Europe Update

Currency

  • Euro has strengthened modestly versus the U.S. dollar in December (Chart 1).
  • PMI Leading Indicators: Eurozone PMI is at its highest level on record (Chart 2); Germany (Chart 3) and France (Chart 4) PMIs are at record levels also

Eurostat October Production Indices

  • Industrial production rose for the Eurozone 28. France, Italy and UK rose but Germany declined (Chart 5).
  • Electronic equipment production declined slightly from its September high (Chart 6).
  • Motor vehicle (Chart 7) and instrument and appliance (Chart 8) production also declined sequentially.
  • Semiconductor shipments to Europe (in Euros) have moved closer to European electronic equipment production on a 3/12 growth basis (Chart 9).
  • Loaded board production has declined significantly in recent months but recovered slightly in October (Chart 10).
  • Wiring device production declined in October (Chart 11) but the German speaking countries (VdL) PCB book to bill rose in November (Chart 12).
  • Eurozone PMI leading indicator points to further PCB growth ahead (Chart 13).

Source: research.stlouisfed.org/fred2/series/TWEXBMTH

Source: www.markiteconomics.com

Source: Eurostat

Flash December Purchasing Managers Indicators (Chart 15)

Due to the holiday season IHS Markit’s “flash” December PMI leading indicators for select countries have been released early. Chart 15 summarizes the November versus “flash” December results. All countries in the sample had increased PMIs.

Worldwide Server Revenue up 16% in 3Q’17 (Charts 16-19)

In the third quarter of 2017, worldwide server revenue increased 16% year-over-year, while shipments grew 5.1% from the third quarter of 2016, according to Gartner, Inc.

"The third quarter of 2017 produced continued growth on a global level with varying regional results," said Jeffrey Hewitt, research vice president at Gartner. "A build-out of infrastructure to support cloud and hybrid-cloud implementations was the main driver for growth in the server market for the period."

x86 servers increased 5.3% in shipments for the year and 16.7% in revenue in the third quarter of 2017. RISC/Itanium Unix servers declined globally, down 23.5% in shipments and 18.3% in vendor revenue compared with the same quarter last year. The 'other' CPU category, which is primarily mainframes, showed an increase of 54.5%," Hewitt said.

Hewlett Packard Enterprise (HPE) continued to lead in the worldwide server market based on revenue. Despite a decline of 3.2%, the company posted $3.1 billion in revenue for a total share of 21% for the third quarter of 2017. Dell EMC maintained the No. 2 position with 37.9% growth and 20.8% market share. Inspur Electronics experienced the highest growth in the quarter with 116.6%, driven by ongoing sales into China-based cloud providers, as well as global expansion efforts.

In server shipments, Dell EMC maintained the No. 1 position in the third quarter of 2017 with 17.8% market share. HPE secured the second spot with 16.4% of the market. Inspur Electronics was the only vendor in the top five to experience positive growth in the quarter.

Source: www.gartner.com

Oversupply and Price Drop in 1Q’18 NAND Flash Market, Production Capacity Expansion and Low Season are Main Causes (Chart 20)

  • NAND Flash market is expected to reach oversupply in 1Q’18
  • Contract prices of SSD, NAND flash chips and wafer will finally drop.

DRAMeXchange, a division of Trendforce expects lower demand for NAND Flash in 1Q’18 due to the traditional off-peak season. The demand from notebooks, tablets, and smartphones (mainly Chinese branded smartphones) is estimated to drop by more than 15% compared with 4Q’17, and that from server will remain generally the same. Therefore, the overall bit demand is projected to drop by 0-5% compared with 4Q’17. On the other hand, as suppliers keep improving their production capacity and yield rate of 3D-NAND Flash, the bit output will grow by more than 5% compared with 4Q’17. Consequently, NAND Flash market will experience an oversupply in 1Q’18 and contract prices of SSD, NAND Flash chips and wafer, etc. will drop.

In 1Q’17, NAND Flash undersupply was aggravated as the transition from 2D-NAND to 3D-NAND caused production capacity loss, together with strong demand from Chinese vendors like Huawei, OPPO, and Vivo. The contract prices of eMMC/UFS, Client SSD, and Enterprise SSD all recorded a growth of more than 10% in 1Q’17 compared with 4Q’16. In 2Q’17, the demand for NAND Flash from notebooks and tablets increased, but that from Chinese branded smartphones was lower than expectation. Consequently, the price rise slowed down.

In 2H17, the launch of new iPhone and SSD demand from servers raised the demand in NAND Flash market, widening the gap between supply and demand. Although there is undersupply, the price increase is limited. This is because the current price is approaching the highest level that OEM factories can afford after a long period of continuous price hike. In 4Q’17, the demand growth from server slows down while Apply remains its strong demand. In addition, Toshiba’s production troubles did not have noticeable effect on the industry as rumors expected. Together with 3D-NAND’s continuous capacity expansion, the supply will eventually meet up to the demand, thus achieving market balance and resulting in stable or slightly higher contract prices.

DRAMeXchange expects the NAND Flash to experience another round of oversupply, leading to end-products’ lower prices and OEM’s higher intention to use more advanced products such as UFS and SSD with PCIe interface. They will also race to increase the memory content. As the result, when peak season comes in 2H18, the market situation of NAND Flash has a chance to reverse, ending up with tight supply again.

Source: www.DRAMexchange.com

North America-based Semiconductor Equipment Manufacturers’ World Billings Increased 27.2% y/y in November 2017 (Chart 21)

SEMI reports that the 3-month average of worldwide billings of North American equipment manufacturers in November 2017 was $2.05 billion, 1.6% higher than October 2017 and 27.2% higher than November 2016.

“November billings for North American equipment manufacturers increased modestly for the first time in four months,” said Dan Tracy, Senior Director, Industry Research and Statistics, at SEMI. “Year-to-date equipment spending is well on track to set a historical high, and we expect that positive momentum to continue into next year as new fabs in China begin to equip."

The SEMI Billings report uses three-month moving averages of worldwide billings for North American-based semiconductor equipment manufacturers. Billings figures are in millions of U.S. dollars.

Source: www.semi.org

Japan-based SEMI & Flat Panel Display Equipment Shipments (Charts 22 & 23)

Japan-based manufacturers of semiconductor equipment posted ¥154,531 million in billings in October 2017 (3-month average basis), down 2.8% from September 2017 and 18.3% up from October 2016.

Japan-based manufacturers of flat panel display equipment had billings in October down 11.6% versus September and down 14.7% versus October 2016

Source: www.seaj.or.jp/english/

U.S. November Industrial Production rose 0.2%; Global Data Positive (Charts 24 & 25)

U.S. industrial production rose modestly in November. A decline in utilities output offset an increase in oil and gas production and a 3-month increase in manufacturing.

Globally most key countries are reporting expanding industrial production. In October notable exceptions were Russia, South Korea and Thailand.

Source: www.federalreserve.gov/

Source: www.economist.com

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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