Weekly Global Update for February 17, 2016

Europe Update

The December European results were just released by Eurostat:

• Industrial production declined sequentially from November to December for the EU27, Germany, France, Italy and the UK (Chart 1).
• The Eurozone PMI leading indicator (Chart 2) declined in January but still remained in expansion territory (PMI>50).
• European electronic equipment production increased in both November and December (Chart 3) as growth is holding at about +5% (Chart 4).
• Automobile production plunged in December (Chart 5).
• Aircraft production declined (Chart 6) as did instrument and control output (Chart 7).
• Medical electronics production (which is highly volatile on a monthly basis) jumped in December (Chart 8).
• The growth of semiconductor shipments to Europe is “in sync” with European electronic equipment production growth (Chart 9).
• Electronic assembly (“loaded board production”) declined sequentially in October, November and December (Chart10).
• Component & board production jumped (Chart 11) and wiring device (PCB) output rose modestly (Chart 12). On a longer term basis European PCB production has been flat (Chart 13).
• The European PMI leading indicator points to PCB growth ahead (Chart 14).

Chart 15 summarizes annualized (12/12) and 3-month (3/12) growth of the European electronics supply chain and Chart 16 compares sector growth in 4Q’15 vs.4Q’14.

Source: Eurostat

2015 EMS & ODM Revenues

Based upon still incomplete 4Q’15 company financial results:

• Consolidated fourth quarter revenues of 52 publicly traded EMS and ODM declined 5.9% in 4Q’15 vs. 4Q’14. These multinational revenues were consolidated into US$ at fluctuating exchange rates. About 4% of this decline was due to currency effects (Chart 17).
• A group of 9 “EMS” companies (including Foxconn for comparison) had revenues declined 7.1% in 4Q’15 (Chart 18) however they were up 1.5% for total 2015 vs 2014 (Chart 19).
• Excluding Foxconn the remaining 8 companies in Chart 18 saw their consolidated 4Q’15 sales rise 1% in 4Q’15 (Chart 20).
• Major ODM companies’ 2015 sales rose 0.2% in local currency (Chart 21) although when converted to stronger US$ they declined. On a monthly basis they seasonally declined in December and are likely to decline further in 1Q’16 (Chart 22).

Source: Company financial reports with Custer Consulting Group analysis

Process Equipment, Consumables and CCL Laminate 4Q’15 Growth

Also based upon still incomplete fourth quarter financial results:

• Consolidated revenues of 10 multinational companies supplying process equipment and related activities primarily to the PCB industry reported a 4Q’15 vs. 4Q’14 decline of 5.1% (Chart 23).
• Rigid and Flexible laminate sales dropped 7.7% (Chart 24).
• Material suppliers (excluding laminate) to the PCB industry saw a 5.9% decline (Chart 25)

Chart 26 compares the 3/12 growth of process equipment, laminate and other materials from 2003 to 2015.

Source: Company financial reports with Custer Consulting Group analysis

Let us caution that the above 4Q’15 growth estimates for EMS and ODM companies and process equipment, laminate and material suppliers are still preliminary estimates, as not all companies in our samples have reported calendar fourth quarter 2015 financial results.

Another Record Year for Silicon Wafer Shipment Volumes in 2015 (Chart 27)

Worldwide silicon wafer area shipments increased 3% in 2015 when compared to 2014 area shipments according to the SEMI Silicon Manufacturers Group (SMG) in its year-end analysis of the silicon wafer industry. However, worldwide silicon revenues decreased by 6% in 2015 compared to 2014.

Silicon wafer area shipments in 2015 totaled 10,434 million square inches (MSI), up from the previous market high of 10,098 million square inches shipped during 2014. Revenues totaled $7.2 billion down from $7.6 billion posted in 2014. "Semiconductor silicon shipment levels remained strong throughout most of the year, resulting in record volume shipments,” said Dr. Volker Braetsch, chairman SEMI SMG and senior vice president of Siltronic AG. ”The strength in shipments was not enough to compensate headwinds from further price decline and some exchange rate impact; silicon revenues for the year decreased yet again and are significantly below their market high set in 2007.”

All data cited is inclusive of polished silicon wafers, including virgin test wafers and epitaxial silicon wafers, as well as non-polished silicon wafers shipped by the wafer manufacturers to the end-users.

Source: www.semi.org

5G Status & Outlook

Nokia previewed a demonstration it will present at Mobile World Congress later this month, detailing its vision for 5G. Nokia's 5G forecast includes some surprising capabilities: 5G will make cars safer to drive. It will make instant replay more instant. And doctors will be able to perform surgery using wirelessly controlled robots.

Nokia, aiming to be one of the world's biggest 5G players, claims that it has tested a 5G connection with download speeds of 30 gigabits per second. That's more than 1,000 times faster than an average 4G connection.

In the real world, there's very little chance of actually getting speeds that fast. Trees, buildings, distance from a cell tower and usage levels are going to slow down speeds dramatically from what Nokia was able to achieve in a lab.

Still, the wireless industry thinks 5G will be really fast: 10 to 100 times faster than 4G, according to Brian Daly, director of government standards at AT&T.

"5G will give birth to the next phase of human possibilities, bringing about the automation of everything," said Marcus Weldon, chief technology officer at Nokia. "This automation, driven by a smart, invisible network, will create new businesses, give rise to new services and, ultimately, free up more time for people."

Source: www.money.cnn.com/

Nokia Warns of Telecom Equipment Slowdown amid Uncertainty over Customer Capital Spending

Nokia Corp. warned that it expects a slowdown in the telecommunications equipment market, yet another sign of trouble in the IT markets and the global economy

• Profits rose, yet the company said the outlook reflects problems, especially in China.

  The warning was issued as Nokia’s integration of the recently acquired Alcatel-Lucent SA gathers speed, according to the WSJ's Christina Zander

• "The first quarter, in particular, looks quite challenging as customers assess their [capital-expenditure] plans in light of increasing macroeconomic uncertainty," Nokia Chief Executive Rajeev Suri said. The company warned that the sale of mobile networks will slow in China, a primary concern. More generally, "the first quarter, in particular, looks quite challenging as customers assess their CAPEX (spending) plans," he said.

Source: www.wsj.com/

Cautious IC Industry Expectations amid Slow-growth Global Economy

The health of the IC industry is increasingly tied to the health of the worldwide economy. Rarely can there be strong IC market growth without at least a “good” worldwide economy to support it.

Consequently, IC Insights expects annual global IC market growth rates to closely track the performance of worldwide GDP growth. In the recently released The McClean Report 2016, IC Insights forecasts 2.7% global GDP growth for 2016, only marginally ahead of what is considered to be the recession threshold of 2.5% growth.

Chart 28 puts the worldwide electronics and semiconductor industries into perspective. The top figure, worldwide GDP, represents all global economic activity. Essentially, the worldwide total available market (TAM) for business (i.e., GDP) was $78.4 trillion in 2015.

Source: www.ICInsights.com

Quantum Dot Market worth $4.6B by 2021

The global value of the quantum dot markets was $306 million in 2014 and is expected to reach $4.6 billion over the forecast period due to subsequent generation devices, displays, and systems activated by quantum dots, according to Radiant Insights.

Source: www.radiantinsights.com/

Global SCARA Robot Revenue to grow over 8% annually from 2016-21

SCARA (Selective Compliance Assembly Robot Arms) are commonly used in most industrial end-users for applications such as assembling, pick & place, and loading and unloading operations.

The global SCARA robots market in terms of sales revenue is expected to grow at over 8% annually in 2016 to 2021. Strongest drivers of the market growth will be the electronics industry followed by the automotive industry.

Despite the competition challenges from other industrial robots like articulated robots and Cartesian robots, the overall SCARA robots market will continue to show positive prospects due to technological advancements and expanding applications in various industrial processes.

Companies mentioned in a recent ResearchandMarket report:

• ABB Ltd.
• Adept Technology Inc.
• Denso Wave
• Epson Robotics
• Fanuc Corp.
• Kawasaki
• Kuka AG
• Mitsubishi Electric Corp.
• Staubli International
• Toshiba Machine
• Yaskawa Electric Corp.

Source: www.researchandmarkets.com

Digital Still Camera Sales Continue to Shrink

Digital camera shipments continue to be impacted by phones with built in cameras. The Point & Shoot camera category has been hit especially hard.

Source: www.cipa.jp/