Strong Finish for 2016; Potentially Disruptive Outlook for 2017

WALT CUSTER AND JOHN CUSTER-TOPAI

2016 finished with upbeat news. The November Global PMI leading indicator (Chart 1) reached its highest point since October 2014 signaling that seasonally adjusted world manufacturing growth will accelerate at least into early 2017. Most major electronics producing countries with the exception of S. Korea (Chart 2) saw their November PMIs in expansion territory (PMI >50).


Based upon now complete 3Q’16 company financial data, world electronic equipment revenue growth was an estimated +2.1% in the third quarter 2016 vs. 2015 when computed using actual (fluctuating) exchange rates (Chart 3). Regionally electronic equipment sales had a strong seasonal year-end rebound in China and Taiwan and good growth in Europe (Chart 4), but the USA was flat.


Chart 5 shows 3Q’16 vs 3Q’15 growth by sector of the gl obal electronic supply chain. Automotive, SEMI equipment and medical electronics led the third quarter upturn. Domestically the expansion was more subdued (Chart 6) with only defense capital goods and electromedical, measurement and control equipment enjoying decent 3Q’16 end market growth.


Semiconductor shipments (non-seasonally adjusted in Chart 7) have rebounded strongly. While they will most likely dip this winter as part of normal seasonality, their seasonally adjusted trajectory is certainly upwards.


Taiwan-listed ODM companies’ November revenues (Chart 8) also reflected the strong close to 2016 although they too will likely plunge seasonally this winter.


With Trump’s efforts to force more manufacturing back to the USA it will be interesting to see these charts a year from now. Presumably capital equipment sales will surge if new USA-based assembly plants must be created. However the overall environmental and social impact of the Trump administrations’ policy direction remains worrisome.


2017 could be a disruptive and challenging year.

 

End Markets

MOBILE COMMUNICATIONS

Smartphone sales to end users increased 5.4% y/y to 373 million units in 3Q’16. –Gartner

Smartphone shipments grew 0.6% y/y to 1.45 billion units in 2016; 4G smartphones expanded 21.3% y/y to 1.17 billion units. –IDC

Preowned smartphone market will be worth about $30 billion in 2020, with an average selling price of $136. –IDC

Taiwan ODM smartphone shipments declined 23% y/y to 13.82 million units in 4Q’16. –Digitimes Research

INDIA:
• mobile handset shipments reached 265 million units in 2016.
–Cyber Media Research

• smartphone shipments grew 17.5% q/q to 32.3 million units in 3Q’16.
–IDC

• expected to manufacture $80 billion of mobile phone components over next five years.
–IIM Bangalore and Counterpoint Research

CHINA:
• smartphone vendors’ shipments increased 18.6% y/y to 168 million smartphones worldwide in 3Q’16.

–Digitimes Research

• smartphone shipments to the China market grew 15% y/y to about 500 million units 2016.
–Sigmaintell Consulting

COMPUTERS & PERIPHERALSNotebook shipments increased 6.4% q/q to 41.65 million units in 4Q’16.
–Digitimes Research

PC shipments fell 6.4% y/y to 258.2 million units in 2016. –IDC

Tablet shipments declined 12% y/y to 182.3 million units in 2016. –IDC

Tablet shipments dropped 21.5% y/y to 51.29 million in 4Q’16. –Digitimes Research

Western Europe tablet shipments declined 6.7% y/y to 8.2 million units in 3Q’16. –IDC

Australian tablets fell 17.4% y/y to 640K units in 3Q’16; fifth straight quarter of decline. –IDC

Taiwan-based makers’ combined revenues for server motherboards, servers, storage and network equipment will grow from NT$558.5 billion (US$17.45 billion) in 2016 to NT$600 billion in 2017. –Digitimes Research

Enterprise storage systems revenue dropped 3.2% y/y to $8.8 billion in 3Q’16. –IDC

Hardcopy peripherals shipments declined 3.0% to 25 million units in 3Q’16. –IDC

INDIA:
• PC shipments declined 22.5% y/y to 2.51 million units in 3Q’16 – IDC

• tablet shipments grew 7.8% q/q to 1.06 million units in 3Q’16 –IDC

NETWORK EQUIPMENT
Server revenue declined 5.8% y/y to $12.7 billion and shipments fell 2.6% to 2.69 million units in 3Q’16. –Gartner

Ethernet switch market (Layer 2/3) revenue increased 2.0% y/y in 3Q’16; router market revenue grew 2.6% y/y to $3.56 billion. –IDC

Industrial Ethernet market will grow at a 16.8% CAGR from USD 19.43 billion in 2015 to USD 59.20 billion by 2022.
–MarketsandMarkets

Li-Fi market is estimated to be worth US$ 80 billion by 2021. –Research and Markets

Wireless local area network market increased 1.8% y/y to $2.47 billion in 3Q’16. –IDC

CONSUMER ELECTRONICS
TV shipments reached 225 million units valued at US$86 billion in 2016.
–Futuresource Consulting

LCD TV shipments are forecast to reach 220 million units in 2016. –WitsView

China color TV sales are expected togrow from more than 50 million units in 2016 to 53 million units in 2017. – AVC

LCD TV shipments expanded 15% y/y to 83.6 million units in 2016.
–Sigmaintell Consulting

Wearables market grew 3.1% y/y to 23 million units in 3Q’16; Fitbit held 23% market share and Apple dropped to 4.9% market share. –IDC

INTERNET OF THINGS
Commercial and residential IoT sectors revenue are expected to grow at a nearly 17% CAGR to $777 billion from 2016 through 2025. –Navigant Research

ROBOTS/AUTOMATION
Healthcare robot shipments will increase from 3,400 units (with revenue of $1.7 billion) annually in 2016 to more than 10,500 units ($2.8 billion revenue) per year by 2021. –Tractica

Service robotics market is expected to reach nearly US$ 13 Billion by 2021.
–Market Reports Online

U.S. installed 27,500 industrial robots in 2015. –IFR

LED LIGHTING
HB-LED market will grow at a 10% CAGR from $15 billion in 2015 to $29 billion by 2022. –Allied Market Research

China LED lighting market value surpassed US $72.45 billion by 2016. –ISA

PRINTED ELECTRONICS
demand will grow at a 22.4% CAGR from USD 3.05 billion in 2015 to USD 10.26 billion in 2021. –Zion Research

 

EMS, ODM & Related Assembly Activity
European EMS industry is forecast to grow from EUR 27.4 billion in 2016 to EUR 30 billion in 2020 with Western Europe EMS revenues expanding from EUR 10.8 billion in 2015 to EUR 11.7 billion in 2020. –Reed Electronics Research

Anuva Manufacturing Services received ISO-13485:2003 certification.

Apple cut its upstream suppliers’ (including Flexium and Zhen Ding Tech, LG Display and Japan Display, Foxconn Electronics and Pegatron

Technology) quotes by around 10%.

Celestica purchased the business assets of Lorenz and Suntek Manufacturing Technologies.

congatec established a new subsidiary in France with offices in Paris and Toulouse.

Dynamic EMS Ltd received ISO9001:2015 accreditation.

EIT added a MIRTEC MV-6 OMNI 3D AOI machine.

Enics Group’s Slovakian business unit received ISO/TS 16949:2009 certificate.

Flex
• became first company in the world to receive accreditation for the manufacture of PCBAs from MedAccred.

• Received contract to manufacture 3D laser printers for Glowforge.

• and Lenovo opened an x86 server assembly plant in Sárvár, Hungary.

• acquired the premium generic domain name Flex.com.

Foxconn/ Hon Hai
• subsidiary, Global Logistics Solutions leased a new 11,000 M2 hall in Logistika Park Pardubice in Cerná za Bory, Czech Republic.

• invested $20 million in Chinese image recognition start-up Megvii.

• subsidiary Jusda International acquired Sharp Jusda Logistics.

• began assembling OnePlus 3T smartphones in India.

• shipped 60,000 Pepper robots in 2016.

Integrated Micro-Electronics plans to open a new factory in Serbia by 2018.

Inventec intends to shut down its all-in-one PC subsidiary TPV-Inventa in 2017.

Jabil
• acquired Kuatro Technologies

• received North America’s first HP Multi Jet Fusion 3D printers.

• Jaguar de Mexico added a MIRTEC MV-6 OMNI 3D AOI system.

Libra Industries
• Dallas facility passed recertification audits for ISO 9001:2008 and ISO 13485:2012.

• installed two Omron CDK VP5200-V solder paste inspection systems in its Mentor and Dallas facilities.

NEO Tech Otay Mesa added multiple high-speed surface mount pick and place machines to provide incremental printed circuit card SMT capacity inTijuana Mexico.

Nistec purchased two Siplace SX placement machines and three router machines.

Elite Automatic for production plants in Petah Tikva, Maalot and Katzrin, Israel.

Nortech Systems VP and CFO, Paula Graff plans to retire in March 2017.

OVEN Industries added precision in-house conformal coating capabilities.

Sanmina’s Salt Lake City facility received AS9100C certification for defense and aerospace manufacturing.

SED Systems purchased a KISS-102 selective soldering machine from ACE.

SIIX
• established a manufacturing subsidiary in Xiaogan, Hubei Province, China.

• invested HUF 6.4 billion to construct a plant in Nagykorös, Hungary.

Speedboard Assembly Services supplied customer Jenoptik Traffic Solutions UK with its 2,000th VECTOR camera unit.

SWEMCO selected Aegis FactoryLogix Software for Ivyland, Pennsylvania and Moorestown, NJ factories.

VirTex hired Matt Alpers as Business Development Manager.

Zollner Elektronik cleared NADCAP audit at its German sites for Aerospace and Defense.

PCB Fabrication

PCB design software market is anticipated to grow at a 12.9% CAGR from US$ 1,409 million in 2016 to US$ 4,755 million by 2026. –Future Market Insights

Japan’s rigid printed circuit board sales rose nearly 12% sequentially in September on a 90-day moving average.
–Japan Electronics Packaging and Circuits Association

Apple plans to use South Korean FPCB for its next iPhone.

AT&S had 183 operators that received information technology management diplomas from Shanghai Open University on November 30 2016.

Cambridge Nanotherm and Elvia PCB Group introduced their “Six Sigma” PCB fabrication route.

Cartel Electronics acquired Cirtech.

Century PCB Taiwan received the ISO 13485 medical certification.

CIPSA Circuits added an Orbotech Nuvogo 780 DI solution and a Fusion 22 AOI system in Spain.

Compunetics appointed Burhan Capar, GM of PCB fabrication business.

Edmond de Rothschild Investment Partners acquired ACB Group.

Hindley Circuits purchased Opsol UK.

Mentor Graphics named Craig Armenti, PCB marketing engineer.

Nan Ya Printed Circuit Board sold entire stake of its petrochemical firm for T$460.6 million and its chemical fiber firm for T$516.9 million.

PNC purchased a 1913 Mark III Series SMT reflow oven from Heller Industries.

San Diego PCB merged with Milwaukee Electronics.

Schweizer Electronic CEO, Maren Schweizer reassumed her responsibility for business units’ operations, sales & marketing, global supply chain and systems.

SMT Hautes Technologies added a MIRTEC MV-7 OMNI 3D AOI platform.

SMT Slovenia installed an Aegis Software’s FactoryLogix R3 logistics module.

Trackwise manufactured a 10 meter long, 6-layer flexible multilayer PC.

Trax Interconnect (Cape Town, South Africa) designed a 16-layer board for CERN.

Materials & Process Equipment

Electronics adhesives market is expected to grow 12.1% y/y to US$ 4.5 billion by 2017. –Future Market Insights

Machine vision market is estimated to expand at a 9.1% CAGR from $8.1 billion in 2015 to $12.5 billion by 2020. –ReportsnReports

SMT placement equipment market will grow at 6.46% CAGR during 2016-2020. –360 Market Updates

Atotech launched its ST–Line equipment for advanced surface preparation.

Blakell Europlacer appointed Christian Müeller, Service Manager in Germany.

Cogiscan named Tom Baro, Global Account Manager–Equipment Partners.

Cognex acquired EnShape and AQSense.

Count On Tools celebrated its 25th year in business and broke ground on 5,000 SF expansion.

Dow Chemical Company funded Penn State research for controlling the way fluorinated polymer chains twist and turn that may enable fast and flexible electrical circuits.

Essemtec hired Juerg Schuepbach as International Sales Manager.

EUTECT developed a fully automatic, robotic soldering automation.

Fujifilm Electronic Materials opened a new plant for advanced IC materials in Tainan, Taiwan.

Heidelberg Instruments opened a process and application center in Suzhou, China in partnership with Stella International.

Heraeus sold its target businesses to Materion.

Keysight Technologies named Mark Wallace, VP and GM of Americas Field Operations, replacing retired Guy Séné.

Kita Manufacturing was acquired by Cohu.

Konrad Technologies hired Rung-Kai Tsay as VP of Sales and Marketing, Americas.

Kurtz Ersa North America officially opened 200 M2 demo & technology center in Guadalajara, Mexico.

Molex introduced solder on polyester substrate, a flexible, economical alternative to rigid PCB and polyimide.

Mycronic acquired Automation Engineering.

Nordson received a 10-year enterprise zone property tax abatement to help fund its business at the former Tamarkin warehouse in Austintown, Ohio.

Polymer Technology & Services held a grand opening at its new location in Guadalajara, Mexico.

Robnor Resins was re-branded as Robnor Resinlab following partnership with Resinlab.

Rogers
• purchased DeWAL Industries

• plans to close it’s Killingly, Connecticut facility and move its HQ to Arizona by the end of 2017.

Saki incorporated its 3D AOI and 3D SPI systems into Fuji’s Smart Factory SMT line at its Vernon Hills, IL facility.

Speedprint appointed Mark Brawley, President.

Ventec International named Chris Bowles, Technical Account Manager.

Vi TECHNOLOGY hired Miguel Arroyo as Sales-Applications Engineer.

Yxlon appointed Christian Gück, Head of Inspection Services.

Semiconductors & Other Components

World semiconductor market will grow from US$335 billion in 2016 to US$354 billion in 2017 and US$354 billion in 2018. –WSTS

Worldwide semiconductor equipment bookings were $11.3 billion in 3Q’16 and billings reached US$11.0 billion. –SEMI

China is on track to have 15% of world fab capacity by 2018. –VLSI Research

European semiconductor distribution market sales declined 0.9% y/y to 1.81 billion Euros in 3Q’16. –DMASS

Taiwan’s light-emitting diode industry rose almost 14.8% y/y to NT$7.6 billion (US$238 million) in first nine months of 2016. –MOEA

3D IC market is expected to grow at ~17% CAGR to USD ~10 billion in 2022. –Market Research Future

Capacitor shipments reach three trillion units valued at $16 billion in 2016. –ECIA

Conductive silicone market will grow at a 7.2% CAGR to 4.5 billion USD by 2021. –MarketsandMarkets

Display panel makers increased fab utilization rate to 90% in 4Q’16. –IHS MarkitElectronic components channel will expand 1.6% y/y in 2017 and 2.5% in 2018. –MAPI

Embedded system market share will exceed US$258 billion by 2023.
–Global Market Insights

Fabless IC design is estimated to decline 3.2% y/y to US$77.5 billion in 2016 and grow 3.4% y/y to around US$80.6 billion in 2017. –TrendForce

Mobile DRAM sales increased 16.8% q/q to US$4.59 billion in 3Q’16.
– DRAMeXchange

Molded interconnect device market will grow at 13.8% CAGR from USD 225 million in 2015 to USD 692 million in 2024. –Fractovia

NAND flash industry increased 19.6% q/q to US$10.23 billion in 3Q’16.
–DRAMeXchange

Pulsed RF power semiconductor device market will exceed $250 million by 2021. –ABI Research

Semiconductor inspection system market is growing at a ~12% CAGR to USD 8 billion by 2022. –Market Research Future

Semiconductor stepper system is on trajectory to grow at 0.88% CAGR through 2020. –WiseGuyReport

Supercapacitor market is estimated to expand at a 20.7% CAGR from USD 568.2 million in 2015. –ReportsnReports

Wafer level packaging market is expected to grow at a 21.5% CAGR to $7.8 billion by 2022. –Allied Market Research

PANELS/ MONITORS/TOUCH SCREENS:
• Flat panel display revenues will grow by 9.3% y/y in 2017 to $110 billion.
–IHS Markit

• LCD TV panel shipments are forecast to decline 1.2% y/y to 258.4 million units in 2017. –IHS Markit

• Global 7-inch and above panel shipments are expected to fall 2.4% y/y in 2017 as total area of panels grows 3.8%. –WitsView

• OLED production value is expected to grow at 66% CAGR from US$11.7 billion in 2015 to US$61.4 billion in 2020. –Photonics Industry and

Technology Development Association

China AMOLED panel shipments are forecast to grow from 2.4 million in 2016 to 2.6 million units in 2017, 3.5 million units in 2018 and 4.8 million units in 2019. –Digitimes Research

SENSORS:
• Force sensors market will reach $1.8 billion annually by 2027. –IDTechEx

• Temperature sensor market will rise at a 4.6% CAGR to US$6.6 billion by 2024. –Transparency Market Research

• Sensor market is expected to grow at an 11.3% CAGR to $241 billion by 2022. –Allied Market Research

 

by CUSTER AND CUSTER-TOPAI