Weekly Global Update for July 22, 2015

Based on recently released data from Taiwan/China (June), and the U.S., Europe and Japan (May) world electronic equipment shipments have begun their normal mid-year seasonal recovery (Chart 1). June 2015 electronic equipment shipments were up 2.6% versus June 2014 and up 7.9% sequentially versus May 2015.

Printed circuit board shipments (Chart 2) mirrored electronic equipment. Aside from the seasonal effects PCB growth is currently only modest and Custer Consulting Group’s PCB leading indicator (Chart 3) points to a slower expansion rate ahead. Sequential growth will occur through autumn but compared to 2014 growth looks to be in low single digits.

Source: Custer Consulting Group analyses of country data

Taiwan/China Update

Taiwan listed companies (many of which manufacture in China) released their June 2015 monthly sales.

• Electronic equipment shipments had their expected June seasonal upturn (Chart 4), up 2.1% versus June of 2014.
• Taiwan-listed ODMs also reported June sequential revenue growth (Chart 5) but they were down 0.3% in 2Q’15 versus. 2Q’14 (Chart 6).
• Taiwan wafer foundries experienced a large June sales decline (Chart 7), package and test were up (Chart 8) but memory (Chart 9) and passive component (Chart 10) sales declined.
• Rigid and flexible PCB sales rose sequentially (Chart 11) but rigid (CCL) laminate revenues declined (Chart 12).
• Asia/Pacific’s PCB leading indicator points to minimal y/y growth short term – aside from seasonal effects (Chart 13).
• Solar/Photovoltaic sales improved in June (Chart 14).

Source: Financial reports of Taiwan-listed companies

Europe Update

Europe had a decent 3-month period (March-May 2015) compared to the same period in 2014 (Chart 15) as most members of the electronic supply chain expanded (based on euro denominated revenues)

• Industrial production growth was weak in June with Italy, France and the UK improving but Germany and the total EU27 down (Chart 16).
• Electronic equipment shipments declined in June (Chart 17) but auto production increased (Chart 18).
• Aerospace production improved sequentially (Chart 19), instrument and control equipment revenues declined slightly (Chart 20), and the highly volatile electromedical sector dropped sharply (Chart 21).
• Electronic assembly (Chart 22) and wiring device (Chart 23) output increased with the PCB leading indicator pointing to improving printed circuit demand ahead (Chart 24).

Source: Eurostat

Japan Update

Japan’s domestic electronics output remained weak in May reflecting normal seasonality (Chart 25).

• Electronic component and device growth slowed (Chart 26) but still remained positive versus last year.
• PCB sales dropped versus April (Chart 27) with their short term outlook (Chart 28) pointing to minimal growth.
• Semiconductor equipment orders declined (Chart 29) on a typically highly volatile monthly basis as did flat panel equipment shipments and orders (Chart 30).

Source: JEITA

Internet of Things (IoT) market revenues to grow 29% in 2015 to $62.4 billion after increasing 21% in 2014 to about $48.4 billion

Wearable Systems Give Major Boost to Total IoT Sales in 2015

New IoT connections growing quickly; Apple Watch boosts growth of wearable systems, but will these be merely a passing fad?

Market revenues associated with network communications, sensing, and control functions in subsystems and objects attached to the Internet of Things (IoT) are forecast to grow 29% in 2015 to $62.4 billion after increasing 21% in 2014 to about $48.4 billion, according to IC Insights. Chart 31 provides a breakout of sales growth in five IoT market categories, based on IC Insights’ updated forecast.

IC Insights raised its projection for IoT-related revenues in 2015 to show much stronger growth in wearable systems after the formal launch of Apple’s first smartwatches in April 2015. The long-term fate of smartwatches continues to be debated. Whether these wearable systems evolve into a major end-use market category or simply become a niche with a short lifecycle remains to be seen. In the short-term, however, the launch of the Apple Watch—jam-packed with ICs, sensors, and other components—has provided a major boost to semiconductor unit shipments and sales to the wearable IoT category.

Total IoT-related revenues (excluding Internet servers, network infrastructure, and cloud-computing systems) are now expected to rise by a compound annual growth rate (CAGR) of 21.1% from 2013 to 2018, reaching $104.1 billion at the end of the forecast period.

Worldwide growth of “things” connected to the Internet continues to significantly outpace the addition of human users to the World Wide Web, according to the IC Market Drivers Update. New connections to the “Internet of Things” (IoT) are forecast to increase 40% in 2015 with 574 million new Internet connections expected to be attached to embedded systems, sensors, instruments, vehicles, controllers, cameras, wearable electronics, and other objects. IoT connections grew to 410 million in 2014, which was a 45% increase from 282 million in 2013 (Chart 32).

The total installed base of connected things on the IoT is forecast to reach 13.2 billion units worldwide in 2015 versus about 3.1 billion humans using computers, cellphones, and other system applications over the Internet this year, based on IC Insights’ updated projections. By the end of this decade, more than 25 billion systems and objects are expected to be attached to the Internet versus about 4.4 billion human users.

Source: www.ICInsights.com

Worldwide Semiconductor Capital Spending to Increase 2.5% in 2015 (Chart 33)

Reductions in Memory Spending Will Result in a 3.3% Decline in 2016

Worldwide semiconductor capital spending is projected to grow 2.5% in 2015, to $66.1 billion, according to Gartner, Inc. This is down from the 4.1% growth predicted in the previous quarter's forecast.

"Since the previous quarter's forecast, continued weakness in the euro and yen have created major weaknesses in the overall equipment market picture," said Bob Johnson, research vice president at Gartner. "With over half of all equipment being produced by either Japanese or European suppliers, the weakness in their currencies has been the primary factor in our reducing our overall outlook for 2015. Longer term, we expect modest growth throughout the semiconductor cycle, with just a pause in the equipment market growth expected in 2016, as DRAM goes through a typical cyclical downturn."

Foundries will continue to outspend the logic integrated device manufacturers (IDMs) in 2015. Worldwide foundry spending is forecast to increase 17.2%, in contrast with the 1.4% decline in total logic spending. However, the longer-term outlook for total logic spending is strong as predicted mobility market saturation will dampen the need for new capacity and create an environment where existing capacity is upgraded to the latest node.

Worldwide memory capital spending remains strong for 2015, with a 3.2% increase anticipated, compared with a 10.2% increase in the previous quarter's forecast. The reduction from the previous forecast is a result of spending announcements by major manufacturers, which were lower than previously anticipated, and reflected the fact that major equipment types are cheaper due to weaknesses in exchange rates. Memory manufacturers currently enjoy a strong chip-pricing environment, which sets the stage for continued spending growth through 2015. However, an anticipated oversupply in DRAM in 2016 will lead to a 13.6% decrease for worldwide memory spending next year.

Wafer-level equipment spending is forecast to increase 0.1% in 2015, as manufacturers pull back on new fab construction and concentrate instead on ramping up new capacity. "As we get better visibility into individual company spending plans for 2015, it is apparent that caution is a prevailing sentiment, with the exception of memory, where manufacturers are adding capacity in response to favorable market conditions," said Johnson.

This research is produced by Gartner's Semiconductor Manufacturing program. This research program, which is part of the overall semiconductor research group, provides a comprehensive view of the entire semiconductor industry, from manufacturing to device and application market trends.

Source: www.gartner.com

U.S Industrial Production Growth Stalls (Chart 34)

The U.S. Fed reported that manufacturing output was little changed both in June and in May.

The June weakness was concentrated in the auto sector, where output fell 3.7%. Excluding that decline, factory production would have increased 0.3%.

Despite the soft manufacturing reading, overall industrial output climbed 0.3% after a 0.2% decline in May. Mining output jumped 1.0% and utilities production gained 1.5%.

Source: www.federalreserve.gov/releases/g17/table1_2.htm