PMI Leading Indicators – Mixed Results in March

Although solidly in expansion territory, the global PMI leveled off in March at 53 (Chart 1).

  • Results varied by major country (Chart 2) with the Eurozone and Taiwan expanding and South Korea, China and Japan seeing a softer PMI.
  • The USA was mixed (Chart 3) with the ISM version of the PMI expanding further but the Markit Economics declining but still in growth territory)
  • The Eurozone PMI has risen to a 6-year high (Chart 4) with Germany showing strong growth (Chart 5).
  • Asia results varied (Chart 6). Taiwan expanded further (Chart 7), China (Chart 8) and Japan (Chart 9) grew at a slower rate and South Korea (Chart 10) continued to contract.

U.S. “Factory Orders” – Electronic Supply Chain Strengthens Slightly

The U.S. department of Commerce released its February Shipments, Orders and Inventories report.

  • The electronic equipment book/bill held above 1.03(Chart 11) as both order and shipment growth accelerated (Chart 12).
  • The instrument and control sector remained strong (Chart 13).
  • Vehicle shipments are flat (Chart 14).
  • Military electronic orders slipped in February (Chart 15).
  • Electromedical, Measurement & Control Equipment orders and shipment continued their steady expansion (Chart 16).

Chart 17 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain. Most sectors are growing.

Global Semiconductor Sales increased 16.5% y/y to $30.4 billion in February 2017 (Charts 18-23)

Year-to-year growth is market’s largest since October 2010

The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $30.4 billion for the month of February 2017, an increase of 16.5% compared to the February 2016 total of $26.1 billion. Global sales in February were 0.8% lower than the January 2017 total of $30.6 billion, exceeding normal seasonal market performance. February marked the global market’s largest year-to-year growth since October 2010. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.

“The global semiconductor industry has posted strong sales early in 2017, with memory products like DRAM and NAND flash leading the way,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Year-to-year sales increased by double digits across most regional markets, with the China and Americas markets showing particularly strong growth. Global market trends are favorable for continuing sales growth in the months ahead.”

Neuffer also noted the recent growth of foreign semiconductor markets is a reminder of the importance of expanding U.S. semiconductor companies’ access to global markets, which is one of SIA’s policy priorities for 2017. The U.S. industry accounts for nearly half of the world’s total semiconductor sales, and more than 80% of U.S. semiconductor company sales are to overseas markets, helping make semiconductors one of America’s top exports.


SEMI Reports 2016 Global Semiconductor Materials Sales of $44.3 Billion (Charts 24 & 25)

SEMI, the global industry association representing the electronics manufacturing supply chain, announced that the global semiconductor materials market increased 2.4% in 2016 compared to 2015 while worldwide semiconductor revenues increased 1.1%.

According to SEMI, total wafer fabrication materials and packaging materials were $24.7 billion and $19.6 billion, respectively. Comparable revenues for these segments in 2015 were $24.0 billion for wafer fabrication materials and $19.3 billion for packaging materials. The wafer fabrication materials segment increased 3.1% year-over-year, while the packaging materials segment increased 1.4%.

For the seventh consecutive year, Taiwan was the largest consumer of semiconductor materials due to its large foundry and advanced packaging base, totaling $9.8 billion. Korea and Japan maintained the second and third places, respectively, while China rose in the rankings to claim the fourth spot during the same time. Annual revenue growth was the strongest in the China, Taiwan, and Japan markets. The materials market in Europe, Rest of World (ROW) and South Korea experienced nominal growth, while the materials market in North America contracted. (The ROW region is defined as Singapore, Malaysia, Philippines, other areas of Southeast Asia and smaller global markets.)

Worldwide top 50 EMS companies combined sales revenue fell to $270 billion from $273 billion in 2015

Manufacturing Market Insider (MMI) announced the Top 50 EMS Companies Worldwide which surpasses $270 billion in revenue.

Manufacturing Market Insider, a newsletter specializing in the EMS (electronics manufacturing services) industry, has released its annual MMI Top 50™ list of the world’s largest EMS providers. In 2016, Top 50 sales required $270 billion in sales revenue – a decline from $273 billion in 2015.

Top 50 sales declined by 1.0% from the previous year, largely as a result of top tier EMS firms performing poorly, such as Foxconn and Pegatron. If we remove these two leading EMS firms from the top 50 list, the industry growth rate was actually a positive 1.5% for the top 48 companies EMS in 2016.

MMI Top 50 EMS companies were ranked based on 2016 sales in U.S. dollars, where the dollar was strong but hurting many European and Asian companies. In descending order, the top ten EMS companies were Hon Hai, Pegatron, Flex, Jabil, Sanmina, Celestica, Wistron, New Kinpo Group, Plexus and Benchmark Electronics. Three companies that fell off the top ten list included Topscom, Kitron and TT Electronics, whereas the three new companies to replace them were Sparton, Alpha Networks and PRIME BASE.

In addition to ranking providers by 2016 sales, MMI Top 50 listings include sales growth, previous rank, number of employees, number of plants, facility space, space in low-cost regions, number of SMT lines and customer data. This special section was published in the March 2016 edition of MMI, and in April will include market segmentation data obtained from the survey.

Founded in 1991, Manufacturing Market Insider is a division of New Venture Research Corp., and is a monthly newsletter providing dedicated coverage of the EMS industry. Available in both printed and electronic form, the newsletter is published by New Venture Research Corp., based in Nevada City, CA.

2017 list of the MMI Top 50 EMS providers.

  1. Hon Hai Precision Industry (Foxconn)— New Taipei, Taiwan
  2. Pegatron— Taipei, Taiwan
  3. Flexn— Singapore
  4. Jabil— St. Petersburg, FL
  5. Sanmina— San Jose, CA
  6. Celestica— Toronto, Canada
  7. Wistron— Taoyuan, Taiwan
  8. New Kinpo Group— New Taipei, Taiwan   
  9. Plexus— Neenah, WI
  10. Benchmark Electronics— Angleton, TX
  11. Universal Scientific Industrial Co., Ltd. (USI) — Shanghai, China
  12. Shenzhen Kaifa— Shenzhen, China
  13. Venture— Singapore
  14. Zollner Elektronik Group — Zandt, Germany
  15. SIIX— Osaka, Japan
  16. Fabrinet— Pathumthani, Thailand
  17. UMC Electronics— Saitama, Japan
  18. PKC Group— Reeahe, Finland
  19. Kimball Electronics Group— Jasper, IN
  20. Sumitronics— Tokyo, Japan
  21. Integrated Micro-Electronics, Inc.— Laguna, Philippines
  22. NEO Tech — Chatsworth, CA
  23. Asteelflash— Neuilly Plaisance, France
  24. Alpha Networks — Hsinchu, Taiwan
  25. 3CEMS— Guangzhou, China
  26. VTech Communications— Hong Kong
  27. Creation Technologies— Burnaby, BC, Canada
  28. V.S. Industry Berhad, Senai, Malaysia
  29. Scanfil EMS — Sievi, Finland
  30. Enics AG, Zurich, Switzerland
  31. Ducommun— St. Louis, Missouri
  32. VIDEOTON Holding— Székesfehérvár, Hungary
  33. Katolec, Tokyo, Japan
  34. Hana Microelectronics— Bangkok, Thailand
  35. Key Tronic— Spokane Valley, WA
  36. Neways Electronics — Son, The Netherlands
  37. Orient Semiconductor Electronics— Kaohsiung, Taiwan
  38. Computime Limited— Hong Kong
  39. WKK Technology Ltd.— Hong Kong
  40. Wong’s, Hong Kong
  41. Global Brands Manufacturing, New Taipei City, Taiwan
  42. éolane, Le Fresne Sur Loire, France
  43. Sparton, Schaumberg, Illinois
  44. ALL CIRCUITS— Meung-sur-Loire, France
  45. SVI, Bangkadi Pathumthani, Thailand
  46. LACROIX Electronics— Vern-sur-Seiche, France 
  47. Di-Nikko Engineering— Nikko, Japan
  48. Valuetronics Holding — Hong Kong
  49. PRIME BASE— Guangzhou, Chin
  50. Nippon Manufacturing Service— Tokyo, Japan

Worldwide end-user spending on devices (PCs, ultramobiles and mobile phones) will grow 2% y/y in 2017 to nearly US$600 billion, while unit shipments remain flat at 2.3 billion units sold (Charts 25 & 26)

  • Worldwide End-User Spending on Devices Will Grow 2% in 2017, While Unit Shipments Remain Flat
  • Chinese Vendors' Upgrades Will Increase Basic-Phone ASPs by 4%

Users of PCs, ultramobiles and mobile phones are buying new devices at higher average selling prices (ASPs), resulting in growth in end-user spending in 2017. Gartner, Inc. estimates that end-user spending will increase by 2% in 2017, to nearly $600 billion in current U.S. dollars. Spending on mobile phones will represent 67% of that figure.

We estimate that ASPs for computing devices and mobile phones will increase by 2% in 2017 in current US dollars, for two main reasons. First, component price increases are continuing into 2017 (mainly for PCs but also to some extent for phones), which is resulting in more expensive products. Second, users' interest in value and higher quality phones is increasingly overriding their desire for low prices.

"Across the world, the device market is becoming less price-sensitive," said Ranjit Atwal, research director at Gartner. "Consumers and businesses are seeking better products that suit their lifestyles, rather than just opting for the cheapest products."

End-User Spending on Mobile Phones Is Growing

End-user spending on mobile phones is on track to reach nearly $400 billion in 2017, an increase of 4.3% from 2016. "The increased ASP for mobile phones was driven by users across the board," said Annette Zimmermann, research vice president at Gartner. "They are replacing their basic phones with better-quality and more feature-rich basic phones, due to improved product portfolios from rising vendors such as Huawei and Oppo. In emerging markets, the majority of users are upgrading to better basic phones as the leap to premium phones remains out of reach for most."

Greater availability of basic phones from Chinese vendors such as Oppo, BBK and Huawei increased the basic-phone ASP by 13.5% in 2016. It is on track to rise by 4% in 2017. "We expect users to continue to look for higher-value phones this year, which will lead to another rise in ASP," added Zimmermann." "The high-end smartphone ASP will continue to soar, given the announcement of the Samsung Galaxy 8 and the release of the tenth-anniversary Apple iPhone later this year. We expect the premium-phone ASP to increase by 4% in North America in 2017."

Shipments of PCs, ultramobiles and mobile phones are projected to total 2.3 billion units in 2017 — achieving flat growth from 2016.

Note: The ultramobile (premium) category includes devices such as Microsoft Windows 10 Intel x86 products and the Apple MacBook Air.

The ultramobile (basic and utility) category includes devices such as the Apple iPad and iPad mini, Samsung Galaxy Tab S2, Amazon Fire HD, Lenovo Yoga Tab 3 and Acer Iconia One.

Desk-Based and Notebook PC ASP Will Increase by 1.4% in 2017

The PC exodus has reached its peak, but near-term growth of PC sales will be hampered by increasing component costs. Component costs, especially for DRAM, have doubled since June 2016. "As a result, PC providers will increase the prices of PCs toward the end of the year. We expect the overall ASP for PCs to increase by 1.4% in current U.S. dollars," said Atwal.

Worldwide Cloud IT infrastructure products vendor revenue from sales for server, storage, and Ethernet switch for cloud IT, including public and private cloud, grew by 9.2% year over year to $32.6 billion in 2016 (Chart 28)

According to the International Data Corporation (IDC) vendor revenue from sales of infrastructure products (server, storage, and Ethernet switch) for cloud IT, including public and private cloud, grew by 9.2% year over year to $32.6 billion in 2016, with vendor revenue for the fourth quarter (4Q’16) growing at 7.3% to $9.2 billion.

Cloud IT infrastructure sales as a share of overall worldwide IT spending climbed to 37.2% in 4Q’16, up from 33.4% a year ago. Revenue from infrastructure sales to private cloud grew by 10.2% to $3.8 billion, and to public cloud by 5.3% to $5.4 billion. In comparison, revenue in the traditional (non-cloud) IT infrastructure segment decreased 9.0% year over year in the fourth quarter. Private cloud infrastructure growth was led by Ethernet switch at 52.7% year-over-year growth, followed by server at 9.3%, and storage at 3.6%. Public cloud growth was also led by Ethernet switch at 30.0% year-over-year growth, followed by server at 2.4% and a 2.1% decline in storage. In traditional IT deployments, storage declined the most (10.8% year over year), with Ethernet switch and server declining 3.4% and 9.0%, respectively.

"Growth slowed to single digits in 2016 in the cloud IT infrastructure market as hyperscale cloud datacenter growth continued its pause," said Kuba Stolarski, research director for Computing Platforms at IDC. "Network upgrades continue to be the focus of public cloud deployments, as network bandwidth has become by far the largest bottleneck in cloud datacenters. After some delays for a few hyperscalers, datacenter buildouts and refresh are expected to accelerate throughout 2017, built on newer generation hardware, primarily using Intel's Skylake architecture."

From a regional perspective, vendor revenue from cloud IT infrastructure sales grew fastest in Japan at 42.3% year-over-year in 4Q’16, followed by Middle East and Africa at 33.6%, Canada at 16.6%, Western Europe at 15.6%, Asia/Pacific (excluding Japan) at 14.5%, Central and Eastern Europe at 11.6%, Latin America at 9.9%, and the United States at 0.1%.

Global gaming market (games consoles and accessories, content and related services) value in reached US$34.7 billion in 2016

Global gaming market value consisting of games consoles and accessories, content and related services in 2016 is estimated at US$34.7 billion, decreasing 2.5% on year, and Sony's total revenues of US$19.7 billion accounted for 56.8% of the global total, according to IHS.

Global LCD panel shipments for digital signage will increase 8.6% y/y to 4.4 million units in 2017 and keep growing to 5.8 million units in 2020 - Digitimes Research

LCD panel shipments for digital signage will reach 4.4 million units globally in 2017, increasing 8.6% on year, and the shipments will keep growing to 5.8 million units in 2020, according to Digitimes Research.

While SMD (surface mount device) RGB LED technology has improved resolution of LED display panels used in digital signage, LCD panels are still superior in resolution, Digitimes Research indicated.

A large LCD public display still has to be formed by several screens, but slim bezel designs and improved imaging technology will enable LCD to remain mainstream in the market.

Development of digital signage is moving toward integration with IoT (Internet of Things), cloud computing and Big Data analytics to collect and analyze data for commercial use.

Walt D. Custer

Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.

View other posts from Walt D. Custer. View other posts from Walt D. Custer.
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