Updated 3Q’17 Global Electronic Equipment Growth Estimate
We have revised our estimate of 3Q’17 world electronic equipment sales growth up to +5.3% compared to the same quarter in 2016 (Chart 1). Strong server shipments caused this upward revision. Chart 2 is our still-preliminary estimate of 3Q’17/3Q’16 of world electronic supply chain growth by sector.
Source: Custer Consulting Group
JEITA has released September Japanese domestic production for electronic equipment, components and devices.
- Chart 2 summarizes 3Q’17/3Q’16 growth by sector (Chart 3).
- September domestic electronic equipment was high due to normal seasonality but has been declining year/year (Chart 4).
- Despite the ongoing decline in electronic equipment production, Japan’s PMI leading indicator remains in expansion territory and increased in November (Chart 5).
- Discrete semiconductor production is up very slightly but IC output has been generally climbing since mid-2016 (Chart 6).
- PCB output is flat (Chart 7)
- Electronic component and device growth is in double digits but their rates of growth are slowing (Chart 8).
November PMI Leading Indicators
ISM Markit and ISM have released their November Purchasing Managers Indices.
- Chart 9 summarizes November vs. October PMI values for select countries. All but USA and China increased.
- The Global PMI is at 91-month high (Chart 10).
- USA’s ISM Markit and ISM PMIs, although well into expansion territory), weakened slightly in November vs. October (Chart 11).
- European growth is broad (Chart 12) as the Eurozone’s November PMI is at its highest level since 1999 (Chart 13).
- For China (Chart 14) ISM Markit’s November PMI dipped while the China “official” PMI increased slightly.
- Taiwan (Chart 15) and South Korea (Chart 16) PMI values improved.
Worldwide Semiconductor Market forecasted to be US$409 billion in 2017 - up 20.6% from 2016 (Charts 17 & 18)
The World Semiconductor Trade Statistics (WSTS) has released its new semiconductor market forecast generated in November 2017.
WSTS expects the world semiconductor market to grow in 2017 and 2018 to US$409 Billion and US$437 Billion respectively. For 2017, this represents growth of 20.6% which is by far the largest growth year since 2010. This reflects expected growth in all major categories, with largest growth from Memory at 60.1% followed by Sensors with 15.9%. In 2017, all geographical regions are expected to grow.
Worldwide Semiconductor Market growth is expected to continue through 2018.
For 2018, all major product categories and regions are forecasted to grow with the overall market up 7.0%, with Memory contributing the highest growth followed by Optoelectronics and Sensors.
North American PCB Business Growth Continues (Charts 19-22)
IPC announced the October 2017 findings from its monthly North American Printed Circuit Board (PCB) Statistical Program. Positive year-over-year shipment and order growth continued October. The book-to-bill ratio remained high in October at 1.12.
Total North American PCB shipments in October 2017 were up 3.6% compared to the same month last year. This year to date, shipments are 2.9% below the same period last year. Compared to the preceding month, October shipments decreased 2.9%.
PCB bookings in October increased 13.9% year-on-year, while year-to-date order growth grew to 4.9% above the same period last year. Bookings in October were up 0.5% compared to the previous month.
“The North American PCB industry appears to be recovering from this year’s slump. Year-on-year sales growth in October was positive for the second consecutive month and is strengthening,” said Sharon Starr, IPC’s director of market research. “The outlook is positive too, based on continued growth in orders and on PCB book-to-bill ratios above parity (1.0) for the ninth consecutive month. After reaching a 12-year high in August, the book-to-bill ratio has retreated slightly due to growth in sales, but it remains very strong, indicating a likelihood of further sales growth in the coming months,” she added.
The next edition of IPC’s North American PCB Market Report, containing detailed October data from IPC’s PCB Statistical Program, will be available next week. The monthly report presents detailed findings on rigid PCB and flexible circuit sales and orders, including separate rigid and flex book-to-bill ratios, growth trends by company size tiers, demand for prototypes, and other timely data. This report is available free to current participants in IPC’s PCB Statistical Program and by subscription to others. More information about this report can be found at www.ipc.org/market-research-reports.
Global Smartphones Sales to End Users up 3% y/y to 383 million units in 3Q’17 (Charts 23-25)
- Top Five Smartphone Vendors Achieved Growth in the Third Quarter of 2017
- Xiaomi Exhibited Best Performance of the Quarter
Global sales of smartphones to end users totaled 383 million units in the third quarter of 2017, a 3% increase over the same period in 2016, according to Gartner, Inc. All of the top five smartphone vendors achieved double-digit growth apart from Apple, which achieved a 5.7% increase.
"Despite market weakness in China, sales of smartphones rose in the third quarter of 2017," said Anshul Gupta, research director at Gartner. "Emerging Asia/Pacific (15% increase) and North America (11.2% increase) drove the smartphone growth in the quarter."
"In emerging Asia Pacific, both Samsung and Huawei saw healthy demand along with Xiaomi and Vivo, which were able to grow their footprint outside their home markets," added Gupta. "In North America, Samsung was the driving force in the quarter due to its new flagship products."
Samsung’s smartphone sales recorded a double-digit increase (19.3%) in the third quarter of 2017. "Renewed pushes of the newly designed Galaxy S8, S8+ and Note 8 smartphones have brought back growing demand for Samsung smartphones, which helped it compete against Chinese manufacturers and deliver a solid performance in the quarter," said Mr. Gupta. "The last time Samsung achieved a double-digit growth was in the fourth quarter of 2015."
Apple's sales grew 5.7% year-over-year. Apple returned to growth in China and also saw strong sales in many of the emerging markets, including India. This is due to the continued sales of legacy iPhones, including the iPhone 5S which retails at around $240 street price in most markets.
Xiaomi achieved the strongest growth, exhibiting an 80% increase in the third quarter of 2017. Xiaomi's growth came more from international markets than from China, where it faces strong competition from Huawei, Oppo and Vivo. India continues to be the biggest and highest-growth market for Xiaomi outside China, but growing sales from Latin America and Russia are also boosting its sales.
Greater China exhibited a decline of 11% in the third quarter due to consolidation around local and lesser-known brands. Buyers are preferring known and high-priced smartphones, which is cannibalizing demand of budget smartphones from local brands. In Western Europe and North America, demand for premium smartphones from top brands led to smartphone sales growth in the third quarter.
Leading Chinese manufacturers Oppo, Huawei, Vivo and Xiaomi continued to drive sales across emerging markets, led by their midprice and budget smartphones with a focus on 4G connectivity and better cameras.
Worldwide Wearables Market grew 7.3% y/y to 26.3 million units in 3Q’17 as Smart Wearables Rise and Basic Wearables Decline (Charts 26 & 27)
The worldwide wearables market took another step forward in the third quarter of 2017 with total shipment volume reaching 26.3 million units, up 7.3% year over year, according to International Data Corporation. But while the overall market showed continued growth, it also showed a growing trend towards smart wearables (devices capable of running third party applications) and away from basic wearables (devices that do not run third party applications).
"The differing trajectories for both smart and basic wearables underscore the ongoing evolution for the wearables market," said Ramon T. Llamas, research manager for IDC’s Wearables team. "Basic wearables – with devices coming from Fitbit, Xiaomi, and Huawei – helped establish the wearables market. But as tastes and demands have changed towards multi-purpose devices – like smartwatches from Apple, Fossil, and Samsung – vendors find themselves at a crossroads to adjust accordingly to capture growth opportunity and mindshare."
"Along with a change in the types of devices being sold, there's also in a change in where the devices are being sold," said Jitesh Ubrani senior research analyst for IDC Mobile Device Trackers. "Traditional tech outlets still play a huge role in distribution but companies like Fossil and Movado are pushing forth fashion-oriented channels. Meanwhile, Apple's recent introduction of cellular connectivity, and Samsung's longstanding relationship with telcos are also helping provide an uplift to sales and awareness of wearables."
Wearables Company Highlights
Fitbit and Xiaomi finished the quarter in a statistical tie* for first place, but showed different routes getting there. Fitbit, while showing a notable decrease in shipment volume, debuted its first smartwatch – the Ionic – a decidedly fitness-oriented device that plays to the company's rich fitness heritage. While its early responses and reviews have been encouraging, Fitbit's fitness trackers posted their fourth consecutive quarter of year-over-year decline. Xiaomi posted a slight year-over-year decrease in volume with a diversification beyond fitness bands and watches and adding its own line of smart footwear. But as seen in previous quarters, the majority of Xiaomi's shipments remained within its home country of China.
Apple's results reflect the timing of its product refresh late in the quarter and this was evident in the overall shipment increase as the release of its Watch 3 was enough to buoy volumes and remain ahead of the competition. The introduction of a cellular-connected version should spur interest from would-be purchasers going forward, and its slow and purposeful approach to cellular-enabled capabilities (including voice, data, and streaming music) will give users time to acclimate to a smartphone-free experience.
Huawei posted the largest year-over-year growth among the leading vendors, showing a rededication to fitness bands with several new models (including the Sport Band 2 Pro, B19 and B29) and an introduction to smart earwear with its Sport Pulse Earphones that track heart rate in addition to audio. Like Xiaomi, the majority of Huawei's shipments remained in China.
Garmin, though showing a year-over-year decline, continues its transition from basic wearables to smart wearables, with the two categories nearly balancing each other out. Still, Garmin boasts one of the most diversified product portfolios, with devices addressing multiple sports and lifestyle segments, and offering a smart wearable for nearly each of them.
Global Smartphone Shipments will grow at 3.0% CAGR from 1.5 billion units in 2017 to 1.7 billion units in 2021
- Phablets expand at 18.1% CAGR from 611 million units in 2017 to 1 billion units in 2021
- Phablets to Overtake Regular Smartphone Shipments by 2019
According to the International Data Corporation overall smartphone shipments will steadily grow from 1.5 billion units in 2017 to 1.7 billion units in 2021. Meanwhile, phablets (smartphones with a screen size of 5.5 inches to <7 inches) will far outpace total market growth by climbing from 611 million units in 2017 to 1 billion units in 2021, representing a five-year compound annual growth rate (CAGR) of 18.1%. In comparison, the total smartphone market is expected to grow at a 3.0% CAGR during the same period, while normal smartphones (under 5.5 inches) will decline 7.4%. Overall, IDC lowered its previous forecast for 2018-2021 by 1.1% to1.5%, depending on the year. The largest changes came in the China and Middle East and Africa regions, which are still expected to grow through 2021.
Android-based phablets have been the primary driver of large-screen smartphones and IDC expects this trend to continue in the years to come. Samsung's early dominance of the phablet category has been short lived as other OEMs – many of which are Chinese OEMs – quickly pushed the category into the mainstream and even low end. As a result, China consumed 50% of the 437.4 million phablets shipped in 2016. IDC expects China will remain the largest market for large-screen smartphones and to grow at a CAGR of 12.6%.
"In 2012, phablets were just 1% of smartphone shipments and now they are approaching 50% of the market just a few years later," said Ryan Reith, program vice president with IDC's Worldwide Quarterly Mobile Device Trackers. "The rapid transition to bezel-less smartphones will help minimize the device footprint while growing the screen size from previous generations. Consumers continue to consume more video entertainment, gaming, social media, and other data-heavy applications on their smartphones making the display size and type a critical factor in smartphone buying decisions."
Apple has also made a massive push into the phablet space and IDC expects its Plus and X devices to account for 41.2% of its shipment volume in 2017 and 50% or more of Apple's iPhone shipments in 2018. If the recent rumors of new, larger screen iPhones in 2018 hold true, then this number will likely grow further as a share of its overall shipment volume.
"There is no doubt that 2017 gave birth to the new ultra high-end segment of the smartphone market," said Anthony Scarsella, research manager with IDC's Worldwide Quarterly Mobile Phone Tracker. "The latest flagship devices from Samsung, Apple, Google, LG, and others have pushed the high end to the $850-plus level for the first time. Despite these price hikes, consumers look as if they are willing to swallow the cost just to have the latest and greatest device in their pockets. Although many consumers may not be able to afford these devices in more price sensitive markets, programs such as device financing combined with trade-in policies are making these devices more attainable to buyers in a number of markets. This growth at the ultra high end translates to higher average selling prices (ASPs) for smartphones throughout the forecast period. By 2021, the last year of our forecast, smartphones will reach an ASP of $317, up from $282 in 2016, representing a CAGR of 2.3%."
Android: Android-powered smartphones have already captured 85% of total market volume and IDC expects this share to remain relatively stable throughout the forecast. What has changed is the vendor landscape with OEMs that have more market history feeling intense pressure from a range of up and coming vendors focused on tight inventory control and new go-to-market strategies. Despite Android smartphones having such a high share of the market, volumes are still expected to grow from 1.3 billion in 2017 to 1.5 billion in 2021, which represents a five-year CAGR of 3.2%.
iOS: Apple's launch of the iPhone 8/8+ and X in late 2017 set the company up to return to iPhone volume growth in 2017. IDC expects an even bigger rebound in 2018 as channels fill up with inventory of the new models and as price cuts around earlier models enable it to hit lower price points. Coming off the 7% decline in iPhone shipments in 2016, IDC is forecasting growth of 2.4% in 2017 and 8.1% in 2018. IDC also projects sustained growth for Apple through the later years of the forecast with volumes growing at a five-year CAGR of 3.1%.
Worldwide Switching and Router Revenues exceed $11 billion in 3Q’17 as Cisco's share was 51%
New Q3 data from Synergy Research Group shows that Cisco's share of the total worldwide switching and router market was 51%, with shares in the individual segments ranging from 63% for enterprise routers to 38% for service provider routers. This was its best market share performance since the first quarter of 2016. For the last four quarters in aggregate Cisco's market share was 50%, two percentage points down from the preceding four quarters. Behind Cisco the ranking of vendors was different in each of the three main segments but in aggregate Cisco is followed by Huawei, Juniper, Nokia and HPE. Their overall switching and router market shares were in the 4-10% range in Q3. There is then a reasonably long tail of other vendors, with Arista and H3C being the most prominent challengers.
Worldwide switching and router revenues were well over $11 billion in Q3 and were $44 billion for last four quarters, representing 3% growth on a rolling annualized basis. Ethernet switching is the largest of the three segments accounting for almost 60% of the total and it is also the segment that has by far the highest growth rate, propelled by aggressive growth in the deployment of 100 GbE and 25 GbE switches. In Q3 North America remained the biggest region accounting for over 41% of worldwide revenues, followed by APAC, EMEA and Latin America. The APAC region has been the fastest growing and this was again the case in Q3, with growth being driven in large part by spending in China, which benefitted Huawei in particular.
"The big picture is that total switching and router revenues are still growing and Cisco continues to control half of the market," said John Dinsdale, a Chief Analyst at Synergy Research Group. "Some view SDN and NFV as existential threats to Cisco's core business, with own-design networking gear from the hyperscale cloud providers posing another big challenge. While these are genuine issues which erode growth opportunities for networking hardware vendors, there are few signs that these are substantially impacting Cisco's competitive market position in the short term."