Weekly Global Update for September 11, 2019

2Q’19 Electronic Supply Chain Growth by Sector

All of the major electronic equipment companies in the Custer Consulting Group survey have now reported their second quarter financial results.  Here are our findings:

• Electronic equipment revenues declined 1.4 percent in 2Q’19 vs. 2Q’18 (chart 1).  Their 3/12 growth trajectory was still declining in the second quarter (chart 2).
• Growth varied significantly by sector of the world electronic supply chain (chart 3).
• Automotive electronics growth peaked and then declined 4.9 percent in 2Q’19 (charts 4-5).
• Military electronics growth has slowed (charts 6-7) but was still up 5.9 percent in the second quarter.
• The industrial instruments sector has weakened (charts 8-9) and was down 5.9 percent in the second quarter.
• Medical equipment growth has been volatile (charts 10-11) but grew 5.9 percent in the second quarter.
• Communication equipment growth has slowed (charts 12-13) due to the mobile phone market’s maturation. 5G is on the horizon, but has not yet contributed significantly to base station and handset numbers.
• Computer equipment sales have peaked (chart 14-15) as PC growth has been modest and server sales weakened in 2Q’19.

Source: Company financial reports aggregated and analyzed by Custer Consulting Group

Global Semiconductor Sales Decreased 15.5% in July 2019 (Charts 16-20)

The Semiconductor Industry Association (SIA) has announced that worldwide sales of semiconductors were $33.4 billion in July 2019, 1.7 percent more than the June 2019 total of $32.8 billion, but 15.5 percent less than the July 2018 total of $39.5 billion.

Monthly sales are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average. SIA represents U.S. leadership in semiconductor manufacturing, design and research.

“While global semiconductor sales in July were once again down on a year-to-year basis, month-to-month sales were up slightly,” said John Neuffer, SIA president and CEO. “Month-to-month sales increased modestly across most regional markets in July, with Asia Pacific and the Americas posting the largest gains, although sales into the Americas remained down on a year-to-year basis.”

Source: www.semiconductors.org

Worldwide Server Market Revenue Declined 11.6% in 2Q’19 as Unit Shipments Declined 9.3% (Charts 21-24)

According to the International Data Corporation (IDC) Worldwide Quarterly Server Tracker, vendor revenue in the worldwide server market declined 11.6 percent year over year to just over $20 billion during the second quarter of 2019 (2Q’19). Worldwide server shipments declined 9.3 percent year-over-year to just under 2.7 million units in 2Q’19.

After a torrid stretch of prolonged market growth that drove the server market to historic heights, the global server market declined for the first time since the fourth quarter of 2016. All classes of servers were impacted, with volume server revenue down 11.7 percent to $16.3 billion, while midrange server revenue declined 4.6 percent to $2.4 billion and high-end systems contracted by 20.8 percent to $1.3 billion.

“The second quarter saw the server market’s first contraction in nine quarters, albeit against a very difficult compare from one year ago when the server market realized unprecedented growth,” said Sebastian Lagana, research manager, Infrastructure Platforms and Technologies.

Factors impacting the market include “a slowdown in purchasing from cloud providers and hyperscale customers, an off-cycle in the cyclical non-x86 market, as well as a slowdown from enterprises due to existing capacity slack and macroeconomic uncertainty,” Lagana said.

Source: www.idc.com

Passive Component Demand Picking Up

Inventories held by Taiwan-based passive component makers have come down and are approaching “healthy” levels following two to three quarters of correction, sources indicated. These passive component firms are expected to see their sales reach peak for 2019 in the third quarter, the sources said.

Yageo, Walsin Technology, Holy Stone Enterprise and TA-I Technology have all enjoyed a pick-up in MLCC demand for desktop PCs, notebooks, smartphones and other consumer electronics devices since August, sources noted. Orders for MLCC parts, mainly ones with short lead times, will buoy related suppliers’ sales performance in the third quarter.

Meanwhile, demand for large-size MLCCs (mainly for industrial control applications) has been relatively stable, sources said, adding that despite the pull-in of short lead-time orders for conventional MLCCs, suppliers remain cautious about order visibility for the fourth quarter.

In addition, the recent pick-up in demand for PCs and other mass-market applications will slow passive component price drops in the third and fourth quarters, the sources noted, adding that they expect price decreases to slow to single-digit levels in the fourth quarter.

Source: www.digitimes.com

Starting in 2020, Glass to Gradually Replace PCBs as Backplane for Mini LED Backlighting

Glass is expected to gradually replace PCBs as backplanes for mini LED backlighting beginning in 2020 as chip sizes also diminish, industry sources say.

PCBs have been used as backplanes for mini LED backlighting because of their relatively low production cost, the sources said. However, as mini LED chips get smaller, it is more difficult to directly transfer them onto PCBs, sources noted, adding that glass backplanes are the better option because they are more level.

China-based makers of TFT-LCD panels reportedly plan to adopt mini LED backlight units (BLUs) using glass backplanes for 75-inch TV panels in 2020, the sources said.

Source: www.digitimes.com

Global Top 10 IC Design Companies for 2Q’19 (Chart 25)

Newly-released statistics from TrendForce show that, among the top 10 global IC design companies in 2Q’19 ranked by revenue, revenues of the top five all fell year-over-year.

These declines were spurred by the US-China trade war, mounting inventory levels along the supply chain and less-than-satisfactory global demand for consumer electronics, including smartphones, tablets, notebooks, LCDs, televisions and servers.

Nvidia registered the largest decline among the five, 20.1 percent, marking the first time in three years that Nvidia’s YoY revenue has declined for three consecutive quarters.

TrendForce analyst Chia-Yang Yao said that weak Chinese demand due to the US-China trade war had led China’s systems suppliers to reduce component orders. This put the revenues of Broadcom and Qualcomm (whose main market is in China) on a YoY slide in 2Q’19. Qualcomm is also facing intensifying competition from competitors Mediatek and UNISOC.

Mediatek has been using the 12nm process for its mobile processor product line since 2018, greatly enhancing cost structure and adding more value to the product, whereas UNISOC implemented Cortex-A55 and A75 CPUs in its low-mid range processors, presenting a wider choice of products for clients and placing pressure on Qualcomm, who now has a new competitor to deal with in the low- to mid-range market.

Source: press.trendforce.com

Worldwide Large Format Printer Shipments Down Through 1H’19 (Chart 26)

New data from the International Data Corporation (IDC) Worldwide Quarterly Large Format Printer Tracker shows that large format printer shipments declined in the second quarter of 2019, continuing a decline from the first quarter of the year.

“The market has been soft overall as some of the new technology expected to drive investment in large format printing equipment on a worldwide basis has been delayed,” said Tim Greene, research director, U.S. Large Format Printer Tracker. “We’re seeing softer than expected shipments in some of the regions and in some of the technologies where we’ve seen growth in prior quarters. Better than expected eco-solvent and UV inkjet shipments were not enough to offset shrinking sales of some aqueous and toner-based large format printers.”

Source: www.idc.com

World Enterprise External OEM Storage Systems Market Decreased 0.8% in 2Q’19 (Chart 27)

According to IDC’s Worldwide Quarterly Enterprise Storage Systems Tracker, vendor revenue in the worldwide enterprise external OEM storage systems market decreased 0.8 percent year-over-year to $6.3 billion during the second quarter of 2019.

Total capacity shipments in the external storage systems market were up 5.2 percent year-over- year to 16.3 exabytes during the quarter, while capacity shipments in the total market (including ODMs and server-based storage) declined 4.2 percent to 107.9 exabytes. Revenue generated by the group of original design manufacturers selling directly to hyperscale datacenters declined 22.9 percent year-over-year in 2Q’19 to $4.2 billion.

“Second quarter results trended similarly to the first quarter with ODMs continuing to decline against a difficult year-over-year comparison and internal (server-based) storage weighed down by a contraction in the server market,” said Sebastian Lagana, research manager, Infrastructure Platforms and Technologies.

“While the external OEM segment was pressured by contraction in all-flash arrays, which has long been a growth driver for the segment, we did note end user investment in midrange SAN platforms remained strong, with nearly all OEMs generating growth in that portion of the market,” Lagana said.

Source: www.idc.com

World Enterprise WLAN Market Declined 4.4% in 2Q’19

The combined consumer and enterprise wireless local area network (WLAN) market segments declined 4.4 year-over-year in the second quarter of 2019, with worldwide revenues of $3.5 billion.

According to results published in the International Data Corporation (IDC) Worldwide Quarterly WLAN Tracker, the enterprise segment grew 3.1 percent year-over-year in 2Q’19 to nearly $1.6 billion. Continued demand for network refreshes, digital transformation (DX) initiatives and a new wireless standard named WiFi 6 coming to market soon are positive indicators for continued growth in 2019.

The enterprise WLAN market is now dominated by the 802.11ac standard, which makes up 86.8 percent of enterprise-dependent access point (AP) shipments and 92.3 percent of WLAN-dependent AP revenues. The next iteration of the standard, 802.11ax, also known as WiFi 6, will increase in the market throughout the rest of 2019 and into 2020.

Meanwhile, consumer WLAN market revenue declined 9.5 percent in 2Q’19; the 802.11ac standard accounted for 52.6 percent of shipments and 75.2 percent of revenue.

“The enterprise WLAN market continues to see moderate growth, driven by a variety of factors,” said Brandon Butler, senior research analyst, Enterprise Networks. “Enterprise connectivity continues to be a top priority for organizations in their efforts to create a digital workplace and wireless has become a critical platform to engage with customers. Meanwhile, digital transformation is leading organizations to consider broader enterprise campus refreshes as well, which will continue to fuel this market’s growth in the coming quarters.”

“The worldwide enterprise WLAN market saw varying conditions across the globe,” said Petr Jirovsky, research director, Worldwide Networking Trackers. “While the market is mature and moderately growing in the U.S., geopolitical issues are beginning to impact growth across many parts of the world.”

“Meanwhile, the coming 802.11ax standard will lead to a new wave of refresh cycles for enterprises, providing an expected boost to the market starting later this year or early next year,” Jirovsky said.

Source: www.idc.com