Weekly Global Update for October 4, 2017

North American PCB Order Growth Boosts Book-to-Bill Ratio (Charts 1-2). IPC Releases PCB Industry Results for August 2017

IPC announced the August 2017 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Strong year-on-year growth in orders drove the book-to-bill ratio up to 1.15 in August.

Total North American PCB shipments in August 2017 were down 0.6% compared to the same month last year. This year to date, shipments are 4.0% below the same period last year. Compared to the preceding month, August shipments increased 3.1%.

PCB bookings in August increased 17.2% year-on-year, driving year-to-date order growth up to 4.0% above the same period last year. Bookings in August were up 3.6% compared to the previous month.

“Strong growth in North American PCB orders in recent months, combined with negative growth in sales, drove the book-to-bill ratio in August to a 12-year high of 1.15,” said Sharon Starr, IPC’s director of market research. “Unusually fast growth in flexible circuit orders and growing demand from the military and aerospace market are two of the drivers. The ratio has been above parity for seven consecutive months,” she added, “indicating a possible recovery in sales by the end of this year.”

Source: www.ipc.org

Custer Comments: August book/bill is at highest level since October 2015 as orders surged (Chart 1). However PCB orders are well in excess of end market demand on a 3/12 growth basis (Chart 2) suggesting the August high PCB order growth is likely unsustainable.

August U.S. Electronic Equipment Shipments, Orders and Inventories (Charts 3-6)

The U.S. Commerce Department released its “Durable Goods” report covering August shipments, orders and inventories.

• Electronic equipment book/bill moved higher into positive territory (Chart 3).
• Both electronic equipment orders and shipments are growing on a 3/12 basis (Chart 4).
• Actual orders and shipments are at their highest level in 64 months (Chart 5).
• Defense capital goods, although volatile, continue on a 3-year upward trend (Chart 6).

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

Worldwide IaaS Public Cloud Services Market Grew 31% in 2016 (Charts 7 & 8)

The worldwide infrastructure as a service (IaaS) public cloud market grew 31% in 2016 to total $22.1 billion, up from $16.8 billion in 2015, according to Gartner, Inc. Amazon was the number one vendor in the IaaS market in 2016, followed by Microsoft and Alibaba.

"The market for cloud services is growing faster than virtually every other IT market today, with much of this growth coming at the expense of the traditional, noncloud offerings," said Sid Nag, research director at Gartner. "The demand for cloud-based IaaS continues on its path of aggressive growth, and the high growth of IaaS is also driving growth in related cloud markets. While platform as a service (PaaS) and software as a service (SaaS) are also exhibiting strong growth, IaaS is expected to show the fastest growth over the next five years."

Within the IaaS market, there is significant above-market growth for the big three hyperscale IaaS cloud providers. While Amazon Web Services dominated the market in 2016, Microsoft Azure gained more momentum, and Google made some gains. Looking forward, Gartner's position is that while competitive pressures increase, Amazon will witness growth erosion in share, as the non-hyperscale providers struggle to provide value through their services, while other IaaS market leaders will see an increase in growth.

Amazon is the clear leader in the IaaS market with 44.2% of the market (see Table 1). Amazon has achieved this position by serving the most customers across the broadest range of use cases — from cloud-native startups, to midmarket businesses wanting to lift and shift traditional applications, to enterprises executing transformational migrations to the cloud.

Microsoft secured the number two position in the IaaS market with 7.1% market share, an increase of 61.1% over 2015. Microsoft solidified its position as a leading IaaS provider through focused investment in the development of IaaS capabilities and in solid sales and marketing execution.

In the third spot, Alibaba's 2016 growth of 127% reflects the company's position as the current volume leader and dominant player in the cloud services market in China. Actively expanding its international footprint, it also announced in 2016 the launch of four new data centers located in Europe, Australia, the Middle East and Japan.

"The worldwide public cloud service market growth continues, driven by digital business initiatives, data center consolidations and application migrations to the cloud," said Nag.

"Technology strategic planners must build both relevant offerings and partner-based ecosystems to seize the opportunity."

Source: www.gartner.com

LED Lighting Module Market with US $4+ billion Revenue Showing Attractive Prospects (Chart 9):

• After wide use in general lighting applications, LED module manufacturers are now looking for new applications with higher margins.
• LED lighting module market value will treble in the next five years, driven by mid-power modules.
• Associated components and materials are taking advantage of LED module growth.
• New applications emerge as the LED module industry looks for growth engines.

The LED lighting module industry is showing the emergence of innovative functions and the introduction of new market segments including automotive, smart lighting and horticultural markets. In this context, Yole Développement (Yole) estimates the market and presents its vision of the industry in its new technology and market report titled LED Lighting Module Technology Industry & Market.

According to Yole’s Solid State Lighting team, the LED lighting module market, including flexible LED strips, reached nearly US$4 billion in 2016 and will grow to US$13.8 billion by 2022.

“LED technology is increasingly penetrating general lighting applications, thanks to how easily integrators can use it,” announces Pierrick Boulay, Technology & Market Analyst, Solid-State Lighting at Yole. “The LED lighting module market will therefore deliver a 22.6% CAGR between 2017 and 2022.”

Yole’s report provides a comprehensive overview of the LED lighting modules including technologies, markets and applications, main functions and integration into lighting systems. The company proposes a deep analysis of the positioning of each module type, including mid-power, high-power, COB and flexible strip and the main technologies in use. Industry structure, future trends and market data are also analyzed in this report.

What is the status of the LED lighting module industry? Yole’s analysts offer you a snapshot of this market.

General lighting is not a ‘blue ocean market’ any more, due to strong price pressure and intense competition between LED players. Therefore, LED module manufacturers are seeking growth engines, following the example provided by the packaged LED industry a few years ago. Therefore, LED companies are diversifying their activities and looking for market opportunities. These emerging market segments include horticultural lighting, automotive lighting and smart lighting, and are going beyond visible light into the IR or UV parts of the spectrum. All of these applications are attractive by showing much higher margins, compared to general lighting ones. The modules used in these applications require a high level of expertise, a strong industrial knowledge and technical skill. LED module manufacturers targeting these new applications are betting integrators will not have the competencies needed. In addition, high market demand will help them move higher in the value chain.

“A good example is Everlight”, commented Pierrick Boulay, from Yole. “Initially positioned as a light source supplier, it then started developing COB technology. It is now seeking to enter the automotive lighting business, positioning itself as an advanced module supplier.” In parallel, beyond visible light, UV and IR LED modules are increasingly used, pushed by rapidly growing applications like UV curing and IR surveillance cameras. Large numbers of LEDs is used in each module, and thermal management is crucial for performance, especially for UV applications.

Driven by mid-power modules, this industry will treble in the next five years (in value). Therefore, mid-power LEDs can be used in almost all applications. In 2016, the mid-power LED modules are driving the market, providing 60% of market revenues. In parallel, high-power LEDs are used only in applications requiring high luminous flux in a small module. As a result, the number of applications using high power LED modules is limited and represents only 7% of market (in revenues).

COB LED modules provide a compromise on size, LES area, luminous flux and power consumption. COB LED modules are therefore dedicated to many applications, and lead the total LED module market in volumes shipped. However, as these modules are relatively easy to manufacture in few steps, the associated ASP is low. Consequently, COB LED modules represent only 20% of market revenue.

In parallel, flexible LED strips can be directly used as LED lighting systems, mostly in indirect lighting applications. These modules are the ability to be easily implemented for residential and commercial lighting. Recent developments, like using LED chips instead of packaged LEDs on a

Source: www.yole.fr/

U.S. Auto Sales for September Highest in 2017 as Americans in Hurricane Ravaged Cities Replace Damaged Vehicles

Americans in hurricane ravaged cities are replacing their damaged vehicles and that is set to lift the pace of vehicles sales for September to its highest level this year, according to consultancies J.D. Power and LMC Automotive.

September retail sales are expected to come in at an annualized selling rate of 15 million vehicles, flat from a year earlier.

"The effect of hurricanes Harvey and Irma is expected to boost retail light vehicle demand through the remainder of 2017 and into 2018, as recovery continues," Jeff Schuster, senior vice president of forecasting at LMC Automotive, said on Friday.

Hurricane Irma hit the United States on Sept. 10, about two weeks after Hurricane Harvey plowed into Houston, Texas, causing billions in damages, mostly from flooding.

"With the need to replace 500,000 or more damaged or destroyed vehicles, the U.S. auto market slowdown will see some relief as demand over the next 6-9 months will likely be upwardly distorted," Schuster said.

"However, this does not change the overall expectation of level to weaker demand in the U.S. over the next 2-3 years."

Retail sales in September are expected to fall 2.6% to 1.2 million vehicles, compared with September 2016, the consultancies reported.

Incentives have hit all-time highs as manufacturers continue with discount aggressively to clear out record inventories of prior year vehicles, J.D. Power and LMC Automotive said.

"While the industry will benefit from additional replacement demand from storm damaged vehicles in the coming months, elevated incentives remain a threat to the overall health of the industry," Thomas King, senior vice president of the data and analytics division at J.D. Power said.

Source: www.reuters.com

Automotive Electronics Cost as Share of Total Car Cost from 1950 to 2030 (Chart 10)

Based on estimates by NXP/Freescale and Statistica the electronic content of a car on a cost basis is approaching 35% now and will reach 50% by 2030.

Source: www.nxp.com

Source: www.statistica.com

U.S. 2Q’17 GDP Growth Revised up to 3.1% (Chart 11)

The U.S. economy grew a bit faster than previously estimated in the second quarter, recording its quickest pace in more than two years, but the momentum probably slowed in the third quarter as Hurricanes Harvey and Irma temporarily curbed activity.

Gross domestic product increased at a 3.1% annual rate in the April-June period, the Commerce Department said in its third estimate on Thursday. The upward revision from the 3.0% pace of growth reported last month reflected an increase in inventory investment.

Harvey, which struck Texas, has been blamed for much of the decline in retail sales, industrial production, homebuilding and home sales in August. Further weakness is anticipated in September after Irma slammed into Florida early this month.

Rebuilding is, however, expected to boost growth in the fourth quarter and in early 2018. Growth estimates for the July-September period are just above a 2.2% pace.

Source: www.reuters.com