Europe Update

October European results were recently released:

  • The euro is near its weakest level vs. the U.S. dollar since 2002 (Chart 1).
  • Industrial production rose or held steady sequentially from September for the EU27 as well as Germany, Italy, France & the UK (Chart 2).
  • Electronic equipment production dropped rather sharply from September (Chart 3) but both annualized (12/12) and 3-month (3/12) electronic equipment growth held near +5% (Chart 4).
  • Motor vehicle production reached an all-time high (Chart 5).
  • Aircraft/aerospace output eased slightly from September but remained near its highest monthly level (Chart 6).
  • Instrument & control equipment production declined from September but is also near its all-time high (Chart 7).
  • Electronic assembly (loaded board) production declined in October and has been effectively flat (with monthly oscillations) for two years (Chart 8).
  • Printed wiring board (wiring device) production has been dropping throughout most of 2015 (Chart 9) as has component and board output (Chart 10).

In summary many sectors of European electronic supply chain production are at near peak levels but the current business cycle may have peaked.

Source: Eurostat

Japan Update

JEITA just released October Japanese electronic equipment, device and component production for October:

  • The yen is hovering near its weakest level vs. the dollar since 2002 (Chart 11).
  • Electronic equipment production declined sequentially from September and continued its multiyear decline (Chart 12).
  • Semiconductor shipments to Japan and domestic electronic equipment production (Chart 13) are at or near zero growth (3/12=100).
  • PCB production has been increasing in 2015 however it may be peaking per industry sources (Chart 14 & 15).
  • Electronic device production has dropped to near zero growth and component growth has flattened at +10% (Chart 16).


S. Korea Update

Chart 17 shows consolidated quarterly revenues of seven major S. Korean electronic equipment producers. 3Q’15 combined sales were up 6% vs. 3Q’14.

Source: Company financial reports

Flash December PMI

Markit economics released December preliminary (flash) Purchasing Managers Indices for the USA, Eurozone, Germany, France and Japan. Europe improved but Japan and the USA had PMI declines (Chart 18). 

Semiconductor Manufacturing Equipment Forecast (Chart 19)

SEMI projects that worldwide sales of new semiconductor manufacturing equipment will decrease 0.6% to $37.3 billion in 2015, according to the SEMI Year-end Forecast, released at the annual SEMICON Japan exposition. In 2016, nominal positive growth is expected, resulting in a global market increase of 1.4%.

The SEMI Year-end Forecast predicts that wafer processing equipment, the largest product segment by dollar value, is anticipated to increase 0.7% in 2015 to total $29.5 billion. The “Other Front End” category (fab facilities, mask/reticle, and wafer manufacturing equipment) is expected to increase 20.6% in 2015. The forecast predicts that the market for assembly and packaging equipment will decrease by 16.4% to $2.6 billion in 2015 and that the market for semiconductor test equipment is forecast to decrease by 7.4%, totaling $3.3 billion this year.

For 2015, Taiwan, South Korea, North America, remain the largest spending regions, with investments in Japan approaching North American levels. SEMI forecasts that in 2016 equipment sales in Europe will climb to $3.4 billion (a 63.1% increase over 2015). After a 13% contraction for Europe in 2015, GLOBALFOUNDRIES, Infineon, Intel, and STMicroelectronics are all expected to significantly accelerate fab equipment spending in 2016, resulting in strong growth in the region in 2016. In Rest of World, essentially Southeast Asia, sales will reach $2.5 billion (25.7% increase), the China market will total $5.3 billion (9.1% increase), and North America equipment spending will reach $5.9 billion (6.1% increase). The equipment markets in Japan, Korea, and Taiwan are expected to contract in 2016.


N American Semiconductor Equipment November 2015 book/bill ratio 0.96 (Charts 21 & 22)

N America-based manufacturers of semiconductor equipment posted $1.24 billion in orders worldwide in November 2015 (3-month average basis) and a book-to-bill ratio of 0.96, according to SEMI.

SEMI reported that the 3-month average of worldwide bookings in November 2015 was $1.24 billion, 6.7% lower than October 2015 and 1.7% higher than the November 2014.
The 3-month average of worldwide billings in November 2015 was $1.29 billion, 5.2% lower than October 2015 and 8.3% higher than November 2014.

"The semiconductor equipment book-to-bill ratio continued to decelerate in the fourth quarter," said Denny McGuirk, president and CEO of SEMI.  “In light of this recent softening and with the currently strong U.S. dollar, SEMI anticipates that the total equipment market (billings) will be flat to slightly down this year vs. last year as reported in U.S. dollars."


Top 100 Arms-Producing & Military Services Companies for 2014 (Charts 22-27)

The sales of arms and military services by the SIPRI Top 100—the world’s 100 largest arms-producing and military services companies (excluding China), ranked by their arms sales—totaled $401 billion in 2014. This represents a decrease of 1.5% compared to Top 100 revenues in 2013.

However, despite four consecutive years of decreasing sales, total arms revenues for the Top 100 companies in 2014 remained 43% higher than for the Top 100 in 2002.


Worldwide Wearable Device Market Shipments will grow 44.4% y/y from 80 million units in 2015 to 111.1 million units in 2016 (Charts 27 & 28)

IDC Forecasts Worldwide Shipments of Wearables to Surpass 200 Million in 2019, Driven by Strong Smartwatch Growth

The worldwide wearable device market (commonly referred to as wearables) will see continued growth as second- and third-generation iterations reach the market. These new devices will build upon the hardware and software of their predecessors and answer some of the shortcomings and concerns that potential customers have today. According to the International Data Corporation (IDC), the worldwide wearable device market will reach a total of 111.1 million units shipped in 2016, up a strong 44.4% from the 80 million units expected to ship shipped in 2015. By 2019, the final year of the forecast, total shipments will reach 214.6 million units, resulting in a five-year compound annual growth rate (CAGR) of 28%.

"The most common type of wearables today are fairly basic, like fitness trackers, but over the next few years we expect a proliferation of form factors and device types," said Jitesh Ubrani , Senior Research Analyst for IDC Mobile Device Trackers. "Smarter clothing, eyewear, and even hearables (ear-worn devices) are all in their early stages of mass adoption. Though at present these may not be significantly smarter than their analog counterparts, the next generation of wearables are on track to offer vastly improved experiences and perhaps even augment human abilities."

One of the most popular types of wearables will be smartwatches, reaching a total of 34.3 million units shipped in 2016, up from the 21.3 million units expected to ship in 2015. By 2019, the final year of the forecast, total shipments will reach 88.3 million units, resulting in a five-year CAGR of 42.8%.

"In a short amount of time, smartwatches have evolved from being extensions of the smartphone to wearable computers capable of communications, notifications, applications, and numerous other functionalities," noted Ramon Llamas, Research Manager for IDC's Wearables team. "The smartwatch we have today will look nothing like the smartwatch we will see in the future. Cellular connectivity, health sensors, not to mention the explosive third-party application market all stand to change the game and will raise both the appeal and value of the market going forward.

"Smartwatch platforms will lead the evolution," added Llamas. "As the brains of the smartwatch, platforms manage all the tasks and processes, not the least of which is interacting with the user, running all of the applications, and connecting with the smartphone. Once that third element is replaced with cellular connectivity, the first two elements will take on greater roles to make sense of all the data and connections."

Global Smartphone Shipments increased 7.7% y/y to 331.9 million units in 3Q’15

There were 331.9 million smartphones shipped globally in the third quarter of 2015, increasing 10.5% on quarter and 7.7% on year, according to Digitimes Research.

Samsung Electronics took up 25.6% of the shipments, followed by Apple with 14.5%, Huawei Device 7.4%, Lenovo 4.8%, LG Electronics 4.5%, Xiaomi Technology 3.8%, BBK 3.5%, TCL Communication Technology 3.3%, Oppo 3.2%, ZTE 2.5%, Sony Mobile Communications 2.0%, Microsoft Mobile 1.7%, Meizu 1.7%, Coolpad 1.5% and Asustek Computer 1.4%.

The top-15 vendors together took up 81.4% of shipments and nine were based in China, two in the US and South Korea, and one in Japan and Taiwan.

Global smartphone shipments in the fourth quarter will increase to 396.8 million units, leading to 1.326 billion units for 2015 which will rise 10.1% on year.


Internet of Things Market will grow at a 15.9% CAGR from 1.7 billion in 2015 to nearly 3.1 billion in 2019 (Charts 29 & 30)

Internet of Things integrated circuit sales expected to display a compound annual growth rate (CAGR) of 15.9% over the next four years, with MCUs and SoC processors seeing the strongest growth.

Between 2015 and 2019, worldwide systems revenues for applications connecting to the Internet of Things will nearly double, reaching $124.5 billion in the final year of this decade, according to IC Insights. During that same timeframe, new connections to the Internet of Things (IoT) will grow from about 1.7 billion in 2015 to nearly 3.1 billion in 2019,

The new IC Market Drivers report shows about 30.0 billion Internet connections are expected to be in place worldwide in 2020, with 85% of those attachments being to web-enabled “things”—meaning a wide range of commercial, industrial, and consumer systems, distributed sensors, vehicles, and other connected objects—and 15% for electronics used by humans to communicate, download and receive streams of data files, and search for online information. It was the opposite of that in 2000, with 85% of 488 million Internet connections providing human users with online access to the World Wide Web and the remaining 15% serving embedded systems, remote sensing and measurements, control, and machine-to-machine communications.

Strong double-digit increases in the Internet of Things market will drive up IC sales in IoT applications by a CAGR of 15.9% between 2015 and 2019 to about $19.4 billion in the final year of this decade. IoT applications will also fuel strong sales growth in optoelectronics, sensors/actuators, and discrete semiconductors (O-S-D), which are projected to rise by a CAGR of 26.0% between 2015 and 2019 to $11.6 billion in four years.

The new IC Market Drivers report shows microcontrollers and system-on-chip microprocessors topping integrated circuit sales growth with a CAGR of 22.3% in the next four years, followed by memories at 19.8%, application specific standard products (ASSPs) at 16.4%, and analog ICs at an annual growth rate of 12.7%.

In the 2014-2019 forecast period of the IC Market Drivers report, wearable systems are projected to be the fastest growing IoT application with sales increasing by a CAGR of 59.0%, thanks in great part to a 440% surge in 2015 due to the launch of Apple’s first smartwatches in 2Q’15. Sales of IoT-connected wearable systems are expected to reach $15.2 billion in 2019 compared to $1.5 billion in 2014 and about $8.1 billion in 2015.

Meanwhile, connected vehicles (passenger cars and light trucks) are expected to be the second fastest market category for IoT technology with revenues growing by a CAGR of 31.5% between 2014 and 2019 to $5.3 billion in the final year of this decade.


Global Copper Clad Laminate Output grew 7.1% y/y to 760 million square meters, of which 520 million SM were produced in China

In 2014, global CCL output witnessed a year-on-year growth of 7.1% to 760 million square meters, of which 520 million square meters were produced in China, accounting for 68.4% of the global total.

Glass-fabric-base CCL and paper-based CCL are two products that have the largest output in China, separately making up 61.4% and 16.5% of China's total CCL output in 2014.

The Chinese CCL market is highly concentrated. Kingboard Chemical ranked first with a market share of 29.3%, followed by Shengyi Technology (14.8%) and ITEQ Corporation (9.3%).

The CCL industry has entered a new round of growth in recent years, and two regions in Asia- China and Southeast Asia have become the fastest-growing ones. Relevant manufacturers have successively taken measures like capacity expansion and acquisitions to strengthen their CCL business.

Shengyi Technology Co., Ltd.: In Aug 2015, the company announced a capital increase of RMB500 million into its holding subsidiary- Shengyi Technology (Suzhou) Co., Ltd to meet the latter's capital demand for building 11 million m2 CCL and 24 million m2 bonding sheet project.

Guangdong Chaohua Technology Co., Ltd.: In Aug 2015, the company acquired a 51% stake in Zhuhai ATEM Electronic Technology Co., Ltd., which specializes in flexible CCL and is one of few domestic adhesive-free flexible CCL manufacturers.

Goldenmax International Technology Ltd.: Phase I of 10.20 million pcs/a medium and high-grade CCL and 6 million m2 prepreg production line project" was completed and went into production in Oct 2014; Phase II was completed and placed in operation in Apr 2015.

Source: ResearchInChina

U.S. Industrial Production Declines in November (Chart 31)

U.S. industrial production saw its sharpest decline in more than three and a half years in November as utilities dropped sharply.

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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