June “Flash” Leading Indicators (& Brexit)
Markit Economics just released its “flash” June PMI leading indicators:
- Manufacturing expanded in the USA, the Eurozone and Germany and contracted in France and Japan (Chart 1).
- The USA (Chart 2) and the Eurozone (Chart 3) saw accelerating growth while Japan remained well into contraction (Chart 4).
- The UK pound plummeted following the Brexit vote (Chart 5). Obviously this saga continues and the full impact is uncertain.
Final PMI values for all countries will be released by Markit Economics in early July.
JEITA released Japan’s April electronic equipment, device and component production results. In general, output experienced a seasonally normal but sharp downturn relative to March.
- Electronic equipment plunged sequentially from March (Chart 6). Historically April has been a seasonally weak month.
- Domestic electronic equipment production and semiconductor shipments to Japan (in yen) are both contracting on a 3/12 growth basis (Chart 7).
- Passive component production rebounded slightly but still remained well below its September 2015 peak (Chart 8).
- PCB production dipped sequentially from March (Chart 9) as its 3/12 growth moved further into contraction (Chart 10).
- Japan’s PMI leading indicator points to further near-term 3/12 growth declines in PCB output (Chart 11).
- Electronic component and device growth remains negative with device production contracting sharply (Chart 12).
May U.S. “Durable Goods” Report
May preliminary domestic shipment, order and inventory data were just released by the U.S. Department of Commerce.
- May electronic equipment book/bill ratio climbed to 1.037 on a 3-month average basis (Chart 13) as shipments increased while orders were flat for the month of May alone (Chart 14).
- 3/12 growth rates for both electronic equipment orders and shipments are at or near zero growth territory (Chart 15).
- Electronic equipment inventories relative to orders held at near a 4-year low (Chart 16).
- Defense capital goods orders continued to increase (Chart 17).
- Aircraft and parts shipments increased for both the defense and non-defense sectors (Chart 18). Non-defense aircraft orders increased slightly while defense orders declined (Chart 19).
- Communication equipment orders increased slightly while computer equipment booking continued their long-term decline (Chart 21).
Solar/Photovoltaic Revenues up 4% in 1Q’16 versus 1Q’15 (Charts 22 & 23)
The solar/photovoltaic industry has resumed modest growth.
- Based on 1Q’16 financial data from 90 publicly traded, global companies, sales rose 3.9% in the first quarter of this year versus the same quarter in 2015. Note that this information is based on both actual and estimated data.
- The solar/photovoltaic industry appears to now be in the early stages of growth in this current business cycle (Chart 23).
Source: Company financial reports with Custer Consulting Group analysis.
North American Semiconductor Equipment May 2016 Book/Bill 1.09 (Charts 24 & 25)
North America-based manufacturers of semiconductor equipment posted $1.75 billion in orders worldwide in May 2016 (3-month average basis) and a book-to-bill ratio of 1.09, according to SEMI.
SEMI reports that the 3-month average of worldwide bookings in May 2016 was $1.75 billion, 9.6% higher than April 2016 and 13.1% higher than May 2015.
The 3-month average of worldwide billings in May 2016 was $1.60 billion, 9.6% higher than April 2016 and 2.8% higher than the May 2015.
"Bookings and billings for new semiconductor equipment continue to improve,” said Denny McGuirk, president and CEO of SEMI. "The data are consistent with higher spending expectations for the second half of the year."
Automotive Semiconductor Market Grows Slightly in 2015 While Ranks Shift (Chart 26)
Despite slower growth for the automotive industry and exchange rate fluctuations, the automotive semiconductor market grew at a modest 0.2% year-over-year, reaching $29 billion in 2015, according to IHS.
A flurry of mergers and acquisitions last year caused the competitive landscape to shift, including the merger of NXP and Freescale, which created the largest automotive semiconductor supplier in 2015 with a market share of 14.3%, IHS said. The acquisition of International Rectifier (IR) helped Infineon overtake Renesas to secure the second-ranked position, with a market share of 9.8%. Renesas slipped to third-ranked position in 2015, with a market share of 9.1%, followed by STMicroelectronics and Texas Instruments.
“The acquisition of Freescale by NXP created a powerhouse for the automotive market. NXP increased its strength in automotive infotainment systems, thanks to the robust double-digit growth of its i.MX processors,” said Ahad Buksh, Automotive Semiconductor Analyst for IHS Technology. “NXP’s analog integrated circuits also grew by double digits, thanks to the increased penetration rate of keyless-entry systems and in-vehicle networking technologies.”
NXP will now target the machine vision and sensor fusion markets with the S32V family of processors for autonomous functions, according to the IHS Automotive Semiconductor Intelligence Service Even on the radar front, NXP now has a broad portfolio of long- and mid-range silicon-germanium (SiGe) radar chips, as well as short-range complementary metal-oxide semiconductor (CMOS) radar chips under development. “The fusion of magnetic sensors from NXP, with pressure and inertial sensors from Freescale, has created a significant sensor supplier,” Buksh said.
The inclusion of IR, and a strong presence in advanced driver assistance systems (ADAS), hybrid electric vehicles and other growing applications helped Infineon grow 5.5% in 2015. Infineon’s 77 gigahertz (GHz) radar system integrated circuit (RASIC) chip family strengthened its position in ADAS. Its 32-bit microcontroller (MCU) solutions, based on TriCore architectures, reinforced the company’s position in the powertrain and chassis and safety domains.
The dollar-to-yen exchange rate worked against the revenue ranking for Renesas for the third consecutive year. A major share of Renesas business is with Japanese customers, which is primarily conducted in yen. Even though Renesas’ automotive semiconductor revenue fell 12%, when measured in dollars, the revenue actually grew by about 1% in yen. Renesas’ strength continues to be its MCU solutions, where the company is still the leading supplier globally.
STMicroelectronics’ automotive revenue declined 2% year-over-year; however, a larger part of the decline can be attributed to the lower exchange rate of the Euro against the U.S. dollar in 2015, which dropped 20% last year. STMicroelectronics’ broad-based portfolio and its presence in every growing automotive domain of the market helped the company maintain its revenue as well as it did. Apart from securing multiple design wins with American and European automotive manufacturers, the company is also strengthening its relationships with Chinese auto manufacturers. Radio and navigation solutions from STMicroelectronics were installed in numerous new vehicle models in 2015.
Texas Instruments has thrived in the automotive semiconductor market for the fourth consecutive year. Year-over-year revenue increased by16.6% in 2015. The company’s success story is not based on any one particular vehicle domain. In fact, while all domains have enjoyed double-digit increases, infotainment, ADAS and hybrid-electric vehicles were the primary drivers of growth.
Other suppliers making inroads in automotive
After the acquisition of CSR, Qualcomm rose from its 42nd ranking in year 2014, to become the 20th largest supplier of automotive semiconductors in 2015. Qualcomm has a strong presence in cellular baseband solutions, with its Snapdragon and Gobi processors; while CSR’s strength lies in wireless application ICs – especially for Bluetooth and Wi-Fi. Qualcomm is now the sixth largest supplier of semiconductors in the infotainment domain.
Moving from 83rd position in 2011 to 37th in 2015, nVidia has used its experience, and its valuable partnership with Audi, to gain momentum in the automotive market. The non-safety critical status of the infotainment domain was a logical stepping stone to carve out a position in the automotive market, but now the company is also moving toward ADAS and other safety applications. The company has had particular success with its Tegra processors.
Due to the consolidation of Freescale, Osram entered the top-10 ranking of automotive suppliers for the first time in 2015. Osram is the global leader in automotive lighting and has enjoyed double-digit growth over the past three years, thanks to the increasing penetration of light-emitting diodes (LEDs) in new vehicles.
Global Automotive Telematics Revenue will grow at more than 19% CAGR to $4.2 Billion in 2021 (Chart 27)
Demand for connectivity plus eCall rollout in Europe to drive growth
“The telematics supply chain will see amazing growth and innovation through the end of the decade, as more vehicles debut new connected solutions that make use of embedded modules, while at the same time enabling consumers to fully leverage their mobile devices.”
Global revenue from automotive telematics systems will grow at a compound annual growth rate (CAGR) of more than 19% to $4.2 billion by the end of 2021, according to new forecasts from IHS Automotive. These forecasts are driven by continued innovation in vehicle connectivity and safety technologies, and project nearly $2.8 billion in additional annual revenue by the end of the forecast period in 2021, compared to 2015.
Data from the IHS Automotive Telematics Forecasts represents production of telematics systems, including embedded, consumer electronics and hybrid telematics (those that include both consumer electronics and embedded technology).
Consumer electronics-based (CE) solutions will make up nearly 30% of the market, leaving only about 15% of embedded systems in 2021, the IHS Automotive forecasts say. Additionally, hybrid telematics will boast the strongest revenue CAGR at more than 12% from 2015 – to 55% of the overall market.
Currently, CE telematics leads the global automotive telematics market since it is a relatively low-cost solution and available in a wide range of vehicles. More cars of the future will feature multiple connections for a variety of applications and services. As a result, hybrid telematics is expected to dominate in the global telematics market after 2018. The eCall mandate, effective March 2018, will require an embedded connection in vehicles for automatic crash notification (ACN) and SOS calling, which forces all OEMs to offer either embedded or hybrid telematics in Europe.
The mandate will have a significant impact on the growth of the telematics market. If other regions follow this trend, it will expedite the growth of telematics and all vehicles will eventually be connected.
“The telematics supply chain will see amazing growth and innovation through the end of the decade, as more vehicles debut new connected solutions that make use of embedded modules, while at the same time enabling consumers to fully leverage their mobile devices,” said Anna Buettner, manager for infotainment at IHS Automotive.
“There are opportunities in vehicle segments that traditionally didn’t offer connectivity, but due to market demand and the imminent roll-out of eCall in Europe, the avenues are opening up quickly,” Buettner said. “Autonomous driving applications will further drive the demand for non-stop, reliable connectivity.”
Global production volumes for all telematics systems, including those that are based on brought-in devices, are estimated to grow by more than 112% over the forecast period, surpassing 55 million units in 2021, IHS Automotive says. The global growth forecast in the telematics systems is based on multiple factors. In China, for example, overall volume is expected to grow because original equipment manufacturers (OEMs) are continuing to add embedded and CE-based solutions, while regional vehicle sales also increase. Meanwhile, telematics systems production will triple in Europe in order to meet demand as eCall is rolled out in all new vehicles in the market starting in spring of 2018.
Even though telematics has existed in the automotive industry for almost 20 years, growth is still expected for the next decade, whether due to mandates or the desire from consumers to be connected even while driving. Telematics systems based on wireless communications have become a vital link between customers and OEMs, and will be increasingly important in all regions.
Telematics systems are a major factor in changing the automobile from a collection of analog control systems to a fully networked and connected digital car, where software-defined functionality can be remotely changed, corrected and updated. Telematics systems also add connectivity-based applications that make the average car safer and more fuel efficient, as well as help to correct common driver errors. As a result, telematics can bring many benefits to various parties including consumers, auto manufacturers, dealers, communities, and more.
As the telematics market grows, the automotive industry starts to face new challenges and issues that need to be solved. Cybersecurity is one of the most important issues in the connected car era. Since the role of telematics increases in importance as connectivity becomes essential for V2X and autonomous driving cars in the future, the automotive industry needs to find solutions to protect its telematics systems from cyber-attacks, IHS says. Research and development is under way but must continue.
Worldwide PC Monitor Market in First Quarter of 2016 (Chart 28 & 29)
The total worldwide PC monitor market shipped more than 29 million units in the first quarter of 2016 (1Q’16), up 0.5% year-over-year but a decrease of 5.7% compared to the previous quarter, according to the International Data Corporation.
“IDC expects the global monitor market will continue to decline at rates around 3% year over year from 2018 through 2020. However, there should be some pockets of growth along the way, as illustrated by the Middle East and Africa region, which experienced its second sequential gain in a row, recording 3.8% quarter-over-quarter growth in 1Q’16,” said Maura Fitzgerald, senior research analyst, Worldwide Trackers.
IDC currently forecasts 114 million PC monitor units will be shipped for full year 2016 and expects to see a year-over-year decline of 7.4% in worldwide shipments to 27.1 million units in the first quarter of 2017. By 2020, worldwide shipments are expected to be less than 100 million units as the adoption of mobile devices at lower price points is expected to continue.
- The presence of Curved monitors is on the rise, with 1.2% market share in 1Q’16. This represents year-over-year growth of 495%.
- Of the top 10 screen sizes, 23.8-inches wide and 31.5-inches wide saw the largest year-over-year growth, posting 91.4% and 183.2%, respectively, in 1Q’16.
- Monitors with TV tuners are expected to grow 1.3% year-over-year to 5.7% market share in 2017, up from 5.1% in 2015, led by LG and Samsung with a combined market share of 99.0% in this category.
Wearables Shipments to Reach 213.6 Million Units Worldwide in 2020 with Watches and Wristbands Driving Volume while Clothing and Eyewear Gain Traction (Chart 30)
Worldwide shipments of wearable devices are expected to reach 101.9 million units by the end of 2016, representing 29.0% growth over 2015. According to International Data Corporation the market for wearable devices will experience a compound annual growth rate (CAGR) of 20.3%, culminating in 213.6 million units shipped in 2020.
“Unlike the smartphone, which consolidated multiple technologies into one device, the wearables market is a collection of disparate devices,” said Jitesh Ubrani, senior research analyst for IDC Mobile Device Trackers. “Watches and bands are and always will be popular, but the market will clearly benefit from the emergence of additional form factors, like clothing and eyewear, that will deliver new capabilities and experiences. Eyewear has a clear focus on the enterprise as it stands to complement or replace existing computing devices, particularly for workers in the field or on the factory floor. Meanwhile, clothing will take aim at the consumer, offering the ability to capture new forms of descriptive and prescriptive data.”
Two other factors driving the wearables market forward are cellular connectivity and applications.
“Cellular connectivity essentially frees the wearable from being tethered to a smartphone,” said Ramon T. Llamas, research manager for IDC's Wearables program. “The immediate use case will be to make telephone calls, but it goes well beyond that. Cellular connectivity on a wearable can transmit and receive data, including time, location, and other data about a user and his or her surroundings. Imagine what that means when tracking steps, analyzing patient activity, or shopping: the information can be shared immediately with a second or third party, and the user can, in turn, receive context appropriate information back.
“The trajectory of the wearables market signals a strong opportunity for developers,” Llamas continued. “Applications increase the value and utility of a wearable, and users want to see more than just their health and fitness results. News, weather, sports, social media, and Internet of Things (IoT) applications will all have a place on a wearable. And, when combined with cellular connectivity, users will not have to take out their smartphones to get the latest information. All they will need to do is glance at their wearable.”
World had 8.1 Billion Connected Smartphones, Tablets, Personal Computers, TVs, TV-attached devices and Audio Devices at year-end 2015 (Chart 31)
On average, this device base equates to an astounding four devices per household; Netflix has secured a presence across 32% of connected devices in the US
The IHS Technology Connected Device Market Monitor report examines key trends and data for global devices, over the top (OTT) and pay TV multiscreen markets.
As of year-end 2015, the world now contains 8.1 billion connected smartphones, tablets, personal computers, TVs, TV-attached devices and audio devices. On average, across the globe, this device base equates to an astounding four devices per household.
“The proliferation of media-enabled connected endpoints has implications for media consumption, media production, broadband infrastructure, and the business itself of network management and traffic discrimination,” said Merrick Kingston, principal analyst-connected home, at IHS Technology. “It drives media consumption, IP traffic and more.”
Smartphones outnumber tablets by five to one
Year-on-year, smartphones contribute roughly half a billion new devices to the market; tablet and OTT set-tops are also growing quickly, but operate a full order of magnitude below the smartphone. By 2020, this ratio will only widen. Within the forecast period, the smartphone-to-tablet ratio rises to nearly 10:1.
Chromecast leapfrogs Apple TV
The latest IHS Technology reports also noted the big changes in the wider-connected, media-enabled hardware ecosystem.
For all its early momentum, Chromecast had been unable to out-ship the Apple TV. This finally changed during the first quarter of 2016 with Apple TV shipping 1.7 million units compared to Google pushing 3.2 million Chromecasts to market. “We anticipate that this reversal will persist,” Kingston said. “Since the introduction of the fourth-generation Apple TV, Apple and Google have pursued vastly different strategies.”
The Apple TV, starting at $149, has inexorably been shuttled into the segment’s top end. The device is now positioned as a premium hub that appeals to consumers of digital video, to casual gamers and to iOS owners who are intrinsically attracted to Apple’s singular user-interface.
Chromecast, at $35, is a veritable bargain, naturally complements portable Android devices and offers a no-frills casting experience that obviates the very need for a user-interface.
Netflix has secured a presence across 32% of connected devices in the U.S.
As of year-end 2015, Netflix addresses 339 million connected devices in the U.S. As a fraction of the total U.S. installed base, this is equivalent to addressing 32% of the audio-visual hardware landscape.
“Netflix’s reach is a testament to the company’s unrivalled device strategy,” Kingston said. “The service’s ubiquity turns Netflix into a de facto rival – and on occasion complement – to any other given video offering in the U.S.”
The days when a multiscreen pay TV service could uniquely lay claim to a device or platform are effectively gone. Pay TV media apps are virtually guaranteed to sit alongside the Netflix application on consumers’ end devices.