Weekly Global Update for January 13, 2016

November Factory Orders - Domestic Shipments, Orders and Inventories

The U.S. Department of Commerce released its November “Factory Orders” report detailing monthly shipments, orders and inventories of key electronic supply chain categories.

• Total electronic equipment orders rose slightly (Chart 1) and inventories shrank for most categories (Chart 2).
• Vehicle (Chart 3) and aircraft (Chart 4) shipments increased sequentially from October.
• Defense capital goods orders spiked (Chart 5) but military electronics orders only increased slightly (Chart 6).
• Electromedical, measurement and control equipment orders and shipments eased slightly but remained near their historic highs (Chart 7).
• Passive component orders and shipments remained robust (Chart 8) as their 3-month (3/12) growth rates (Chart 9) are at 15 year highs. However passive component growth is much greater than N. American semiconductor shipment growth, suggesting that a major domestic passive component “downward correction” may be imminent (Chart 10).

Chart 11 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain.

Source: www.census.gov/indicator/www/m3/

PMI Leading Indicators

Markit Economics and the Institute for Supply management released their December PMI leading indicators.

• The Global PMI declined from November to December (Chart 12), weighed down by weak U.S. and China results (Chart 13).
• ISM’s U.S. PMI fell into contraction territory (Chart 14).
• Eurozones’ manufacturing activity accelerated in December (Chart 15) as most European countries except the UK, Spain and Russia saw manufacturing activity increases (Chart 16).
• China continued to weaken (Chart 17) and India slipped slightly while other key Asian countries improved (Chart 18).
• Japan’s PMI was little changed in December but remained firmly in expansion territory (Chart 19).
• Taiwan (Chart 20) and S Korea (Chart 21) saw their PMIs return to expansion (PMI >50).

Global Semiconductor Sales Dip Slightly in November (Charts 22-24)

Worldwide sales down 0.3% month-to-month, 3.0% year-to-year; industry still on pace to narrowly exceed 2014 sales total

The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $28.9 billion for the month of November 2015, 0.3% lower than October and 3.0% down from the November 2014. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a 3-month moving average.

“Softening demand and lingering macroeconomic challenges continued to limit global semiconductor sales in November,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Despite these headwinds, the industry may narrowly surpass total annual sales from 2014 and is projected to post modest sales increases in 2016 and beyond.”

Source: www.semiconductors.org

Custer Comments:

• Custer Consulting Group’s semiconductor leading indicator points to continued world shipment declines through at least 1Q’16 (Chart 25).
• Exchange rates continue to impact European (Chart 26) and Japan (Chart 27) monthly values. For Europe growth is positive when expressed in Euros but negative when converted to U.S. dollars.

Worldwide Semiconductor Revenue Declined 1.9% in 2015 (Charts 28 & 29)

Mixed Results in All Segments Drove Slow Growth

Worldwide semiconductor revenue totaled $333.7 billion in 2015, a 1.9% decrease from 2014 revenue of $340.3 billion, according to preliminary results by Gartner, Inc. The top 25 semiconductor vendors' combined revenue increased 0.2%, which was more than the overall industry's growth. The top 25 vendors accounted for 73.2% of total market revenue, up from 71.7% in 2014.

"Weakened demand for key electronic equipment, the continuing impact of the strong dollar in some regions and elevated inventory are to blame for the decline in the market in 2015," said Sergis Mushell, research director at Gartner. "In contrast to 2014, which saw revenue growth in all key device categories, 2015 saw mixed performance with optoelectronics, nonoptical sensors, analog and ASIC all reporting revenue growth while the rest of the market saw declines. Strongest growth was from the ASIC segment with growth of 2.4% due to demand from Apple, followed by analog and nonoptical sensors with 1.9% and 1.6% growth, respectively. Memory, the most volatile segment of the semiconductor industry, saw revenue decline by 0.6%, with DRAM experiencing negative growth and NAND flash experiencing growth."

Intel recorded a 1.2% revenue decline, due to falls in PC shipments. However, it retained the No. 1 market share position for the 24th year in a row with 15.5% market share. Samsung's memory business helped drive growth of 11.8% in 2015, and the company maintained the No. 2 spot with 11.6% market share.

"The rise of the U.S. dollar against a number of different currencies significantly impacted the total semiconductor market in 2015," said Mr. Mushell. "End equipment demand was weakened in regions where the local currency depreciated against the dollar. For example in the eurozone, the sales prices of mobile phones or PCs increased in local currency, as many of the components are priced in U.S. dollars. This resulted in buyers either delaying purchases or buying cheaper substitute products, resulting in lower semiconductor sales. Additionally, Gartner's semiconductor revenue statistics are based on U.S. dollars; thus, sharp depreciation of the Japanese yen shrinks the revenue and the market share of the Japanese semiconductor vendors when measured in U.S. dollars."

The NAND market continued to deteriorate throughout the year. As a result, revenue grew only 4.1% in 2015, fueled by elevated supply bit growth that resulted in an aggressive pricing environment. The tumultuous NAND pricing environment rippled through most of the NAND solutions, particularly solid-state drives (SSDs), which continue to encroach on hard-disk drives (HDDs). The ensuing price war in SSDs further pressured the profitability of the NAND flash makers amid the biggest technology transition in flash history — 3D NAND. While 3D NAND commercialization was modest, it was limited to only one vendor — Samsung. Modest revenue gains have not stopped investment in NAND flash and 3D technology, with all vendors continuing to spend aggressively in the technology and most with new fabs.

After 32.0% revenue growth in 2014, the DRAM market hit a downturn in 2015. An oversupply in the commodity portion of the market caused by weak PC demand led to severe declines in average selling prices (ASPs), and revenue contracted by 2.4% compared with 2014. The oversupply and the extent of ASP declines could have been significantly worse if Micron Technologies' bit growth had performed in line with its South Korean rivals. Fortunately for the market, the company saw negative bit growth due to its transition to 20 nm, sparing the industry from an even more severe downturn.

Source: www.gartner.com

Worldwide 3D Printer shipments up 35% in Jan-Sep 2015 (Charts 30-32)

Worldwide shipments of 3D Printers rose 35% YTD through the first three quarters of 2015 on the back of shipments of low priced Personal/Desktop 3D Printers, according to CONTEXT, an IT market research company. Of the total 173,962 units shipped year-to-date, 95% of these were Personal/Desktop printers, mostly priced below $5,000. This represents a 38% YEAR-ON-YEAR growth for this sub-category compared to a decline in shipments of 3% YTD in the Industrial/Professional segment which saw only 8,706 units shipped through the first three quarters of 2015. Most of the growth came in the first half of the year however, with Q3'15 showing only a 4% YEAR-ON-YEAR growth in Personal/Desktop printer shipments and the Industrial/Professional sector struggling again, down 7% from Q3'14.

Taiwan's XYZ printing is the global leader in the Desktop/Personal 3D Printer space so far in 2015, with a 17% global share, taking the top spot from the previous leader at the same time last year, MakerBot. The market continues to be characterized by regional brand dominance and the ability of start-ups to gain share quickly via various crowdsourced efforts. The influence of start-ups is evidenced by the progress of US based M3D and its highly successful Kickstarter effort showing strong demand remaining in this segment. Meanwhile, the recent announcement from 3D Systems of its refocus away from its $999 consumer-focused printer gives further indication that demand in the Desktop/Personal segment is not coming from at-home consumers.

"While not quite yet resonating with general consumers, Desktop 3D Printers remain an important gateway technology for the evolution of the 3D Printing industry" noted Chris Connery, VP for Global Analysis at CONTEXT. "Today's young engineers, students, and hobbyists need to become exposed to the concepts necessary to allow them to properly design products for an additive manufacturing environment and low cost, entry level Personal 3D Printers allow for this learning to take place more rapidly."

The Industrial/Professional portion of the 3D Printing market struggled in 2015 after the hype from recent years faded. Additionally, IT industry stalwarts (previously not part of this industry) like HP, Canon, Ricoh and Toshiba Machines each announced plans to enter the market in the coming years, potentially slowing expensive capital investments in 3D Printers until these new technologies arrive.

The Industrial/Professional sector is characterized by a wide range of technologies and products which can range in price from $20,000 to over $1.5M. Stratasys and 3D Systems are the most diversified in their portfolio of offerings and continued to lead the market in 2015. Germany based EOS showed the most growth in the year thanks its participation in the only sector in the Industrial/Professional space which prospered, Metal 3D Printing.

As the industry evolves from typically only using 3D Printing as a Rapid Prototyping technology, to one which can now be used to make finished goods and parts, the addition of Metal 3D Printers to production floors took another step forward in 2015. While many of the 30-year-old Additive Manufacturing (AM) technologies were invented in and sold into the United States, the market for Industrial Metal 3D Printing machines is dominated by European companies such as EOS, Concept Laser, SLM solutions, Arcam, Realizer and Renishaw who account for 78% of total global sales. Machines in this category carry a weighted average list price of $459,000. For this reason, the Industrial/Professional side of the 3D Printing market often benchmarks itself based on revenues generated from the sale of machines, rather than in unit volume shipments alone, and on this measure companies with larger metal portfolios such as EOS, SLM Solutions and Arcam show their relevance as market leaders.

The total global market for 3D Printing including not only printer Hardware, but also Materials and Services is projected to grow from $4.3B in 2015 to $17.7B by 2020. Growth is expected in both the Industrial/Professional sector especially in metals and in the Persona/Desktop sector especially in education. For the Personal/Desktop sector, as many companies recognize that general consumer adoption for these devices may be many years away, efforts in this space will be refocused toward engineers, architects, small businesses and educational institutions.

Source: www.contextworld.com