Weekly Global Update for August 17, 2016

China/Taiwan Update

July monthly revenues were released for Taiwan-listed companies, many of which manufacture in China.

• Both the China and Taiwan PMI leading indicators returned to “growth territory” (PMI >50) in July (Charts 1 & 2).
• The China yuan strengthened slightly in July and the Taiwan NT$ continued is strengthening versus the dollar (Charts 3 & 4)
• Electronic equipment production in July 2016 was down 4.7% compared to July 2015 and down sequentially 7.2% compared to June 2016 (Chart 5).
• ODM revenues were July 2016 down 4.1%% versus July 2015 and down 7.6% sequentially from June 2016 (Chart 6).
• Display revenues were sequentially flat (Chart 7).
• Semiconductor shipments to Asia/Pacific were “in sync” with electronic equipment revenues on a 3/12 growth basis. Both are in contraction relative to the same 3-month period in 2015(Chart 8).
• Wafer foundry output declined slightly in July versus June but appears to be on an upward trend (Charts 9 &10).
• Package and test (Chart 11), Memory (Chart 12) and passive component (Chart 13) revenues all rose modestly from June.
• Solar/photovoltaic related sales continued to decline from their year-end 2015 high point (Chart 14).
• Printed circuit board sales grew in a typical seasonal pattern (Charts 15 & 16).
• Rigid CCL laminated growth mirrored rigid PCB growth (Chart 17).
• Custer Consulting Group’s PCB leading indicator points to further PCB growth ahead (Chart 18).

Source: Company financial reports analyzed by Custer Consulting Group

Europe Update

Eurostat has just released European production by PCB electronics sector: Euro denominated indices vs. a 2010 base year =100 are given.

• Markit Economics Eurozone PMI indicator dropped in July but still remained in growth territory (Chart 19).
• The euro hovered around the 1.10 dollar/euro mark (Chart 20)
• Industrial production declined in June versus May for many key European countries (Chart 21).
• Electronic equipment production appears to have peaked in the present cycle (Charts 22 & 23). However Eurostat appears to have revised its historical data and is now reporting the 28 country composite but not the 27 country version. We suggest not drawing major conclusions from the recent decline until another month of reporting.
• Chart 24 shows growth in 2Q’16 versus 2Q’15 for the key electronics related sectors and Chart 25 provides the annualized (12/12) and 3-month (3/12) growth by sector. The 3/12 typically “leads” the 12/12.
• Motor vehicle production rebounded in June from its May decline (Chart 26) as did aerospace output (Chart 27).
• Production of instruments and appliances for measuring, testing and navigation declined slightly from May 2016 (Chart 28) while medical electronics improved but remained very volatile month-to-month (Chart 29).
• Semiconductor shipments to Europe (euro denominated) appear to have corrected and are now headed back to the electronic equipment 3/12 growth line (Chart 30).
• PCB assembly activities improved slightly from May and are a generally improving trend (Chart 31).
• Printed wiring production declined in in June but in general remains above 2015 monthly levels (Charts 32 & 33).
• The European PMI leading indicator points to slower PCB growth ahead (Chart 34).

Source: Eurostat, www.markiteconomics.com and www.semiconductors.org with Custer Consulting Group analysis.

Japanese semiconductor equipment and flat panel display production.

Charts 35 & 36 provide historical, updated data as provided by the Semiconductor Equipment Association of Japan.

Source: www.seaj.or.jp/english/

Huge 2H16 Spending Surge Expected From Samsung, TSMC, and Intel (Chart 37)

Combined outlays from the “Big 3” spenders is forecast to almost double in 2H16 over 1H16.

In addition to the monthly Updates, IC Insights’ subscription to The McClean Report includes three “subscriber only” webcasts. The first of these webcasts was presented on August 3, 2016 and discussed semiconductor industry capital spending trends, the worldwide economic outlook, the semiconductor industry forecast through 2020, as well as China’s failures and successes on its path to increasing its presence in the IC industry.

In total, IC Insights forecasts that semiconductor industry capital spending will increase by only 3% this year after declining by 2% in 2015. However, driven by the top three spenders—Samsung, TSMC, and Intel—capital spending in 2016 is expected to be heavily skewed toward the second half of this year. Chart 37 shows that the combined 2016 outlays for the top three semiconductor industry spenders are forecast to be 90% higher in the second half of this year as compared to the first half.

Combined, the “Big 3” spenders are forecast to represent 45% of the total semiconductor industry outlays this year. An overview of each company’s actual 1H16 spending and their 2H16 spending outlook is shown below.

Samsung — The company spent only about $3.4 billion in capital expenditures in 1H16, just 31% of its forecasted $11.0 billion full-year 2016 budget.

TSMC — Its outlays in the first half of 2016 were only $3.4 billion, leaving $6.6 billion to be spent in the second half of this year in order to reach its full-year $10.0 billion budget. This would represent a 2H16/1H16 spending increase of 92%.

Intel — Spent just $3.6 billion in 1H16. The company needs to spend $5.9 billion in the second half of this year to reach its current $9.5 billion spending budget, which would be a 2H16/1H16 increase of 61%.

In contrast to the “Big 3” spenders, capital outlays by the rest of the semiconductor suppliers are forecast to shrink by 16% in the second half of this year as compared to the first half. In total, 2H16 semiconductor industry capital spending is expected to be up 20% over 1H16 outlays, setting up a busy period for the semiconductor equipment suppliers through the end of this year.

Further trends and analysis relating to semiconductor capital spending through 2020 are covered in the 250-plus-page Mid-Year Update and first webcast to the 2016 edition of The McClean Report.

Source: www.icinsights.com

Ultra HD TV panel shipments reached 24.8 million units in 1H’16

Thanks to demand stimulated by the upcoming Rio Olympics, Ultra HD TV panel shipments reached 24.8 million units globally in first-half 2016, hiking 70% on year, according to Sigmaintell Consulting.

The Ultra HD shipments took up 20% of all TV panels shipped in the same period and the Ultra HD penetration was 35% for the 40-inch and above segment, over 70% for 55-inch and above, Sigmaintell said.

LG Display was the largest Ultra HD TV panel supplier in first-half 2016, followed by Samsung Display, Innolux, AU Optronics (AUO), China Star Optoelectronics Technology (CSOT) and BOE Technology.

Global Ultra HD TV panel shipments in 2016 will reach 59 million units, accounting for 23% of all TV applications.

Source: www.digitimes.com