China/Taiwan Update (Charts 1-9)
China/Taiwan began its traditional winter sales slowdown however its January electronic equipment revenue decline was less than in prior years. Presumably both stronger business conditions and a rush to ship product before the February 15 to 21, 2018 New Year holidays moderated this year’s seasonal January drop.
Revenues are up significantly in 2018 vs. 2017.
- Consolidated sales of 101 Taiwan-listed OEMs (most of which manufacture in China) were up 15.6% January 2017 compared to January 2016 but down 28.5% sequentially compared to December 2017 (Chart 1).
- ODM sales in January 2018 were up 18.1% versus January 2017 but down 24.5% sequentially from December 2017 (Chart 2).
- Wafer foundry sales declined in January signaling that global semiconductor shipments will soon slow (Chart 3).
- Package and test revenues dipped (Chart 4) but memory (Chart 5) and passive component (Chart 6) sales were little changed from December.
- Printed circuit board January revenues returned to their long term trend line (Chart 7).
- CCL (PCB base material) sales continue to outgrow printed circuit sales suggesting that laminate price increases have held (Chart 8).
- The Asia/Pacific PCB leading indicator suggests that PCB growth will moderate near term (Chart 9).
Source: Company monthly financial reports analyzed by Custer Consulting Group
Global Electronic Supply Chain 1Q’17 Growth Update (Charts 10 &11)
Chart 10 provides our updated estimates of growth by sector of the global electronic supply chain. About 70% of the companies in our sample have now reported their CY 4Q’17 financial results. Note that many very large companies (Dell, HP, Medtronic, Cisco & Applied Materials) closed their quarter in January rather than December or otherwise report late. Hence a “final” estimate will not be available until March.
Chart 11 shows quarterly growth of the supply chain. It is at its highest level since mid-2011.
Source: Company monthly financial reports analyzed by Custer Consulting Group
Annual Semiconductor Sales Increase 21.6%; Top $400 Billion for First Time (Charts 12-16)
Global industry posts highest-ever annual, quarterly, and monthly sales
SIA released year-end global semiconductor sales data for 2017. Key points:
- The global semiconductor industry posted sales totaling $412.2 billion in 2017, the industry’s highest-ever annual sales and an increase of 21.6% compared to the 2016 total.
- Global sales for the month of December 2017 reached $38.0 billion, an increase of 22.5% over the December 2016 total and 0.8% more than the previous month’s total.
- Fourth-quarter sales of $114.0 billion were 22.5% higher than the total from the fourth quarter of 2016 and 5.7% more than the third quarter of 2017.
- Global sales during the fourth quarter of 2017 and during December 2017 were the industry’s highest-ever quarterly and monthly sales, respectively.
The Semiconductor Industry Association (SIA) announced the global semiconductor industry posted sales totaling $412.2 billion in 2017, the industry’s highest-ever annual sales and an increase of 21.6% compared to the 2016 total. Global sales for the month of December 2017 reached $38.0 billion, an increase of 22.5% over the December 2016 total and 0.8% more than the previous month’s total. Fourth-quarter sales of $114.0 billion were 22.5% higher than the total from the fourth quarter of 2016 and 5.7% more than the third quarter of 2017. Global sales during the fourth quarter of 2017 and during December 2017 were the industry’s highest-ever quarterly and monthly sales, respectively.
“As semiconductors have become more heavily embedded in an ever-increasing number of products – from cars to coffee makers – and nascent technologies like artificial intelligence, virtual reality, and the Internet of Things have emerged, global demand for semiconductors has increased, leading to landmark sales in 2017 and a bright outlook for the long term,” said John Neuffer, SIA president and CEO. “The global market experienced across-the-board growth in 2017, with double-digit sales increases in every regional market and nearly all major product categories. We expect the market to grow more modestly in 2018.”
Several semiconductor product segments stood out in 2017. Memory was the largest semiconductor category by sales with $124.0 billion in 2017, and the fastest growing, with sales increasing 61.5%. Within the memory category, sales of DRAM products increased 76.8% and sales of NAND flash products increased 47.5%. Logic ($102.2 billion) and micro-ICs ($63.9 billion) – a category that includes microprocessors – rounded out the top three product categories in terms of total sales. Other fast-growing product categories in 2017 included rectifiers (18.3%), diodes (16.4%), and sensors and actuators (16.2%). Even without sales of memory products, sales of all other products combined increased by nearly 10% in 2017.
“A strong semiconductor industry is foundational to America’s economic strength, national security, and global technology leadership,” said Neuffer. “We urge Congress and the Trump Administration to enact polices in 2018 that promote U.S. innovation and allow American businesses to compete on a more level playing field with our counterparts overseas. We look forward to working with policymakers in the year ahead to further strengthen the semiconductor industry, the broader tech sector, and our economy.”
Current Electronic Component Shortages to Last through End of 2018
The current electronic component shortages are expected to last through the end of 2018. Many factors can cause a shortage aside from a demand surge, including supply chain disruptions, obsolescence, mergers and acquisitions, and production capacity.
However, the recent demand surge causing the electronic component shortage has become under greater strain due to the IoT explosion and growth in the industrial, mobile, and automotive markets. The IoT is a framework of connectivity to share data and information between an array of devices. This is not a new phenomenon, but an increasing number of devices are getting connected and becoming smarter. It is said that there are more than $31 billion connected IoT devices in 2018 across many different verticals.
Furthermore, new business models, such as 5G connectivity, security, wireless technology, and mass data collection have all developed as a result of the IoT explosion as devices are becoming more advanced and requiring more power.
The shortage phenomenon is going to continue throughout 2018, and is expected to grow due to the ever-increasing connected IoT devices. This is putting a constant strain on the electronic component industry and OEMs globally.
With 40 years in the industry, Advanced MP Technology has the experience and resources in place to handle all requirements, including those facing shortage or obsolescence. With 26 global locations and three full-service global logistics centers in America, Asia and Europe, we are able to provide excellent customer service and deliver the highest quality product on time, every time.
China Smartphone Vendors Have Begun to Step-Up Component Purchases
Demand for parts and components by first-tier China-based smartphone vendors has rebounded recently, and some supply chain makers have reportedly landed short lead-time orders from these vendors, according to industry sources.
Oppo, one of the top-three smartphone vendors in China, has reportedly placed short lead-time orders for several million units of lens modules for entry-level and mid-range smartphones, as well as a significant amount of handset panels, said the sources.
Taiwan-based lens module supplier Largan Precision is widely believed to land more windfall orders from China as the company's products are highly rated by Huawei, Oppo, Vivo and Xiaomi Technology, indicated the sources.
But due to the approach of the Lunar New Year holidays in mid-February, supply chain makers are likely to delay shipments for some of the short lead-time orders to March, noted the sources.
However, most suppliers would be cautious about accepting orders from some second-tier vendors such as Gionee and Coolpad on concerns about their financial strengths, added the sources.
While Huawei is expected to continue to serve as the top smartphone vendor in China in the first quarter of 2018, Xiaomi is likely to replace Oppo to take second place as it has continued expanding its sales in Russia and other markets in Eastern Europe, according to Digitimes Research.
Oppo will rank third, while Vivo and Lenovo will take the fourth and fifth positions, respectively, in the first quarter, Digitimes Research estimates.
Electronic component shortage is expected to last through the end of 2018 and is a result of strain due to the IoT explosion and growth in the industrial, mobile, and automotive markets - Advanced MP Technology
Annual Silicon Volume Shipments Remain at Record Highs (Charts 17 &18)
Revenues Improve but Remain Well Below 2007 Peak Worldwide silicon wafer area shipments in 2017 increased by 10% against 2016 shipments, while worldwide silicon revenues rose by 21% over 2016 levels, reported the SEMI Silicon Manufacturers Group (SMG) in its year-end analysis of the silicon wafer industry.
Silicon wafer area shipments in 2017 totaled 11,810 million square inches (MSI), up from the previous market high of 10,738 million square inches shipped during 2016. Revenues totaled $8.71 billion, 21% higher from the $7.21 billion posted in 2016.
"Annual semiconductor silicon volume shipments reached record levels for the fourth year in a row,” said Neil Weaver, chairman of SEMI SMG, and Director, Product Development and Applications Engineering, at Shin-Etsu Handotai America. "Annual silicon revenue also increased last year but remains well below the market high set 10 years ago."