U.S. December Electronic Equipment Shipments, Orders and Inventories
The U.S. Department of Commerce just released its December Durable Goods report:
- Electronic equipment 3-month average book/bill ratio rose slightly in December to 1.024 (Chart 1).
- Electronic equipment orders and shipments both declined sequentially from November (Chart 2) however order growth rose on a 3/12 basis (Chart 3).
- The ratio of inventories/orders increased slightly (Chart 4).
- Communication equipment orders dropped substantially (Chart 5) and computer equipment orders and shipments continued their steady decline (Chart 6).
- Non-defense aircraft shipments plunged (Chart 7) as both defense and non-defense orders dropped (Chart 8).
- Defense capital goods orders declined from their November spike (Chart 9).
North America SEMI Equipment Manufacturers posted $1.34 billion in Orders Worldwide in December 2015 (3-month average basis) and a Book/Bill of 0.99 (Charts 10 & 11)
North America-based manufacturers of semiconductor equipment posted $1.34 billion in orders worldwide in December 2015 (3-month average basis) and a book-to-bill ratio of 0.99, according to SEMI.
SEMI reported that the 3-month average of worldwide bookings in December 2015 was $1.34 billion, 8.6% higher than November 2015 and 2.8% lower than the December 2014.
The 3-month average of worldwide billings in December 2015 was $1.35 billion, 4.9% higher than November 2015 and is 3.2% lower than December 2014.
"Both semiconductor equipment bookings and billings improved in December," said Denny McGuirk, president and CEO of SEMI. “Despite softness in the equipment market in the fourth quarter, both annual bookings and billings in 2015 of North American equipment suppliers remained above 2014 levels."
North American PCB Industry Ends 2015 with 0.4% Sales Growth (Charts 12-14)
IPC announced the December 2015 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Slow sales growth continued in December, bringing 2015 to a close at 0.4% growth over 2014. The book-to-bill ratio returned to parity at 1.00 in December.
Total North American PCB shipments increased 0.6% in December 2015 compared to December 2014. Year-to-date shipment growth remained at 0.4%. In December, year-to-date growth reflects the entire year of 2015 over 2014. Compared to the previous month, PCB shipments were up 6.7%.
PCB bookings rose 1.5% compared to December 2014. Year-to-date order growth in December, which represents the entire year of 2015, was up 2.5% over 2014. Orders in December were 6.4% ahead of orders in the previous month.
“Although North American PCB industry sales ended 2015 just slightly ahead of 2014, orders have grown a bit faster,” said Sharon Starr, IPC’s director of market research. “This and the long run of positive book-to-bill ratios in 2015, falling below parity for just one month, indicate the likelihood of continued slow growth in 2016,” she added.
Samsung and Apple Continue as Top Global Semiconductor Customers in 2015 (Chart 15)
Samsung and Lenovo, Fastest-Growing Companies for the Past Five Years, Decreased Their Design TAM in 2015
Samsung Electronics and Apple remained the top semiconductor buyers in 2015, representing 17.7% of the market, according to Gartner, Inc. Samsung Electronics and Apple together consumed $59.0 billion of semiconductors in 2015, an increase of $0.8 billion from 2014.
"Samsung Electronics and Apple have topped the semiconductor consumption table for five consecutive years, but the growth of Samsung's design total available market (TAM) was lower than the total semiconductor market in 2014 and 2015," said Masatsune Yamaji Masatsune, principal research analyst at Gartner. "Samsung and Lenovo, the fastest-growing companies over the last five years, decreased their design TAM in 2015 and the risk of revenue declines from the strongest customers for semiconductor chip vendors is increasing."
The top 10 companies bought $123 billion of semiconductors, to account for 36.9% of semiconductor chip vendors' worldwide revenue in 2015. This was down from 37.9% in 2014, which was worse than the semiconductor industry's global total decrease of 1.9%.
The market decline happened partly because HP spun off its enterprise business, which bumped Toshiba from the top 10. Toshiba's design TAM in 2015 was $4.6 billion, so the top 10 companies in 2014 (including HP Inc., Hewlett Packard Enterprise and Toshiba) represented $127.6 billion of semiconductors in 2015 on a design TAM basis, to account for 38.2% of semiconductor chip vendors' worldwide revenue.
As the growth of the personal electronic device market continues to slow, the risk of revenue declines from the strongest customers for semiconductor chip vendors is increasing. Many semiconductor chip vendors, especially general-purpose chip vendors, are trying to reduce the dependency on a limited number of extremely large customers, such as Samsung Electronics, Apple and Lenovo, and are making an effort to diversify their sales targets to the fragmented long-tail small customers, so as to stabilize their business growth with a mass-marketing approach.
"Nine of the top 10 companies in the design TAM ranking for 2014 remained in the top 10 in 2015, but seven of the top 10 decreased their semiconductor demand in 2015," said Yamaji. "The slowing of Samsung's design TAM since 2014 should be considered a big trend change. The cycle of an inflated boom and the obsolescence of electronic equipment are becoming faster, and it is also much more difficult for leading companies to maintain their position for a long time. Current winners may not always be the winners in the future."
Global Smartphone Shipments increased 5.7% y/y to 399.5 million units in 4Q’15 (Charts 16-19)
Apple, Huawei, and Xiaomi Finish 2015 with Above Average Year-Over-Year Growth, as Worldwide Smartphone Shipments Surpass 1.4 Billion for the Year, According to IDC
A strong holiday quarter boosted worldwide smartphone volumes to new record levels thanks to robust product offerings at numerous price points in both mature and emerging markets. According to preliminary data from the International Data Corporation (IDC) smartphone vendors shipped a total of 399.5 million units during 4Q’15, resulting in 5.7% growth when compared to the 377.8 million units shipped in the last quarter of 2014. For the full year, the worldwide smartphone market saw a total of 1432.9 million units shipped, marking the highest year of shipments on record, up 10.1% from the 1301.7 million units shipped in 2014.
"Usually the conversation in the smartphone market revolves around Samsung and Apple, but Huawei's strong showing for both the quarter and the year speak to how much it has grown as an international brand," said Melissa Chau, Senior Research Manager with IDC's Worldwide Quarterly Mobile Phone Tracker. "While there is a lot of uncertainty around the economic slowdown in China, Huawei is one of the few brands from China that has successfully diversified worldwide, with almost half of its shipments going outside of China. Huawei is poised to be in a good position to hold onto a strong number three over the next year."
Samsung remained the leader in the worldwide smartphone market for the quarter and the year with 85.6 million units shipped in 4Q’15, up 14% from last year. The Korean giant finished the year with 324.8 million shipments, which is up only 2.1% from the 318.2 million shipments in 2014. With continuously increasing pressure in the high end from Apple, and at the low end to midrange from Chinese manufacturers Xiaomi, Huawei, ZTE, and others, Samsung faces a multi-front battle.
Apple hit a new high with 74.8 million units shipped, albeit just 0.3 million more than the same quarter one year ago. Continued demand for Apple's iPhone 6S and 6S Plus, particularly in China and the U.S., elevated Apple in 2015 to 231.5 million units shipped in the year. This represents 20.2% growth from the 192.7 million units shipped in 2014. The combination of new innovative features such as Apple Pay and Force Touch, combined with a new Rose Gold color, better performance, and increased speed, helped drive upgrades and attracted Android switchers in record numbers.
Huawei was the biggest winner in the quarter, with the strongest year-over-year growth among the top five vendors at 37%. Huawei also became the fourth mobile phone vendor in history to ship over 100 million smartphones in a year (preceded only by Nokia, Samsung and Apple). Of the key brands originating from China, Huawei has consistently expanded its presence and share on the back of affordable handsets in emerging markets, combined with increasingly competitive flagship models.
Lenovo, just over one year after its acquisition of Motorola, was still trying to find its feet amidst organizational changes while facing greater competition in its domestic market from smaller, local competitors at the low end. The Motorola brand, strong in 2014 in the Americas with the Moto G and Moto X, saw fewer groundbreaking new models in 2015. The Motorola name will be shortened to just "Moto" and be used for high-end devices while the "Vibe" brand from Lenovo will represent the low-end. Lenovo will also put its faith entirely in Motorola as they have elected Moto to design, develop, and manufacture smartphone products going forward.
Xiaomi leaned heavily on the China market for growth, where volumes were still 90% domestic on average compared to international, despite ramping up in India and launching in Brazil. Xiaomi spent 2015 trying to encourage a transition away from the low-end range of models into more midrange models, although the bulk of shipments still rest on low-end volumes from the Redmi line. On the basis of this growth, it was able to widen the gap from number 6, LG.
China Smartphone Shipments increased 18.3% y/y to 154.2 million units in 4Q’15
Total shipments of smartphones by China-based vendors grew 8.8% on quarter and 18.3% on year to 154.2 million units in the fourth quarter of 2015 according to Digitimes Research.
Global Tablet Shipments fell Double Digits for the First Time in 2015 with Decline Reaching 12.2% YoY (Charts 20-22)
Decline in annual tablet shipments reached double digits for the first time on record in 2015, according to TrendForce. The global market research firm’s latest tablet shipment report shows a total of 168.5 million units of tablets were shipped last year, representing a 12.2% drop from 2014. The gradual contraction of the global tablet market has become a more pronounced trend.
“The saturation of the tablet market, the long life cycles of tablets themselves and the abundance of substitute devices were major factors that contributed to the large shipment decline,” said Anita Wang, notebook analyst for TrendForce. “Tablets were challenged by many large and small devices during 2015, from smartphones sized five inches and above to 2-in-1 PCs. Their demand diminished as a result.”
Apple’s market share fell under 30% for the first time whereas Samsung hanged on to its share by releasing tablets with OLED displays
Apple retained its title of top tablet brand worldwide in 2015, but iPad shipments fell by as much as 22% year on year, from 63.4 million units in 2014 to 49.6 million in 2015. The decline in Apple’s annual tablet shipments exceeded the market average, and the brand likewise saw its worldwide market share shrank from 33% in 2014 to 29.4% in 2015. Wang noted that Apple’s lead in tablet shipments meant that the brand got hit the hardest by the impacts of the slowing global economy and the weak tablet demand. The increasing competition from rival brands also made it very difficult for Apple to hold on to its market share.
The release of iPad Pro in the final quarter of 2015 only made limited contribution to Apple’s shipments because the device fell under the high-end segment in terms of specs and price range. The shipments of iPad mini product line last year are projected to reach 20 million units, accounting for an estimated 41% of Apple’s overall tablet shipments. Currently, there is no indication that Apple is prepared to launch the next generation of iPad mini products. Based on TrendForce’s analysis, Apple’s total shipments for 2016 would drop to under 40 million units if the company decided not to release new models of iPad mini this year and continued with selling the existing models of the series.
Samsung was again the number two tablet brand worldwide in 2015. While the South Korean company saw its tablet shipments fell 18% annually to 33.5 million units, its market share fell by just 1.5% over the year to 19.9%. Product strategy played a large part in Samsung’s ability to keep its portion of the tablet market. Major changes were made to the product lines, including adjustments in specs and sizes. Furthermore, Samsung used its advantage in manufacturing small-size OLED panels and released several new tablets featuring this display technology.
Lenovo did well in Europe, its largest tablet market, even though the region’s consumer demand was severely weakened by exchange rate fluctuations and currency depreciation. With a diverse range of product lines, Lenovo expanded its presence in Europe against the market headwinds and remained as the number three vendor worldwide in 2015. Its market share also grew slightly to 5.8%.
Amazon ignited its tablet sales in the fourth quarter of 2015 with the new 7-inch Fire tablet. Due to its sweet low price of US$49.99 and the tempting “buy five and get the sixth free” promotion, Amazon Fire took off in sales upon its release and supplied over 3.5 million units to the vendor’s fourth-quarter shipments. The success of this product also helped Amazon to closely edge out ASUS to become the No. 4 brand in the 2015 shipment ranking.
ASUS’s tablet strategy for 2015 put profitability over market share, so the vendor posted a massive shipment drop of 34% year on year and fell down a spot in the ranking to No. 5.
Microsoft deserved a mention despite not making the top five for 2015. The vendor continued to deliver stellar shipment results throughout the year as its latest 12.3-inch Surface Pro 4, along with older Surface models, has been enjoying brisk sales. With the help of the Surface series, Microsoft managed to grow its tablet shipments by almost 50% annually in a difficult market and pioneer the popularity of 2-in-1 PCs.
Semiconductor R&D Expenditures grew 0.5% to a Record-high $56.4 billion in 2015 (Chart 23)
Industry-wide R&D expenditures grew 0.5% to a record-high $56.4 billion in 2015. Top 10 R&D spenders collectively increased expenditures by nearly 2% in the year.
Semiconductor industry spending on research and development grew by just 0.5% in 2015, which was the smallest increase since the 2009 downturn year and significantly below the compound annual growth rate (CAGR) of 4.0% in R&D expenditures during the last 10 years, according to IC Insights’ new 2016 edition of The McClean Report. The half-percent increase nudged worldwide R&D spending by semiconductor companies to a new record-high level of $56.4 billion in 2015 from the previous peak of $54.1 billion set in 2014, says IC Insights’ flagship market analysis and forecast report on the IC industry.
Growing concerns about the weak global economy, slumping sales in the second half of the year, and unprecedented industry consolidation through a huge wave of merger and acquisition agreements weighed on semiconductor R&D spending in 2015. The new 2016 McClean Report shows Intel continuing to lead all semiconductor companies in R&D spending in 2015, accounting for 22% of the industry’s total research and development expenditures.
Following Intel in the 2015 R&D ranking are Qualcomm, Samsung, Broadcom, and the world’s largest wafer foundry, TSMC. The top five spenders were unchanged from 2014, but below that point, the rankings of most companies were shuffled. Micron Technology moved up to sixth in 2015, swapping positions with Toshiba, which fell to seventh in the new ranking. MediaTek went from ninth in 2014 to eighth place, while SK Hynix climbed from 12th to ninth in 2015. ST slid from eighth in 2014 to 10th in 2015, and Nvidia fell out of the top 10 to 11th place in 2015.
The top 10 in the R&D ranking collectively increased spending on research and development in 2015 by about 2% compared to the half-percent increase for total semiconductor R&D expenditures in the year. Combined R&D spending by the top 10 exceeded total expenditures by the rest of the semiconductor companies (about $30.8 billion versus $25.6 billion) in 2015, something that has continued to hold true since 2005 and probably well before that, according to The 2016 McClean Report, which becomes available in January 2016.
Intel’s R&D expenditures grew 5% in 2015, which is significantly below its 13% average increase in spending per year since 2010 and slightly under its 8% annual growth rate since 2001, the new report says. Underscoring the growing cost of developing new IC technologies, Intel’s R&D-to-sales ratio has climbed significantly over the past 20 years. In 2010, Intel’s R&D intensity level was 16.4% of revenue spent in research and development compared to 24.0% in 2015. Intel’s R&D-to-sales ratios were 14.5% in 2005, 16.0% in 2000, and just 9.3% in 1995.
With worldwide semiconductor sales falling nearly 1% in 2015 to $353.6 billion and R&D spending rising 0.5% to $56.4 billion, the industry’s R&D-to-sales ratio grew slightly to 16.0% from 15.8% in 2014. Since 2000, the semiconductor industry’s annual R&D-to-revenue ratio has average 16.0%. The new McClean Report forecasts semiconductor R&D spending to grow about 4% in 2016 $58.9 billion and reach $76.3 billion in 2020, which would represent a CAGR of 6.7% from 2015. By between 2016 and 2020, the semiconductor industry’s R&D-to-revenue ratio is expected to average 16.4% compared to 16.2% in the 2011-2015 time period.
Worldwide LCD TV Shipments Down 0.6% in 2015 While China’s TCL and Hisense Saw Growth despite Headwinds (Chart 24)
The global LCD TV market had a dismal 2015. Rising prices of imports caused by currency depreciation was a major force that dragged down consumer spending in Europe and the emerging markets. As a result, the European LCD TV market was too weak to help sustain the overall demand as anticipated, and sell-through in the emerging markets kept falling throughout the year. China, another major market, was also seeing slowing demand and the overall sales results there were also far below expectations. According to the latest reporting by WitsView, a division of TrendForce, global shipments of LCD TV sets for 2015 totaled 215 million, down 0.6% from 2014 and representing a decline for the first time since 2013.
WitsView Research Manager Ricky Lin said 2016 will be a year of mixed blessing for the LCD TV market. “Presently, the biggest concern is the interest rate hike by the U.S. Federal Reserve,” Lin noted. “This would further erode consumers’ purchasing power in markets with weak currencies and in turn could cause a heavy impact on TV shipments.”
On the other hand, the recent decline in LCD panel prices may boost the profitability of TV sets. “Brands could lower their manufacturers’ suggested retail prices (MSRP) to reflect the falling panel costs, thus bringing about a surge of TV buying during the coming peak season,” Lin added. Large-size LCD TVs, for instance, have become economical for consumers, and the reduction in their prices will spur the demand to replace small-size sets with large ones. WitsView’s estimates that shipments of LCD TVs for the entire 2016 will reach 222 million sets, up 3.3% year-on-year.”
South Korean brands Samsung Electronics and LG Electronics held on to their respective first and second place positions in the global shipment ranking for 2015, though both also posted annual declines. The leader Samsung shipped 48 million sets, down 1.2% from a year ago; while LGE shipped 30 million, down 7.8%. With the currencies of the emerging market still being weak, Lin expects major TV brands to scale back their shipments and reduce their inventory levels as to minimize the losses caused by the foreign exchange differences.
China-based brands TCL and Hisense both jumped in the shipment ranking by one spot and overtook Japan’s Sony. TCL became the number three LCD TV brand worldwide with of 13.1 million sets shipped, showing a slight year-on-year increase of 0.2%. Hisense climbed to the fourth place with 12.8 million sets shipped, up 1.6% from 2014. In addition to being supported by domestic demand, Chinese brands also acquired other well-known international brands as part of their overseas strategies. With these acquisitions, they have raised their brand awareness globally and will be able to access new export channels later on.
Sony was knocked down to fifth place in the ranking with 12.1 million sets shipped in 2015, amounting to an annual decline of 19.3%. Since Chinese and South Korean brands produce TV sets at much lower costs, Sony is now focusing on raising the product margins rather than shipment growth as its main goal.
U.S. GDP Slows to a 0.7% rate in 4Q’15 (Chart 25)
U.S. gross domestic product growth slowed to a 0.7% annual rate in 4Q’15, the Commerce Department reported due to inventory reductions, the strong dollar’s negative impact on exports, weaker global economic conditions and lower oil prices hurting investment by energy firms.