SEMI. “Demand for semiconductor equipment this year is being driven by leading-edge logic and foundry, though memory segment growth is soft due to weak market sentiment.”

Source:  www.semi.org

Gartner: Worldwide 5G Network Infrastructure Revenue to Reach $4.2 Billion in 2020 (Chart 9)

In 2020, worldwide 5G wireless network infrastructure revenue will reach $4.2 billion, an 89 percent increase from 2019 revenue of $2.2 billion, according to Gartner, Inc.

Additionally, Gartner forecasts that investments in 5G NR network infrastructure will account for 6 percent of the total wireless infrastructure revenue of communications service providers (CSPs) in 2019, and that this figure will reach 12 percent in 2020.

“5G wireless network infrastructure revenue will nearly double between 2019 and 2020,” said Sylvain Fabre, senior research director at Gartner. “For 5G deployments in 2019, CSPs are using non-stand-alone technology. This enables them to introduce 5G services that run more quickly, as 5G New Radio (NR) equipment can be rolled out alongside existing 4G core network infrastructure.”

In 2020, CSPs will roll out stand-alone 5G technology, which will require 5G NR equipment and a 5G core network. This will lower costs for CSPs and improve performance for users.

5G Rollout Will Accelerate Through 2020

5G services will launch in many major cities in 2019 and 2020. Services have already begun in the U.S., South Korea and some European countries, including Switzerland, Finland and the U.K.

CSPs in Canada, France, Germany, Hong Kong, Spain, Sweden, Qatar and the United Arab Emirates have announced plans to accelerate 5G network building through 2020.

As a result, Gartner estimates that 7 percent of CSPs worldwide have already deployed 5G infrastructure in their networks.

Source:  www.gartner.com

PCB Makers expected to gain from enlarged mainboards for 5G smartphones

As mainboards for 5G smartphones will surely be enlarged significantly to accommodate many more RF (radio frequency) modules, Taiwan-based PCB makers (including Zhen Ding Technology, Unimicron and Compeq Manufacturing as well as CCL supplier Elite Material) are expected to gain revenue growth momentum from the 5G smartphone sector, according to industry sources.

Sources say that the number of frequency bands used in the 5G mobile communication networks will at least double the number for 4G application; therefore the number of RF modules must be increased, and the surface area of motherboards (whether made of HDI any-layer or substrate-like PCB) should be expanded to support the additional modules.

Also, upgrades in various IC specs for 5G smartphones will require higher-end motherboards to carry those high-end IC solutions.

For more information: www.digitimes.com

North American Robotics Orders expanded 7.2 percent from January to June to 8,572 robots, valued at $446 million

Robotic Industries Association (RIA) stats show more than 7 percent increase in units ordered compared with the first two quarters of 2018.

In the first half of 2019, the North American robotics market is up 7.2 percent. From January to June, North American companies ordered 16,488 robots, valued at $869 million, according to the Robotic Industries Association (RIA), part of the Association for Advancing Automation.

The largest driver of the year-to-date growth was an 83 percent increase in units ordered by automotive OEMs. Other industries that saw increases include semiconductor and electronics (12 percent), life sciences (8 percent) and food and consumer goods (3 percent).

In the second quarter alone, North American companies ordered 8,572 robots, valued at $446 million. This represents a growth of 19.2 percent in number of robots ordered and a 0.6 percent boost in dollars compared to the same time period in 2018.

“Robot use continues to grow, which is helping make U.S. companies more competitive and leading to new job growth,” said Jeff Burnstein, president of the Association for Advancing Automation.

“We are currently experiencing the greatest period of robot expansion in history—over 180,000 robots have been shipped to American companies since 2010, and more than 1.2 million new manufacturing jobs have been created during this time,” Burnstein said.

Source: www.robotics.org

Worldwide Artificial Intelligence Systems spending will increase 44.0 percent y/y to nearly $35.8 Billion in 2019

Worldwide spending on artificial intelligence (AI) systems is forecast to reach $35.8 billion in 2019, an increase of 44 percent over the amount spent in 2018.

With industries investing aggressively in projects that utilize AI software capabilities, the International Data Corporation (IDC) Worldwide Semiannual Artificial Intelligence Systems Spending Guide expects spending on AI systems will more than double to $79.2 billion in 2022 with a compound annual growth rate (CAGR) of 38 percent over the 2018-2022 forecast period.

Global spending on AI systems will be led by the retail industry where companies will invest $5.9 billion this year on solutions such as automated customer service agents and expert shopping advisors and product recommendations.

Banking will be the second largest industry with $5.6 billion going toward AI-enabled solutions including automated threat intelligence and prevention systems and fraud analysis and investigation systems. Discrete manufacturing, healthcare providers, and process manufacturing will complete the top five industries for AI systems spending this year.

The industries that will experience the fastest growth in AI systems spending over the 2018-2022 forecast are federal / central government (44.3 percent CAGR), personal and consumer services (43.3 percent CAGR) and education (42.9 percent CAGR).

Source: www.idc.com