- Manufacturing activity accelerated slightly in July in China (Chart 1) and Taiwan (Chart 2) based upon their PMI reports.
- Electronic equipment shipments by Taiwan-listed companies (many of which produce in China) were up 11.1% in July 2017 compared to July 2016. There was a modest sequential downturn from June to July but this reflected normal seasonality (Chart 3). However the year-on-year increase was significant.
- ODM sales rose 12.5% in July 2017 versus July 2016 (Chart 4).
- Industrial computer sales rose substantially (Chart 5).
- Semiconductor shipments to Asia/Pacific continue to grow ahead of electronic equipment. Memory chip demand and pricing are likely driving the larger semiconductor increase (Chart 6).
- Wafer foundry revenues are still wavering while global semiconductor shipments rise (Chart 7). Foundry sales are near “zero growth” on a 3/12 basis (Chart 8).
- Package and test sales were flat from June to July (Chart 9) but passive component sales rose significantly (Chart 10).
- Solar/photovoltaic revenues were flat from June to July (Chart 11) and little changed from July of last year.
- PCB shipments rose (Chart 12) and CCL laminate revenues increased slightly (Chart 13).
Source: July Financial reports of Taiwan-listed companies
World Passive Component 2Q’17 Growth
Chart 14 shows that a composite of 14 major manufactures passive component revenues increased 5.6% in the second quarter of 2017 versus 2016.
Source: Company financial reports
2Q’17 Global EMS and ODM performance
Chart 15 is the composite second quarter revenues of a large number of global EMS and ODM companies. Their combined sales were up an estimated 11.4% in 2Q’17 versus 2Q’16 as most large companies have now reported their second quarter financial results.
Source: Company financial reports
Printed Circuit Board Supply Chain – 2Q’17 Results
Revenue growth is given for 2Q’17 vs 2Q’16 for:
- Process equipment – Chart 16
- Material suppliers – Chart 17
- PCB laminate – Chart 18
- 3/12 growth of these three groups – Chart 19
Source: Company financial reports
2Q’17 Silicon Wafer Shipments Increase Quarter-Over-Quarter; Continue to Ship at Record Levels (Chart 20)
Worldwide silicon wafer area shipments increased during the second quarter 2017 when compared to first quarter 2017 area shipments according to the SEMI Silicon Manufacturers Group (SMG).
Total silicon wafer area shipments were 2,978 million square inches during the most recent quarter, a 4.2% increase from the 2,858 million square inches shipped during the previous quarter. New quarterly total area shipments are 10.1% higher than second quarter 2016 shipments and are at their highest recorded quarterly level.
"For the fifth consecutive quarter, global silicon wafer volume shipments have shipped at record levels," said Chungwei (C.W.) Lee, chairman of SEMI SMG and spokesman, VP, Corporate Development and chief auditor of GlobalWafers. "These record levels are being driven by both 200mm and 300mm shipments.”
iPhone Suppliers’ Sales Rising as New iPhone Production Gains Momentum
Most component and service suppliers in the iPhone supply chain have reported strong sales for July, indicating that production for new iPhone devices is gaining momentum, according to industry sources.
All of the three new iPhone models, including two TFT LCD and one OLED model, have entered volume production, said the sources, adding that there will not be shortages for the two LCD models, but the supply of the OLED version could fall short of demand due to high expectations for the model.
The high consumer expectations for new iPhone devices will keep most component suppliers operating in high gear in the second half of 2017 and drive their monthly or quarterly sales volumes to new highs, commented the sources.
Flexible PCB suppliers Zhen Ding Technology Holding and Flexium Interconnect saw their revenues expand 12.4% and 11.3% on year to NT$8.065 billion (US267 million) and NT$1.734 billion, respectively, in July. Meanwhile, PCB supplier Compeq Manufacturing posted revenues of NT$4.458 billion for July, increasing 22.3% from a year earlier.
Other iPhone supply chain suppliers, including camera module maker Largan Precision, case supplier Catcher Technology, touch module maker General Interface Solution (GIS) and IC backend service supplier King Yuan Electronics (KYEC), have all reported strong sales growth for July.
Since shipments of complete iPhone devices are expected to start gaining momentum in August, iPhone assemblers Foxconn Electronics, Pegatron Technology and Wistron will see their revenues hit highs during the September-November period, said the sources.
Reshoring to USA
American companies outsourcing jobs to other countries have become a major topic in U.S. elections, media debates, and everyday conversations. Lower costs, more flexibility and more favorable regulatory environments are a few of the many reasons American businesses have been sending their manufacturing jobs to workers in other nations.
Recently, though, companies have been bringing their jobs back to the U.S., a trend known as reshoring. Just like there are a lot of reasons for outsourcing, there are plenty of motives for reshoring.
1. Automotive and Electronics Industry Growth
The two industries that have relocated the most jobs back to the US are the automotive and electronics industries. This is partially because the size of these products makes it more difficult and expensive to transport them.
Groups such as the United Auto Workers have had some influence in bringing jobs back to the US, but auto companies have also exceeded their promises to the organization and started producing advanced technologies, such as lithium-ion batteries, in the U.S.
In some cases, unions have even considered allowing lower wages for US workers to make onshore production more cost-effective compared to outsourcing. If car part manufacturers reduce their U.S. wages by 40 to 50%, bringing operations back to America would make economic sense once shipping costs are factored in. After the reductions, the wages for U.S. workers would still be higher than for those in Mexico.
Advanced technologies are the most likely to be reshored, because they're the most difficult to produce and often require highly skilled workers to make them. In the U.S., these workers are often easier to find, and companies can watch manufacturing processes more closely.
2. Increased Labor Cost
One of the most common reasons for moving manufacturing jobs overseas is the cheap production and labor costs available there. Wages in other countries, however, have been rising, making outsourcing less lucrative. Wages in China, for example, more than doubled between 2005 and 2016, making production in China more expensive than in other middle-income countries and closer to the cost of production in high-income countries like the United States.
Around the world, wages adjusted for inflation are predicted to increase by 2.3%. Asia is expected to see the biggest increases, with Vietnam, Thailand, Indonesia, India, and China all near the top of the list. Vietnam is projected to have the highest real wage growth in 2017, at 7.2%.
North America, meanwhile, is expected to have smaller increases in salary. In the U.S., the number is just 1.9%. This means the gap between wages in Asia and the United States is closing.
When taking into account other cost factors, the cost of having plants in the U.S. versus other parts of the world becomes closer to equal. Automation - though it has a reputation for destroying jobs - has made labor costs cheaper in the US, encouraging more companies to bring production back to American soil.
3. Logistical Challenges
Logistical issues are another factor making America more desirable for manufacturing companies. Moving production overseas can complicate the supply chain, and shipping products and materials from overseas to the U.S. can get expensive.
Moving operations offshore requires new facilities to be built and parts to be shipped to the new location, which necessitates significant fuel and transportation costs. The finished products then need to be shipped back to US markets, tacking on additional shipping costs. In a world where companies like Amazon ship almost anything overnight, manufacturing companies that make their products offshore are struggling to keep up.
Dealing with foreign governments and regulatory environments, hiring foreign employees, and finding a location for facilities can also sometimes be a difficult challenge. Although manufacturers could purchase equipment that takes up 30% less floor space, for instance, they may be able to obtain more space for their plants in the U.S., which provides them with more flexibility.
4. Lack of Skilled Workers
As manufacturing equipment becomes more advanced, companies need more technically skilled workers to operate and service it. Finding these kinds of employees can be difficult in some locations. For this reason, a number of manufacturers have decided to move their production back to America, where it is easier to find more highly educated workers.
This rising demand for more skilled workers has also caused wages to rise, especially in areas where finding these workers is more difficult. Some of the demand for skills has shifted to those who know how to work with advanced technologies that use automation or smart technologies.
These workers may get paid more, but because of the technology they're using, they can get more done than an average worker. This enables manufacturers to hire fewer workers, which keeps costs lower and increases the appeal of bringing operations back to the U.S., where a larger share of their workforce can be highly skilled.
Although more manufacturing jobs have been coming back to the U.S., the numbers are certainly still not as high as they once were. By 2011, the United States had lost 6 million manufacturing jobs. The country gained back half a million of those jobs by the end of 2016.
The jobs that came back aren't quite the same as ones that left, either. They deal with more advanced technology and are being redistributed differently. These changes and all the many others may, however, be the beginning of a resurgence of American manufacturing. While the outlook has certainly been improving, we will have to wait and see, and continue working on it before we determine what will ultimately happen.
Global Smartphone Production 324 Million Units in 2Q’17 (Charts 21 & 22)
TrendForce’s latest smartphone market research finds flat growth in the global production volume between the first and second quarter of 2017. Similar to the prior three-month period, smartphone sales in the second quarter were lackluster and affected by the anticipation of the 10th anniversary iPhone release in the next half of the year. In total, the global smartphone production volume reached 324 million units in the second quarter. Samsung, Apple and Huawei retained first, second and third place, respectively, in the worldwide production volume ranking for the period. Xiaomi managed to surpass LG to take sixth place in the ranking.
Samsung to remain first place this third quarter with the help of new Galaxy Note devices as sales of new iPhone models will take off later in the fourth quarter.
For the second quarter, Samsung’s smartphone production volume totaled around 80 million units, which is about the same volume level for the first quarter. In terms of the global ranking, Samsung retained first place as its device sales have been supported by the flagship series Galaxy S8 and the mid-/low-range series Galaxy J. Despite seasonal effect of the year’s first half, Galaxy J continued to do well in the market and was the main sales driver for Samsung.
For the third quarter, TrendForce expects sales of Samsung’s high-end smartphones will be affected by the competition from the new iPhone models. Nevertheless, the upcoming refresh of the Galaxy Note series will help keep Samsung’s quarterly production volume near 80 million units, maintaining the brand’s first-place position with a global market share of 22.7%.
Apple’s iPhone production volume for this second quarter totaled around 43 million units, down 17% compared with the previous three-month period. Apple remained second place in the global ranking, though its market share fell to 13.3%. Much of the iPhone demand has shifted to the second half of the year, when Apple will be releasing three new device models: the 4.7- and the 5.5-inch models with TFT LCD displays plus the premium 5.8-inch model with AMOLED display.
The 10th anniversary iPhone devices are expected to arrive on the market at the end of this third quarter. Considering the substantial hardware upgrades made to the first AMOLED iPhone, this specific model might have a delayed release, or its availability might be limited to some regional markets during the initial shipment period. TrendForce also estimates that the third-quarter iPhone production volume will register a growth rate of no more than 5% compared with the prior quarter’s result. The fourth quarter will see higher growth in the iPhone production volume as the 10th anniversary models become more widely available.
Huawei kept its third-place ranking while OPPO and Vivo enjoyed strong sales in Southeast Asia
With regard to Chinese brands, Huawei’s sales performance during the second quarter was weaker than anticipated with total production volume falling by 8% compared with the first quarter. Nonetheless, Huawei’s market share in terms of the global production volume stayed at 10.3%, allowing the brand to remain at the third spot of the worldwide ranking. Huawei is expected to do better in the third quarter on account of the year-end busy season. Its annual smartphone production volume for 2017 is estimated around 150 million units.
OPPO and Vivo also remained fourth and fifth, respectively, in the global ranking for the second quarter. Besides being firmly rooted in China’s second- and third-tier cities, both brands have also expanded aggressively in overseas markets since last year. They in particular have recorded impressive results in Southeast Asia. Together, OPPO and Vivo’s total production volume increased by 4% in the second quarter compared with their first-quarter figure. Their total volume is projected to go up by more than 10% this third quarter.
Xiaomi expanded its worldwide smartphone market share to 6% this second quarter and advanced one spot to sixth place in the ranking. In term of market performance, Xiaomi’s smartphone production volume returned to the same level as in 2015. The success is attributed to the brand’s efforts to raise specifications and develop new software apps that work with the upgraded hardware. Xiaomi also benefitted from the financial misfortunes of its domestic rival LeEco. Due to its ongoing operational problems and publicity crisis, a part of LeEco’s user base has gone over to Xiaomi.
Set against the first quarter, Xiaomi’s smartphone production volume for the second quarter grew by more than 50% to almost 20 million units. Going into the third quarter, sales of Xiaomi device will be driven by the seasonal demand and the Indian market. TrendForce estimates that Xiaomi’s third-quarter production volume will increase by more than 10% versus the second quarter.
Total production volume of all Chinese brands will register an above global average growth of nearly 10% this third quarter
TrendForce’s smartphone market outlook for this third quarter is overall positive. In addition to the release of the three new iPhone models, major Android phone vendors will roll out flagships featuring displays with the 18:9 aspect ratio. The upcoming devices with high screen-to-body ratios will raise the level of competition among brands and stimulate consumer demand.
TrendForce projects that the global smartphone production volume will grow by 5% from 324 million units in the second quarter to nearly 340 million units in the third quarter. On the other hand, the total third-quarter production volume of all Chinese brands is estimated go up by almost 10% compared with the prior three-month period to reach 180 million units.
Global memory Card Market to Grow at 0.45% CAGR
Technavio announced that the market for memory cards will reach $9 billion by 2021, up from $8.8 billion in 2016, a CAGR of approximately 0.45%.
Important factors that impede the market growth are enhanced in-built memory capacity in smartphones and proliferation of the cloud. The market deceleration is further enhanced by the decrease in average selling price of memory cards. Technology advances like faster read/write speed, enhanced durability, smaller form factors, and improved cost efficiency, have helped sustain the use of memory cards in smartphones and cameras.
Competitive vendor landscape
The global memory cards market consists of players that are well established in the global memory products and solutions market. Apart from storage capacity, compatibility, and reliability of stored data, vendors in the market are unable to showcase any other major variation in their products.
Top eight memory card market vendors
- Kingston Technology
- Lexar (Micron Consumer Products Group)
- ADATA Technology
- Transcend Information
- Samsung Group
German Exports Declined the Most in Nearly Two Years
German exports declined the most in nearly two years in June and imports logged the biggest contraction since 2009, lifting the trade surplus to a higher level.
Exports fell unexpectedly by 2.8% in June from May, when they climbed 1.5%, data from Destatis showed . This was the biggest fall since August 2015, when shipments slid 5.4%.
At the same time, imports decreased 4.5%, in contrast to May's 1.3% increase.
Imports fell for the first time in four months, logging the sharpest contraction since January 2009. Both exports and imports were expected to gain 0.2% each in June.
As a result, the trade surplus increased to a seasonally adjusted EUR 21.2 billion from EUR 20.3 billion in May.
On a yearly basis, export growth plunged to 0.7% from 14.1%. Similarly, imports grew only 3.6% after expanding 16.3%.
The current account of the balance of payments showed a surplus of EUR 23.6 billion versus EUR 24 billion in the same period of previous year.
Elsewhere in the euro area, data from the French customs office showed Tuesday that the trade shortfall widened to EUR 4.66 billion from EUR 4.43 billion in May. The deficit was forecast to widen to EUR 5.05 billion.
Although German and French exporters struggled in June, the outlook for trade in both countries remains fairly bright amid strong growth in global demand, Jessica Hinds, an economist at Capital Economics, said.
The brighter outlook is also supported by the still low level of the euro exchange rate, despite its recent appreciation, the economist added.
Worldwide Augmented Reality and Virtual Reality (Ar/Vr) Revenues to Increase at 113% CAGR through 2021
Worldwide revenues for the augmented reality and virtual reality (AR/VR) market are forecast to increase by 100% or more over each of the next four years, according to International Data Corporation (IDC). Total spending on AR/VR products and services is expected to soar from $11.4 billion in 2017 to nearly $215 billion 2021, achieving a compound annual growth rate (CAGR) of 113% along the way.
The United States will be the region with the largest AR/VR spending total in 2017 ($3.2 billion), followed by Asia/Pacific (excluding Japan)(APeJ) ($3.0 billion) and Western Europe ($2.0 billion). But then things get interesting as APeJ jumps ahead of the U.S. in total spending for two years before its growth rate starts to slow in 2019. The U.S. then pushes back into the top position in 2020 driven by accelerating growth in the latter years of the forecast. Meanwhile, Western Europe is expected to overtake APeJ for the number 2 position in 2021. The regions that will experience the fastest growth over the 2016-2021 forecast period are Canada (145% CAGR), Central and Eastern Europe (134% CAGR), Western Europe (121% CAGR) and the United States (121% CAGR).
Within the regions, the industry segments driving AR/VR spending start from roughly the same place, but then evolve quite differently over time. The consumer segment will be the largest source of AR/VR revenues in each region in 2017. In the United States and Western Europe, the next largest segments are discrete manufacturing and process manufacturing. In contrast, the next largest segments in APeJ in 2017 are retail and education. Over the course of the forecast, the consumer segment in the U.S. will be overtaken by process manufacturing, government, discrete manufacturing, retail, construction, transportation, and professional services. In APeJ, the consumer segment will remain the largest area of spending throughout the forecast, followed by education, retail, transportation, and healthcare in 2021. Consumer spending will also lead the way in Western Europe, with discrete manufacturing, retail, and process manufacturing showing strong growth by the end of the forecast.
"The consumer, retail, and manufacturing segments will be the early leaders in AR and VR investment and adoption. However, as we see in the regions, other segments like government, transportation, and education will utilize the transformative capabilities of these technologies," said Marcus Torchia, research director of IDC Customer Insights and Analysis. "With use cases that span both AR and VR environments, we see a significant opportunity for companies to re-cast how users interact in business processes and everyday tasks."
"Augmented and virtual reality are gaining traction in commercial settings and we expect this trend will continue to accelerate," said Tom Mainelli, program vice president, Devices and AR/VR at IDC. "As next-generation hardware begins to appear, industry verticals will be among the first to embrace it. They will be utilizing cutting-edge software and services to do everything from increase worker productivity and safety to entice customers with customized, jaw-dropping experiences."
The industry use cases that will attract the largest AR/VR investments are also expected to evolve over the five-year forecast. In 2017, the largest industry use cases will be retail showcasing ($442 million), on-site assembly and safety ($362 million), and process manufacturing training ($309 million). By the end of the forecast, the largest industry use cases in terms will be industrial maintenance ($5.2 billion) and public infrastructure maintenance ($3.6 billion), followed by retail showcasing ($3.2 billion). In contrast, the consumer segment will be dominated by AR and VR games throughout the forecast, with total spending reaching $9.5 billion in 2021. The use cases that will see the fastest growth over the forecast period are lab & field (166% CAGR), therapy and physical rehabilitation (152.0% CAGR), and public infrastructure maintenance (138% CAGR).
Spending on VR systems, including viewers, software, consulting services, and systems integration services, are forecast to be greater than AR-related spending in 2017 and 2018, largely due to consumer uptake of hardware, games, and paid content. After 2018, AR spending will surge ahead as industries make significant purchases of AR software and viewers.