Weekly Global Update for June 10, 2015

May Leading Indicators

World manufacturing growth will accelerate slightly short term based upon a modest upturn in the May Global Purchasing Managers Index (Chart 1)

• The Institute of Supply Management (ISM) U.S. PMI rose significantly while Markit Economics version weakened very slightly (Chart 2).
• The Eurozone PMI also edged up (Chart 3) with growth varying by country (Chart 4).
• With the exception of India and Vietnam, Asia remained at or near contraction territory (Chart 5).

April U.S. "Factory Orders"

Providing more details on its earlier April Durable Goods report the Department of Commerce’s Factory Orders report stated:

• Electronic equipment orders dropped from their March "spike" (Chart 6).
• Vehicle shipments declined slightly from March (Chart 7).
• Military (Chart 8) and electromedical, measurement and control (Chart 9) equipment orders also dropped from their March spikes.
• Passive component orders and shipments surged (Chart 10) but this upturn may not continue near term as the U.S. PMI leading indicator points to a slowing of growth (Chart 11).

Chart 12 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain.

Source: http://www.census.gov/manufacturing/m3/index.html

Global Semiconductor Sales Increase in April; Steady Growth Projected for Next Three Years (Charts 13-17)

Industry forecast projects growth of 3.4% in 2015, 3.4% in 2016, and 3.0% in 2017

The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $27.6 billion for the month of April 2015, 4.8% higher than the April 2014 total of $26.3 billion and 0.4% lower than last month’s total of $27.7 billion. The Americas market posted double-digit growth compared to last year, leading all regions. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average. Additionally, a new WSTS industry forecast projects steady market growth for the next three years.

"Year-to-year semiconductor sales increased for the 24th straight month in April thanks largely to continued growth in the Americas and Asia Pacific regional markets," said John Neuffer, president and CEO, Semiconductor Industry Association. "The global industry has posted higher sales through April than at the same point in 2014, and we expect continued growth for the rest of 2015 and beyond."

Source: www.semiconductors.org

WSTS Semiconductor Market Forecast (Charts 18 & 19)

• WSTS forecasts semiconductor market to keep steady growth until 2017
• Worldwide Semiconductor Market is forecast to be US$347 billion in 2015, up 3.4% from 2014.

The World Semiconductor Trade Statistics (WSTS) has released its new semiconductor market forecast generated in May 2015.

• WSTS anticipates the world semiconductor market to show a moderate growth of 3.4% to US$347 billion in 2015, driven by all major product categories.
• All major product categories are forecasted to have positive growth rates. The highest growth rates are expected for the Optoelectronics (8.3%) and Analog (5.6%) category.
• By geography, not all regions will grow from 2014. Europe and Japan will show a decline in 2015 at the US$ based forecast, which is mainly based on the current FX effect between euro/USD and yen/USD.
• The semiconductor market growth in 2015 will be largely driven by smartphones and automotive.

Worldwide Semiconductor Market is expected to grow further moderately in both 2016 and 2017.

• All major product categories and regions are forecast to grow positively in each year, with the assumption of stable macro economy throughout the forecast period.
• Worldwide semiconductor market is forecast to be up 3.4% to US$359 billion in 2016. For 2017, the market is forecast to be US$370 billion, up by 3.0%.
• By end application, automotive and wireless communications are projected to grow stronger than the total market, whereas consumer and computer are assumed to remain almost flat.
• By region, a positive growth rate is projected for all regions in 2016 and 2017. Asia-Pacific continues to show growth rates above the worldwide average. Asia-Pacific is still the fastest growing region and is expected to reach US$216 billion in 2016, which is a share of 60% of the total semiconductor market.

Source: www.wsts.org

Semiconductor Fab Equipment Spending to increase 11% in 2015 and another 5% in 2016 (Charts 20 & 21)

Fab Equipment Growth Continues into 2015

SEMI announced the update of its World Fab Forecast report for 2015 and 2016. The report projects that semiconductor fab equipment spending (new, used, for Front End facilities) is expected to increase 11% (US$38.7 billion) in 2015 and another five percent ($40.7 billion) in 2016. Since February 2015, SEMI has made 282 updates to its detailed World Fab Forecast report, which tracks fab spending for construction and equipment, as well as capacity changes, and technology nodes transitions and product type changes by fab.

Capital expenditure (capex without fabless and backend) by device manufacturers is forecast to increase almost 6% in 2015 and over 2% in 2016. Fab equipment spending is forecast to depart from the typical historic trend over the past 15 years of two years of spending growth followed by one of decline. For the first time, equipment spending could grow every year for three years in a row: 2014, 2015, and 2016

According to the SEMI report, fab equipment spending in 2015 will be driven by Memory and Foundry ─ with Taiwan and Korea projected to become the largest markets for fab equipment at $10.6 billion and $9.3 billion, respectively. The market in the Americas is forecast to reach $6.1 billion, with Japan and China following at $4.5 and $4.4 billion, respectively. Europe/Mideast is predicted to invest $2.6 billion. The fab equipment market in South East Asia is expected to total $1.2 billion in 2015.

www.semi.org

North American PCB Business Weakened in April but Book/Bill Remains Positive (Charts 22-24)

IPC announced the April findings from its monthly North American Printed Circuit Board Statistical Program. Sales and orders were both down slightly, compared to last year. The book-to-bill ratio remained positive but decreased to 1.02.

Total North American PCB shipments decreased 1.0% in April 2015 from April 2014, and year-to-date shipment growth remained at -1.3%. Compared to the previous month, PCB shipments were down 12.1%.

PCB bookings decreased by 6.3% compared to April 2014, reducing the year-to-date order growth rate to -0.7%. Orders decreased 15.1% in April compared to the previous month.

"North American PCB sales continued slightly below last year's level, and orders, which rallied in the fourth quarter of 2014 and remained strong in recent months, also fell below last year's level in April," said Sharon Starr, IPC's director of market research. "This caused a reduction in the book-to-bill ratio for April, but it is still in positive territory, which is an indicator of probable sales growth later this year," she added.

Source: www.ipc.org

90% of Population will have a Mobile Phone by 2020

• By 2020, 90% of the world's population over 6 years old will have a mobile phone, and smartphone subscriptions are expected to top 6.1 billion
• India and China show fastest growth for new mobile subscriptions with 18 million and 12 million net additions in Q3 2014
• 800 million new smartphone subscriptions in 2014 brings total to 2.7 billion worldwide
• Mobile video traffic to increase tenfold and constitute 55% of all mobile data traffic by 2020

Rima Qureshi, Senior Vice President, Chief Strategy Officer and Head of M&A, Ericsson, says: "The falling cost of handsets, coupled with improved usability and increasing network coverage, are factors that are making mobile technology a global phenomenon that will soon be available to the vast majority of the world's population, regardless of age or location."

Source: www.ericcson.com

Worldwide Enterprise Storage Systems Factory Revenue up 6.8% y/y to nearly $8.8 billion during 1Q’15 (Charts 25-28)

Demand for Server-Based Storage and Hyperscale Infrastructure Drives a 6.8% Increase in Enterprise Storage Spending in the First Quarter of 2015,

Total worldwide enterprise storage systems factory revenue grew 6.8% year-over-year to nearly $8.8 billion during 1Q’15 according to IDC. Total capacity shipments were up 41.1% year-over- year to 28.3 exabytes during the quarter.

"Following a busy end-of-year spending environment, the enterprise storage market fell back into what has become a familiar market pattern," said Eric Sheppard, Research Director, Storage at IDC. "Spending on traditional external arrays fell during the quarter while demand for server-based storage and hyperscale infrastructure was up strongly during the quarter."

Source: www.idc.com

Worldwide Ethernet Switch Market (Layer 2/3) increased 1.4% y/y to $5.4 billion in 1Q’15 (Charts 29 & 30)

Worldwide Quarterly Ethernet Switch and Router Trackers Show Ethernet Switch Market Flat to Slightly Positive, Growth Indicators for Router Market

The worldwide Ethernet switch market (Layer 2/3) totaled $5.4 billion in1Q’15, an increase of 1.4% year over year and a decrease of 13.8% quarter over quarter. Meanwhile, the worldwide total enterprise and service provider router market continues to rebound from recent year-over-year declines, growing 7.7% year-over-year, although declining 8.3% sequentially.

"The first quarter was a story of the ascendance of 40Gb Ethernet. As other market segments declined due to general economic softness factors and the normal first quarter seasonality, powerful growth in the 40GbE segment lifted the overall market," said Rohit Mehra, Vice President, Network Infrastructure, at IDC."1Gb and 10Gb Ethernet should see a rebound in the second quarter given the increasing demands on enterprise networks from core to edge, but the strength of the 40Gb segment demonstrates the ongoing growth of large-scale public and private clouds."

Source: www.idc.com

Internet of Things Market to triple from $655.8 billion in 2014 to $1.7 trillion by 2020

The Internet of Things (IoT) continues to gain momentum as vendors and enterprises begin to embrace the opportunities this market presents. According to new research from IDC the worldwide Internet of Things market will grow from $655.8 billion in 2014 to $1.7 trillion in 2020 with a compound annual growth rate (CAGR) of 16.9%.

Devices, connectivity, and IT services will make up the majority of the IoT market in 2020. Together, they are estimated to account for over two-thirds of the worldwide IoT market in 2020, with devices (modules/sensors) alone representing 31.8% of the total. By 2020, IDC expects that IoT purpose-built platforms, application software, and "as a service" offerings will capture a larger percentage of revenue.

"While wearable devices are the consumer face of the Internet of Things, and where recognition of IoT appears to begin, the real opportunity remains in the enterprise and public sector markets," said Vernon Turner, senior vice president and research fellow (IoT), Enterprise Systems. "The ripple effect of IoT is driving traditional business models from IT-enabled business processes to IT-enabled services and finally to IT-enabled products, which is beginning to disrupt the IT status quo."

Source: www.idc.com