Custer Presentations at Productronica

Custer will be at the Productronica trade show all week, Tuesday Nov 14 to Friday Nov 17 and will be based at the EIPC stand, Hall B3 Booth 529. He will provide his “Global Industry Outlook” presentation on Tuesday, Wednesday and Thursday at 3:30pm in the Speakers Corner in Hall A1. During the show you can reach Walt on his mobile +1 707 494-2495. See you in Munich!

China/Taiwan Update

October monthly revenues were just released for Taiwan-listed companies, many of which manufacture in China. Correcting for normal seasonality October was a strong month.

  • 101 OEMs electronic equipment revenues in October 2017 were up 11% compared to October 2016 and up 3.5% sequentially compared to September 2017 (Chart 1).
  • ODM sales were also strong, up 9.6% compared to October of last year and up 4.8% sequentially from September (Chart 2).
  • Wafer foundry revenues mirrored the run up in global semiconductor sales (Chart 3).
  • Package and test (Chart 4) and memory (Chart 5) sales climbed.
  • Passive components revenues declined very slightly from their September peak (Chart 6).
  • Printed circuit board shipments remained strong (Chart 7) but laminate shipments softened (Chart 8), perhaps correcting for over-ordering in recent months.

Source: Company financial reports

South Korea 3Q’17 PCB Production Rises thanks to Apple (Chart 9)

Thanks to large orders from Apple South Korean PCB output rose significantly in the third quarter. Reportedly with LG Innotek’s recent participation, South Korea FPCB makers are supplying all of Apple’s RF needs.

Data Source: Industry contacts via private communication

European Semiconductor Sales Increased 19% q/q to 2.16 Billion Euro in Q3 2017 (Charts 10 & 11)

European Semiconductor Distribution Market (DMASS) Continues Record Sales in Third Quarter 2017

  • Analog components grew by 18.5% to 654m Euro MOS Micro rose 15.8% to 443m Euro Opto was up 19.9% to 227m Euro Power leapt 24.6% to 213m Euro. Memories (mainly driven by DRAMs) grew by 22.9% to 172m Euro. Programmable Logic, finally, grew by 13% to 138 Million Euro.
  • Semiconductor distribution shows further upswing. Germany, South and East Europe drive growth. Opto, Discrete, Power, Memories and High-end Logic grow over-proportionally.

The European semiconductor industry just reported the third quarter in a row of more than 2 Billion Euro. According to DMASS Ltd., semiconductor sales in Q3 2017 as reported by the members ended with 2.16 Billion Euro, an increase of 19% over the corresponding quarter last year. The first nine months ended for DMASS members with a plus of 15.6% to 6.48 Billion Euro.

Georg Steinberger, chairman of DMASS: "The success story, at least on the sales side, continues. It seems that at least in 2017 the dynamics of growth across the board are unbroken. We are certainly in for a record year already. Newer designs in fields like IoT or e-mobility will see higher components content, so the future looks rather positive from a sales and volume perspective."

Regionally, Turkey, Austria, Eastern Europe and surprisingly Germany contributed most to the growth in Q3. Germany grew by 19.7% to 681 Million Euro, Italy by 18.6% to 185 Million Euro, the UK/Eire "only" by 12.8% to 151 Million Euro and France by 12.2% to 142 Million Euro. Eastern Europe grew by 25% to 324 Million Euro and Nordic by 18% to 183 Million Euro.

Georg Steinberger: "We do not see big changes in the regional trends compared to previous quarters, except for the fact that Germany seems to bounce back nicely, after a slower start into the year than other areas in Europe".

On the product side, growth continues to happen in all product segments.

Other Logic (application-specific), Power-Discretes, Memories, Discrete Components, and Optoelectronics grew above average, Analog and MOS Micro average and Programmable Logic, Standard Logic and Sensors below average. In detail, Analog components grew by 18.5% to 654 Million Euro, MOS Micro by 15.8% to 443 Million Euro, Opto by 19.9% to 227 Million Euro, Power by 24.6% to 213 Million Euro. Memories (mainly driven by DRAMs) grew by 22.9% to 172 Million Euro. Programmable Logic, finally, grew by 13% to 138 Million Euro.

Georg Steinberger: "This quarter again saw strong sales in memory and logic products in general, application specific logic and DRAM particularly, but also a nice upswing in Power and Discretes. Programmable Logic remains a bit disappointing, but there is barely a product area that has not grown double-digit."

"I wish this was all based on merely distribution-driven efforts, but there are price and lead-time effects as well, so not everything is organic", said Steinberger: "Despite the excellent top-line development, with very promising opportunities for the future, the challenges on the distribution channel continue."


Automotive Electronic Systems Growth to be Strong through 2021 (Charts 12 & 13)

IC Market Drivers 2018 report ranks major end-use applications and their impact on IC market growth per IC Insights

Automotive electronic system sales are forecast to rise by a compound annual growth rate (CAGR) of 5.4% from 2016 through 2021, which is the highest among six major end-use system categories, according to data presented in the 2018 edition of the IC Insights’ IC Market Drivers—A Study of Key System Applications Fueling Demand for Integrated Circuits that will be released later this year.

Demand is rising for electronic systems in new cars with increasing attention focused on self-driving (autonomous) vehicles, vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communications, as well as on-board safety, convenience, and environmental features, and growing interest in electric vehicles. Automotive electronics is growing as technology becomes more widely available on mid-range and entry-level cars and as consumers purchase technology-based aftermarket products. For semiconductor suppliers, this is good news as analog ICs, MCUs, and a great number of sensors are required for many of these automotive systems.

The automotive segment is expected to account for an estimated 9.1% of the $1.49 trillion total worldwide electronic systems market in 2017, a slight increase from 8.9% in 2015, and 9.0% in 2016. Automotive’s share of global electronic system production has increased only incrementally through the years, and is forecast to show only marginal gains as a percent of total electronic systems market through 2021, when automotive electronics are forecast to account for 9.8% of global electronic systems sales. Though many electronics systems are being added in new vehicles, IC Insights believes pricing pressures on both ICs and electronic systems will keep the automotive end-use application from accounting for much more than its current share of total electronic systems through the forecast period.

Other electronic system and IC market highlights from the 2018 IC Market Drivers Report include the following.

  • The automotive segment is forecast to be the fastest growing electronic system market through 2021. This is good news for the total automotive IC market, which is forecast to surge 22% in 2017 and 16% in 2018.
  • Industrial electronic systems are forecast to enjoy the second-fastest growth rate (4.6%) through 2021 as robotics, wearable health devices, and systems promoting the Internet of Things help drive growth in this segment. Analog ICs are forecast to hold 45% of the industrial IC market in 2017.
  • The 2016-2021 communication systems CAGR is projected to be 4.2% as global sales of smartphones and other mobile devices reach saturation. Asia-Pacific is forecast to show the strongest regional growth of communication systems and account for 69% of the total communications IC market in 2017.
  • The consumer electronic systems market is forecast to display a CAGR of 2.8% through 2021. The logic segment is forecast to be the largest consumer IC market throughout the forecast. In total, the consumer IC market is expected to register a 2.4% CAGR across the 2016-2021 time period.
  • Flat or marginal demand for personal computing devices (desktops, notebooks, tablets) is expected to result in the computer systems market showing the weakest CAGR through 2021. The total computer IC market is forecast to increase 25% in 2017 driven by much higher average selling prices for computer DRAM and NAND flash memory.


Eurozone Set for Fastest Growth in a Decade

Eurozone is set for its fastest growth in a decade this year, the European Commission said, thanks to resilient private consumption, stronger global growth and falling unemployment.

In its Autumn Forecast, the executive arm of the European Union raised the euro area growth forecast for this year to 2.2% from 1.7%.

The EU growth forecast for this year was also lifted to 2.3% from 1.9% seen in the spring projections.

Eurozone growth has surpassed expectations this year, the commission said.

The economies of all Member States are expanding and their labor markets improving, but wages are rising only slowly, the agency added.

"After five years of moderate recovery, European growth has now accelerated," Pierre Moscovici, the EU Commissioner for Economic and Financial Affairs, said.

"We see good news on many fronts, with more jobs being created, rising investment and strengthening public finances."

However, challenges remain in the form of high debt levels and subdued wage increases, the EU top-official added.

A more pronounced acceleration in wages, supported by productivity gains, would be an important signpost signaling the ability of the expansion to continue at a robust pace, the commission said.

The slowing pace of job creation and household purchasing power growth implies a slight moderation in momentum over the next two years, the EU said.

Yet, the commission raised the Eurozone growth projection for next year to 2.1% from 1.8% and forecast 1.9% expansion for 2019.

The EU growth projection for next year was raised to 2.1% from 1.9%. For 2019, growth was seen at 2019.


World Silicon Wafer Area Shipments Increased 9.8% y/y in 3Q’17 (Chart 14)

Third Quarter 2017 Silicon Wafer Shipments Increase Quarter-Over-Quarter; another Quarterly Record

Worldwide silicon wafer area shipments increased during the third quarter 2017 when compared to second quarter 2017 area shipments according to the SEMI Silicon Manufacturers Group (SMG) in its quarterly analysis of the silicon wafer industry.

Total silicon wafer area shipments were 2,997 million square inches during the most recent quarter, a 0.7% increase from the record 2,978 million square inches shipped during the previous quarter. New quarterly total area shipments are 9.8% higher than third quarter 2016 shipments and continue to ship at their highest recorded quarterly level.

"Global silicon wafer shipment volumes surpassed record levels for the sixth quarter in a row, resulting in a new historical high,” said Chungwei (C.W.) Lee, chairman of SEMI SMG and spokesman, VP, Corporate Development and chief auditor of GlobalWafers. “While silicon demand is strong, silicon pricing remains well below pre-downturn levels.”


Global MEMS Microphone Shipments will increase to 4.8 billion units in 2017 from 4.4 billion units in 2016

Global MEMS microphone shipments will increase to 4.8 billion units in 2017 from 4.4 billion units in 2016, and the volume will reach over 5.0 billion units in 2018, according to Digitimes Research.

Global MEMS microphone shipments surpassed for the first time those of ECMs (electret condenser microphones) in 2015, reaching 3.8 billion units.

MEMS microphone shipments have been mainly driven by growing demand for voice-control smart speakers, for which MEMS microphones are a key voice-command component, Digitimes Research indicated.

Among various MEMS microphone applications, smartphones account for the largest portion, followed by notebooks and tablets. MEMS microphones are also used in headphones, digital video recorders, automotive electronic, medical care and IoT (Internet of Things) devices.

MEMS microphones, audio ICs and micro-speakers are main audio components used in smartphones, notebooks and tablets.

US-based Knowles Electronics and China-based GoerTek and AAC Technologies Holdings were the global top-3 MEMS microphone vendors in 2016, with Sony and Infineon Technologies mainly undertaking outsourced production. IDMs including STMicroelectronics, Bosch, TDK and Omron, are also MEMS microphone suppliers.

Amazon, Google, Apple, Sony, Bose and Harman International Industries have launched smart speakers and/or devices with voice assistance functions.

To enhance smart speakers' sound reception, it is necessary to not only improve performance of MEMS microphones but also match MEMS microphones with sound source positioning, noise- and echo-cancelling hardware/software systems.


Nintendo plans to pick up the production pace for its hit Switch game console next year, people with direct knowledge of the matter said, showing the company's deepening confidence in the success of the device.

The Kyoto-based company is sketching out a plan to make 25 million to 30 million units of the Switch in its next fiscal year, which begins April 2018, and has begun informing business partners about it, the people said.

They said the plan is still in its early stages and Nintendo could aim higher depending on sales during this year's holiday season.

The Switch went on sale globally on March 3, 2017. Between that date and Sept. 30, Nintendo said it sold 7.63 million units. The company said at its quarterly earnings announcement in October that it planned to sell an additional 9.1 million units by March 2018, meaning total sales by that date would reach nearly 17 million.

Expectations for the Switch were low ahead of the launch because of its $300 price and what analysts saw as the product's uneasy positioning between smartphones, which are more portable, and rival game machines such as Sony Corp.'s PlayStation 4, which are more powerful.

However, consumers have been drawn to the product's hybrid nature-it can be used both as a living-room console and as a portable hand-held machine. A Nintendo survey of Switch owners found they viewed the device more as a hand-held than a console, opening room for it to become a one-per-person item rather than one-per-household. Suppliers said an AC adapter is one of the best-selling Switch accessories, suggesting people are using it in their bedrooms.


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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