Global Automotive Electronics Market Poised for Impressive Growth (Chart 1)

The global market for automotive electronics is set to rise to $240 billion in 2020, up more than 50% from $157 billion in 2010, driven to new levels of prominence by government and automaker safety initiatives, according to the new report entitled, "The World Market for Automotive OEM Electronic Sytsems-2013 Edition" from IMS Research, now part of IHS Inc.

"The massive growth of automotive electronics in the space of a decade reflects the field's rising importance to the car industry at large, especially as original equipment manufacturers ratify in-vehicle electronics to be an essential selling feature for an automobile," said, Ben Scott, automotive analyst for IHS.

All told, the size of the market is even more impressive than a cursory view would reveal, as the overall figures actually exclude the burgeoning infotainment segment.

Government safety mandates represent a major factor driving the growth of automotive electronics revenue. Here legislated systems including electronic stability control (ESC) and tire pressure monitoring systems (TPMS) come into play, both of which require significant electronic content.

Also serving as an engine of market growth is the effort among automakers to add advanced driver assistance systems (ADAS). Such mechanisms can enhance car safety, a key selling point. Illustrative of its promise and potential, the ADAS electronics market is estimated to almost triple from 2010 through 2020.

"ADAS features are finding their way into more and more vehicles," Scott said. "The integration of ADAS into the instrument cluster and head up display (HUD) is expected to be commonplace in the future."

In particular, instrument clusters are becoming more advanced, featuring at least one LCD display and allowing ADAS features to be exhibited. For their part, head up displays represent an ideal way to deliver ADAS information, showing data directly in the driver's field of view.

HUDs with ADAS are now available as a feature in the premium D and E car segments, and are also expected to gain a strong presence in the C-segment of affordable small family cars within the next five years.

Combiner displays are likely to drive the growth of the automotive HUD segment, as they eliminate the development costs associated with windscreen displays. The combiner is an angled flat piece of glass located in front of the viewer that redirects an image from a projector in such a way for the field of view and the projected image to be seen at the same time.

Caution should still be exercised while using the feature as it relates to the amount of information displayed on the HUD: If too much information appears, the display could become a distraction, transforming from a safety feature into a safety concern instead.


Worldwide Server Shipments Declined 0.7%; Revenue Declined 5% in 1Q'13 (Charts 2-5)

"The first quarter of 2013 was certainly not a strong period for the server market on a global level," said Jeffrey Hewitt, research vice president at Gartner. "The only regions to post increases were Asia/Pacific and the United States, with Asia/Pacific showing the strongest growth with shipment and revenue increases of 7% and 1.7%, respectively. While these two regions grew in both shipments and revenue, it was not enough to offset the declines of the other geographies−all of which declined in server shipments and revenue for the quarter."

"x86 server shipment growth was flat in the quarter, while revenue increased 1.8%. RISC/Itanium Unix servers declined globally for the period, down 38.8% in shipments and down 35.8% in vendor revenue compared to the same quarter last year. The ‘other' CPU category, which is primarily mainframes, exhibited an increase of 3.6% in worldwide revenue."

IBM had the lead in the worldwide server market based on revenue. The company totaled just over $3 billion in server vendor revenue worldwide, with a total share of 25.5% in the first quarter of 2013. This share was down 2.5% percentage points from the same period in 2012. In the first quarter of 2013, system x accounted for 29.3% of IBM's total server revenue.

All of the top five vendors suffered revenue declines in the first quarter of 2013 except for Dell which grew 14.4%.

In server shipments, HP remained the worldwide leader in the first quarter of 2013 in spite of a year-on-year shipment decline of 15.2%. Dell and Cisco were the only vendors in the top five to have positive shipment growth, with increases of 2.6% and 33%.

In terms of server form factors, blade servers fell 5.9% in shipments and 5% in revenue for the quarter. The rack-optimized form factor dropped 5.2% in shipments and 2% in revenue in the first quarter of 2013.


Worldwide Tablet shipments are expected to grow 58.7% y/y to 229.3 million units in 2013 (Chart 6)

According to a new forecast from the International Data Corporation (IDC), tablet shipments are expected to grow 58.7% year-over-year in 2013 reaching 229.3 million units, up from 144.5 million units last year. IDC now predicts tablet shipments will exceed those of portable PCs this year, as the slumping PC market is expected to see negative growth for the second consecutive year. In addition, IDC expects tablet shipments to outpace the entire PC market (portables and desktops combined) by 2015.

"What started as a sign of tough economic times has quickly shifted to a change in the global computing paradigm with mobile being the primary benefactor," said Ryan Reith, Program Manager for IDC's Mobility Trackers. "Tablets surpassing portables in 2013, and total PCs in 2015, marks a significant change in consumer attitudes about compute devices and the applications and ecosystems that power them. IDC continues to believe that PCs will have an important role in this new era of computing, especially among business users. But for many consumers, a tablet is a simple and elegant solution for core use cases that were previously addressed by the PC."

While Apple has been at the forefront of the tablet revolution, the current market expansion has been increasingly fueled by low-cost Android devices. In 2013, the worldwide average selling price (ASP) for tablets is expected to decline -10.8% to $381. In comparison, the ASP of a PC in 2013 is nearly double that at $635. IDC expects tablet prices to decline further, which will allow vendors to deliver a viable computing experience into the hands of many more people at price points the PC industry has strived to meet for years.

"Apple's success in the education market has proven that tablets can be used as more than just a content consumption or gaming device," said Jitesh Ubrani, Research Analyst for the Worldwide Quarterly Tablet Tracker. "These devices are learning companions, and as tablet prices continue to drop, the dream of having a PC for every child gets replaced with the reality that we can provide a tablet for every child."

In addition to lower prices, another major shift in the tablet market has occurred around screen sizes. Apple's first generation iPad, which included a 9.7-inch display, was perceived by many as the sweet spot for tablets. That is, until 7-inch Android-based tablets began to gain traction in the market. Apple responded with the iPad mini in the fourth quarter of 2012, and in the space of two quarters the sub-8-inch category exploded to overtake the larger-sized segment in terms of total shipments.


Worldwide PC Shipments now expected to fall 7.8% in 2013 as Market Increasingly Looks to Tablets (Chart 7)

Worldwide PC shipments are now expected to fall by 7.8% in 2013 according to the International Data Corporation (IDC). The new forecast reflects a shift in PC buying trends as users increasingly consider alternatives such as delaying a PC purchase or using tablets and smartphones for more of their computing needs. In place of a limited decline of 1.3% in 2013 followed by a gradual increase in volume, the new outlook calls for a more substantial decline of 7.8% in 2013 and minus 1.2% in 2014 with shipment volume reaching only 333 million in 2017, still below the 349 million shipped in 2012 and a peak of more than 363 million shipped in 2011.

The updated forecast reflects the significant drop in volume during the first quarter of 2013 as well as the transitions happening in PC design as vendors bring products to market that are optimized for Windows 8, including more thin, convertible, touch, and slate models.

"As the market develops, usage patterns and devices are evolving," said Loren Loverde, Program Vice President, Worldwide Quarterly PC Trackers at IDC. "Many users are realizing that everyday computing, such as accessing the Web, connecting to social media, sending emails, as well as using a variety of apps, doesn't require a lot of computing power or local storage. Instead, they are putting a premium on access from a variety of smaller devices with longer battery life, an instant-on function, and intuitive touch-centric interfaces. These users have not necessarily given up on PCs as a platform for computing when a more robust environment is needed, but this takes a smaller share of computing time, and users are making do with older systems."

IDC expects to see some replacements happen in 2014, particularly in the commercial segment as support for Windows XP expires. However, the commercial market has been conservative with replacements, focusing on individual systems more than large upgrade projects. In addition, workers at many companies already have portable PCs with adequate configurations. The motivation to buy a new system due to falling prices or to switch from a desktop to a portable PC is contributing less to market growth than it did in the past.

"In addition, the BYOD (Bring Your Own Device) phenomenon has moved from smartphones to tablets and PCs with nearly 25% of employees in organizations larger than 10 people claiming to have purchased the primary PC they use for work," said Bob O'Donnell, Program Vice President, Clients and Displays. "This means that some of the corporate PC purchases we expected this year will no longer happen."


Notebook Vendors to Defer Shipments for 60 days, say Taiwan makers

Notebook vendors will wait till July before ramping up their orders in preparation for the back-to-school demand, a delay of about 60 days as compared to the usual practice in previous years, probably because the vendors are conservative about market demand or are waiting for sufficient supply of touch panels, according to sources with the Taiwan-based supply chain.

The sources pointed out that the initial batch of Haswell-based notebooks, which are set for release in June, has already been shipped, but its volume was rather limited.

Currently, most notebook players are adjusting their modules for new product models and are unlikely to start placing large orders to upstream suppliers until July for the back-to-school season.

Quanta Computer vice chairman CC Leung recently pointed out that the company's clients have mostly halted their order placements until late June and it is expected to impact the company's shipment performance in the second quarter, resulting in flat or only slight growth.

Compal Electronics president Ray Chen also noted that the company's second-quarter shipments will suffer a sequential drop.

However, the sources believe the delay in placing orders will not change the vendors' sales plans for the second half of 2013.


Global Tablet Sales in 2Q'13 may fall 20-30% sequentially, say Taiwan Makers

Global tablet sales in the second quarter of 2013, due to off-season effects and consumers deferring purchases in anticipation of new models to be launched in the third quarter, are likely to decrease by 20-30% from 49.2 million units sold in the first quarter based on IDC statistics, according to Taiwan-based supply chain makers.

Among first-tier tablet vendors, Apple's overall iPad sales are expected to suffer a decline in the second quarter. In addition to a sales drop for the 9.7-inch iPad, iPad mini sales are also expected to see a sequential decrease of 20-30% due to excess inventories and seasonal factors.

Sources from panel players also noted that panel shipments for iPad mini in the second quarter are expected to drop sharply from the original forecast of 10-12 million units to only 8-9 million.

As for Samsung Electronics, the company's success in achieving strong tablet shipments in the first quarter was mainly due to price promotions of its 7-inch Galaxy Tab 2, down from US$199 to US$179 in the North America region.

However, as many brand vendors have released tablets featuring an even better price/performance ratio, Samsung's tablet shipment performance may be impacted in the second quarter, the sources said.

Although Amazon is also likely to be impacted by off-season effects in the second quarter, since the company is expected to release a new 7-inch tablet in July and expand its Kindle Store to more countries, there will be a good chance that the company will attract demand away from its competitors in the second half, the sources added.


North American PCB Book-to-bill Ratio Reached 34-Month High of 1.10 in April 2013

IPC announced that total North American PCB shipments were down 7.0% in April 2013 from April 2012, but bookings increased 7.2% year over year. Year to date, PCB industry shipments were down 5.1% and bookings were down 2.3%. Compared to the previous month, PCB shipments in April decreased 9.9%, and bookings declined 14.3%. Bookings have outpaced shipments for the past five months.

"North American PCB sales in April continued to lag behind 2012 levels, although sales in the flexible circuit segment are strengthening," said Sharon Starr, IPC director of market research.

"Rigid PCB orders for the month exceeded last year's orders and continued to push the book-to-bill ratio up to a strong 1.10. This is the fifth consecutive monthly increase in the ratio, which reinforces our hope that PCB sales will strengthen during the coming month."


Global Handset Touch Panel Shipments to Show 5.5% Sequential Growth to 284 Million Units in 2Q'13

The second quarter is the beginning of the traditional boom season for the touch panel market and demand from handset makers has been reviving.

Demand from China handset makers is the strongest, and shipments to China-based firms are expected to reach 117 million units, a sequential growth of 5.1%, Digitimes Research estimates.

Global touch panel shipments to the tablet segment are expected to reach 70.42 million units in the second quarter, representing a sequential growth of 9.4%, as international brands continue to introduce entry-level 7-inch tablets. Taiwan- and China-based touch panel firms will benefit from the rising demand. China-based touch panel makers are likely to ship 32.33 million tablet touch panels in the second quarter, showing an on-quarter growth of 18.7%. This growth rate is higher compared to Taiwan, Japan and South Korea-based touch panel makers.

Digitimes Research forecasts global shipments of notebook touch panels to reach 4.524 million units in the second quarter, a 24.9% on-quarter growth. However, Taiwan-based touch panel maker TPK is likely to see its market share fall below 50% as more competitors enter the market.


U.S. Consumer Confidence at Five-Year High (Chart 8)

A better view of the current economy and the job markets pushed U.S. consumer confidence in May to the highest level since 2008, according to The Conference Board.


Touch Screen Notebooks Expected to see 50% Increase in shipments to reach 7-7.5 million units in 3Q'13

Shipments of touch screen notebooks are expected to reach 7-7.5 million units in third-quarter 2013, up 50-60% on quarter, according to market observers.

The estimated amount should keep the penetration rate of touch screen notebooks at around 10%, the observers said, adding that the percentage is likely to climb to as high as 13% by the end of the year due to vendors' plans to release even more notebooks featuring the technology.

A lot of the notebooks are expected to be sized 11.6-inch and may be as low as US$400-450. However, the vendors also have plans to release 14- to 15.6-inch units, which are expected to hold nearly a 70% market share later in the year, the observers noted.

Shipments of touch screen notebooks in second-quarter 2013 meanwhile are expected to reach between 4.2-4.5 million units.


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.

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