Weekly Global Update for July 12, 2017
Global Semiconductor Sales Increased 22.6% Y/Y to $31.9 Billion in May (Charts 1-4)
- Worldwide sales of semiconductors reached $31.9 billion for the month of May 2017, an increase of 22.6% compared to the May 2016 total of $26.0 billion and 1.9% more than the April 2017 total of $31.4 billion.
- Year-to-year growth in May was the global market’s largest since September 2010.
- All major regional markets notched year-to-year increases of more than 15% in May, and the Americas led the way with growth of 30.5%.
The Semiconductor Industry Association (SIA) announced worldwide sales of semiconductors reached $31.9 billion for the month of May 2017, an increase of 22.6% compared to the May 2016 total of $26.0 billion and 1.9% more than the April 2017 total of $31.4 billion. Year-to-year growth in May was the global market’s largest since September 2010. All major regional markets notched year-to-year increases of more than 15% in May, and the Americas led the way with growth of 30.5%. All monthly sales numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.
“The global semiconductor market has settled into a period of significant and steady growth in 2017, with sales through May well ahead of the total from the same point last year,” said John Neuffer, president and CEO, Semiconductor Industry Association. “Significantly, recent market growth has been consistent across all major regional markets and semiconductor product categories, with sales of memory products continuing to lead the way.”
- Custer Consulting Group’s semiconductor leading indicator points to much more modest global semiconductor growth ahead (Chart 5).
- Semiconductor shipment growth to North America remains well ahead of domestic electronic equipment shipment growth suggesting that a downward correction in semiconductor shipments will occur soon (Chart 6).
PMI Leading Indicators for June
IHS Markit (Markit Economics) and the Institute for Supply Management have released their June PMI Leading Indicators (Purchasing Managers Indices).
- Global PMI was unchanged from May to June but remained well into expansion territory (Chart 7).
- Chart 8 summarizes June versus May PMIs for some key countries / regions. All but Japan held steady or improved (Chart 8).
- The USA got mixed reviews. ISM showed a sharp rebound while IHS Markit reported slowing (Chart 9).
- Europe (Chart 10) was mixed with the overall Eurozone continuing to climb to near a record high (Chart 11) but the UK, Spain and Russia seeing slower growth.
- Asia was mixed (Chart 12) as China (Chart 13), Taiwan (Chart 14) and South Korea (Chart 15) saw improved manufacturing growth while Japan (Chart 16) remained in expansion territory but saw growth plateau.
U.S. May Shipments, Orders and Inventories for Domestic Electronic Supply Chain
The U.S. “Factory Orders” report was just released for May detailing shipments, orders and inventories for key domestically manufactured goods:
- Electronic equipment orders and shipments were flat from April to May (Chart 17) as little order growth was seen in any equipment sector (Chart 18).
- Vehicle sales improved in May thanks to light trucks and utility vehicles (Chart 19) but reportedly auto sales slid in June hurt by higher vehicle prices and Detroit’s reduced dumping of excess inventory to rental car lots.
- Military electronics orders improved modestly (Chart 20).
- Electromedical, measurement and control equipment orders and shipments plateaued (Chart 21).
- Passive component orders and shipments were also flat (Chart 22).
Chart 23 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain.
China to Kick Off 5G Commercialization by 2020
ZTE engineer said that China will be assured to kick off 5G commercialization by 2020. 5G technologies will create economic output of USD 12.3 trillion globally by 2035, representing 2016 expenditure of all Americans, surpassing the total of China, Japan, Germany, England and France.
Source: SinoCast LLC
IT Infrastructure Products (Server, Enterprise Storage & Ethernet Switches) Spending for Deployment in Cloud Environments will increase 12.4% Y/Y in 2017 to $40.1 Billion (Chart 24)
Spending on IT Infrastructure Supporting Public Cloud Services will be fastest growing among IT Deployment Segments in 2017
According to a new forecast from the International Data Corporation (IDC) Worldwide Quarterly Cloud IT Infrastructure Tracker, total spending on IT infrastructure products (server, enterprise storage, and Ethernet switches) for deployment in cloud environments will increase 12.4% year over year in 2017 to $40.1 billion. Public cloud datacenters will account for the majority of this spending (60.7%) and will grow at the fastest rate year over year (13.8%). Off-premises private cloud environments will represent 14.9% of overall spending and will grow 11.9% year over year. On-premises private clouds will account for 62.2% of spending on private cloud IT infrastructure and will grow 9.6% year over year in 2017.
Increased spending on cloud IT infrastructure and decreasing investments in non-cloud IT infrastructure will be a common theme for all regions. Worldwide spending on traditional, non-cloud, IT infrastructure will decline 4.6% in 2017 accounting for 58.7% of the overall end-user spending on IT infrastructure products across the three segments, down from 62.6% in 2016.
Note: All figures above exclude double counting between server and storage.
In cloud IT environments, Ethernet switches will be the fastest growing technology segment with 25.8% year-over-year growth in 2017, while spending on servers and enterprise storage will grow 9.1% and 12.0%, respectively. These growth rates include double counting between server and storage to fully represent each of the technology segments. In all three technology segments, spending on IT infrastructure deployed off-premises will grow in 2017 while spending on on-premises environments will decline.
Over the five-year forecast, IDC expects spending on off-premises cloud IT infrastructure will have a compound annual growth rate (CAGR) of 11.0%, reaching $45.7 billion in 2021. Public cloud datacenters will account for 79.8% of this amount with an 11.0% CAGR, while spending on off-premises private cloud infrastructure will increase at an 11.3% CAGR. Combined with on-premises private cloud, overall spending on cloud IT infrastructure will have a five-year CAGR of 10.9% and by 2020 will surpass spending on non-cloud IT infrastructure. Spending on on-premises private cloud IT infrastructure will grow at a 10.5% CAGR, while spending on non-cloud IT (on-premises and off-premises combined) will decline at a 3.1% CAGR during the same period.
"The overall profile of spending on IT infrastructure in various deployment/location scenarios seen in 2016 will continue in 2017 with some differences in specific technology segments," said Natalya Yezhkova, research director, Enterprise Storage. "Enterprise adoption of hybrid and multi-cloud IT strategies and the proliferation of cloud-native applications and areas such as the Internet of Things (IoT), which embrace a cloud-first approach to supporting IT resources, will fuel further increases in end-user spending on services-based IT. In turn, this move will be reflected in a shift of the overall spending on IT infrastructure from on-premises to off-premises deployments and from traditional IT to cloud IT."
Taiwan-based PC-related IC Suppliers Positive about 3Q’17 Outlook
Shipments of new Intel and AMD motherboards are set to kick off and gaming graphics cards and mining machines are experiencing brisk demand
With shipments of new Intel and AMD motherboards set to kick off, as well as brisk demand for gaming graphics cards and mining machines, Taiwan-based PC-related IC suppliers are optimistic about their performance in the third quarter of 2017.
With orders rising starting July, many of Taiwan-based PC- and notebook-related IC suppliers are expected to post double-digit sequential growth in third-quarter revenues, according to industry sources.
Realtek Semiconductor, which saw its June revenues decrease sequentially for the second consecutive month, should have seen its sales hit bottom in June, the sources said. The company will manage to enjoy sequential revenue growth from June to September.
Other Taiwan-based IC design houses specializing in PC- and notebook-related solutions, including Anpec Electronics, Amazing Microelectronic, Global Media Technology (GMT), ITE Tech, On-Bright Electronics and Weltrend Semiconductor, have also seen their customers step up their pace of orders, the sources indicated.
In addition, demand for USB Type-C solutions, fingerprint sensors, fan motor drivers and power management chips has grown substantially benefiting related suppliers, such as Anpec with its fan driver ICs and Weltrend with its USB Type-C PD controllers, the sources said.
MOSFET chip demand has also risen as new CPU platforms require more MOSFET chips, benefiting companies such as Advanced Power Electronics (APEC), Niko Semiconductor and Sinopower Semiconductor, the sources noted.
AMOLED Fine Metal Mask Market to Grow at 38% CAGR from $234 Million in 2017 to $1.2 Billion in 2022 (Chart 25)
As active-matrix organic light-emitting diode (AMOLED) displays quickly displace liquid crystal displays (LCDs) in smartphones, panel makers are rapidly adding new production capacity, accelerating the demand for the fine metal mask (FMM), a critical production component used to manufacture red-green-blue (RGB) AMOLEDs. The FMM market is forecast to grow at a compound annual growth rate (CAGR) of 38% from $234 million in 2017 to $1.2 billion in 2022, according to IHS Markit, a world leader in critical information, analytics and solutions.
In the AMOLED manufacturing process, FMM is a production component used to pattern individual red, green and blue subpixels. A heating source evaporates organic light-emitting materials, but vapor deposition can only be controlled precisely with the use of a physical mask. FMM – a metal sheet, only tens of microns thick, with millions of very small holes per panel – is the only production-proven method of accurately depositing RGB color components in high-resolution displays.
“FMM has become a bottleneck in the supply of AMOLED panels due to the manufacturing technology challenges posed by increasing resolutions and a limited supply base. As pixels per inch (PPI) increase, thinner FMMs with finer dimensions are required, which reduce mask production yield and useable lifetime,” said Jerry Kang, senior principal analyst of display research at IHS Markit.
Dai Nippon Printing (DNP) is the dominant FMM supplier, owing to its proprietary etching technology for very thin metal foils and mass production experience. Currently, DNP’s FMMs are used to fabricate the vast majority of AMOLED smartphone panels, and exclusively for high-end quad high definition (QHD) resolutions. “Most panel makers are now trying to procure DNP’s FMM in hopes of being able to quickly ramp new fabs to high yields,” Kang said.
The critical nature of FMM and rapid demand growth are encouraging a number of companies to develop alternative FMM technologies and enter the market. Panel makers are also encouraging new players as a second source to mitigate supply chain risk and create price competition. As the supply of FMM is a determinant factor in the AMOLED display market to meet its projected growth rates, and with the FMM market forecast to grow five times its current size by 2022, FMM is garnering intense interest from both set and panel makers alike and creating new opportunities for suppliers.
The AMOLED Shadow Mask Technology and Market – 2017 report from IHS Markit provides a comprehensive analysis of the latest technology and market trends for FMMs and open masks, as well as mask and panel supplier status updates, including forecasts of revenues, units, area and prices from 2014 to 2022.
Walt D. 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.