Weekly Global Update for May 4, 2016

U.S EMS Providers 1Q’16 Financial Results

First quarter financial results have been released by many of the domestic EMS companies:
A group of 6 large providers’ combined 1Q’16 revenues declined 0.4% compared to 1Q’15 (Chart 1) but results varied significantly by company:

• Benchmark Electronics down 12% (Chart 2)
• Celestica up 4% (Chart 3)
• Flex down 3% (Chart 4)
• Jabil up 2% (Chart 5)
• Plexus down 5% (Chart 6)
• Sanmina up 6% (Chart 7)

As a group their combined guidance was for flat revenues in 2Q’16 versus 2Q’15 and down 0.5% sequentially from 1Q’16.

Source: Company financials

March 2016 U.S. Electronic Supply Chain Shipments, Orders and Inventories

The U.S. Department of Commerce just released its March “Durable Goods” report:

• Electronic equipment shipments rose slightly but orders declined in March versus February 2016 (Chart 8) as their book/bill ratio increased very slightly to 1.025 (Chart 9).
• On a 3/12 growth basis both orders and shipments declined – comparing total 1Q’16 to 1Q’15 (Chart 10).
• Electronic equipment inventories rose relative to orders (Chart 11).
• Defense capital goods orders rebounded sequentially from February (Chart 12).
• Aircraft and part shipments improved slightly but remained well below their November 2015 peak (Chart 13) due to weaker commercial aircraft sales.
• Communication (Chart 14) and computer (Chart 15) equipment demand remained relatively flat.

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

North American PCB Shipments up 6.1% y/y in 1Q’16 (Charts 16-18)

IPC announced the March 2016 findings from its monthly North American Printed Circuit Board Statistical Program. Sales growth accelerated in March and order growth rebounded. Bookings outpaced shipments, but the book-to-bill ratio held steady at 1.02.

Total North American PCB shipments in March 2016 came in at 10.3% above the same month last year, bringing the year-to-date growth rate up to 6.1% for the first quarter. Compared to the preceding month, March shipments were up 18.6%.

PCB bookings in March increased 10.5% year-on-year, boosting year-to-date bookings growth for the first quarter to 3.5%. Orders in March 2016 were up 28.1% from the previous month.

“March was a good month for the North American PCB industry, with strong growth in both sales and orders,” said Sharon Starr, IPC’s director of market research. “This is a welcome change from no growth in 2015,” she added, “and the first quarter’s positive book-to-bill ratios support an expectation of continued growth in the second quarter.”

Source: www.ipc.org

Worldwide Smartphone Vendors Shipped 334.9 Million Smartphones in 1Q’16 (Charts 19 & 20)

Growth Goes Flat in the First Quarter as Chinese Vendors Churn the Top 5 Vendor List

According to International Data Corporation (IDC) vendors shipped a total of 334.9 million smartphones worldwide in1Q’16, up slightly from the 334.3 million units in 1Q’15, marking the smallest year-over-year growth on record. The minimal growth this quarter is primarily attributed to strong smartphone saturation in developed markets, as well as a year-over-year decline from both Apple and Samsung, the two market leaders.

The biggest change to the market, however, was the addition of lesser-known Chinese brands OPPO and vivo, which pushed out previous fourth and fifth place players Lenovo and Xiaomi, respectively. As the China market matures, the appetite for smartphones has slowed dramatically as the explosion of uptake has passed its peak. In 2013, China's year-over-year shipment growth was 62.5%; by 2015, it had dropped to 2.5%. Conversely, the average selling price (ASP) for a smartphone in China rose from US$207 in 2013 to US$257 in 2015.

"Along China's maturing smartphone adoption curve, the companies most aligned with growth are those with products serving increasingly sophisticated consumers. Lenovo benefited with ASPs below US$150 in 2013, and Xiaomi picked up the mantle with ASPs below US$200 in 2014 and 2015. Now Huawei, OPPO, and vivo, which play mainly in the sub-US$250 range, are positioned for a strong 2016," said Melissa Chau, senior research manager with IDC's Worldwide Quarterly Mobile Phone Tracker. "These new vendors would be well-advised not to rest on their laurels though, as this dynamic smartphone landscape has shown to even cult brands like Xiaomi that customer loyalty is difficult to consistently maintain."

"Outside of China, many of these brands are virtually unknown and the ability of these rapidly growing Chinese vendors to gain entry into mature markets such as the United States and Western Europe will be essential if they have aspirations of catching Apple or Samsung at the top," said Anthony Scarsella, research manager with IDC's Mobile Phone team. "Huawei has proven that it can sell increasingly premium devices. In China, Huawei is already recognized as a premium brand, but it is now going toe-to-toe on build quality with premium devices like the Nexus 6P that are available worldwide. While Huawei is furthest along in terms of international recognition, selling equally impressive volumes outside of China remains a challenge for many of these brands, whether it is Xiaomi, Lenovo, OPPO, or vivo. Their ability to drive local growth no longer applies when it comes to international expansion, where premium branding quickly.

Source: www.idc.com

PC and Handset Supply Chain Makers Conservative about Prospects for 2016

Makers in the PC and handset supply chains in Taiwan are conservative about a business rebound in the second half of 2016 as well as the overall performance for the entire year amid unfavorable business news from the sectors, including layoffs at Intel and declining iPhone shipments.

Global PC shipments declined 10% on year in the first quarter of 2016, while demand for smartphones is saturating, making first-tier suppliers in the two segments ill at ease and second- and third-tier makers scrambling for orders at low prices, according to industry sources.

The decline in PC shipments in the first quarter of 2016 came after the industry saw global PC shipments shed 10.4% on year to 276 million units in 2015, according to IDC.

Among major vendors, Acer suffered the most and saw its shipments decrease over 15% on year in 2015; while Lenovo, Hewlett-Packard (HP), Dell and Asustek Computer saw their shipments drop in a range of 3-7% during the same period.

Major PC ODMs and parts and components suppliers all saw their shipments decline on year in the first quarter of 2016 as brand PC vendors were conservative about demand from the end market and therefore were holding back their orders for parts and components, said the sources.

In the motherboard sector, Asustek Computer and Gigabyte Technology have been grabbing market share from second- and third-tier suppliers and have recently begun to take on Micro-Star International (MSI) and ASRock, indicated the sources.

Meanwhile, no major graphics card suppliers are expected to see a rebound in their shipments and profits in 2016 due to dwindling market demand, commented the sources.

On the other hand, suppliers in the iPhone supply chain are worried that Apple may reduce its orders in the coming quarters as sales of iPhone 6s have been lower-than-expected recently, said the sources.

Recent sales performance of Sony Mobile Communications and HTC were also lower-than-expected, while Asustek has lowered its smartphone shipment target for 2016.

Source: www.digitimes.com

Metal Prices

Metal prices increased sequentially from March to April for copper (Chart 21), tin (Chart 22), silver (Chart 23) and gold (Chart 24).

Source: futures.tradingcharts.com/
www.infomine.com/investment/metal-prices/tin/

Currency Exchange Rates

The U.S. dollar has recently weakened against most major currencies (Chart 25). Results for individual countries’ currencies versus the U.S. dollar are:

• Eurozone (Chart 26)
• Canada (Chart 27)
• Mexico (Chart 28)
• Japan (Chart 29)
• China (Chart 30)
• Taiwan (Chart 31)
• South Korea (Chart 32)

Source: research.stlouisfed.org/fred2/