2015 Wrap Up with Thoughts for 2016

WALT CUSTER AND JOHN CUSTER-TOPAI

WALT CUSTER AND JOHN CUSTER-TOPAI

2015 finished with global electronic equipment sales down 0.7% in Q4’15 vs.Q4’14 when consolidated at fixed 2014 exchange rates but down 5.4% at fluctuating exchange (Chart 1). Weaker currencies conversion to stronger dollars significantly impacted the financial results of multinational companies when their revenues were converted to U.S. dollars.

On a fluctuating exchange basis 4Q’15 was difficult for the entire global electronic supply chain as only datacom and medical electronics and large EMS companies saw sales grow versus the same quarter in 2014 (Chart 2).

Semiconductor shipments also began to decline at year-end with Asia flat and N. America, Europe and Japan dropping sequentially from November to December (Chart 3).

Taiwan-listed ODM companies as a group reported a very modest 0.2% sales increase in 2014 when expressed in local currency (NT$) but were down 4.4% in 2015 vs. 2014 when converted to US$ (Chart 4). Due to a combination of normal seasonality and Apple’s December cut back on iPhone orders, September 2016 finished quite weak for the ODMs with January 2016 down 15% versus January 2015 and down 21% sequentially from December 2015 (Chart 5).

EMS sales were less volatile. A group of large EMS companies had 2015 revenues increase 1.5%. Foxconn is included for comparison. Growth varied significantly by company (Chart 6). Excluding Foxconn, 4Q’15 revenues were up 1% and the combined “guidance” of six public domestic EMS companies was for a 0.9% increase in the first quarter of 2016.

As we have moved into 2016 the exchange rate impact should be minimal as we will be comparing 2016 to 2015 rates but the underlying demand in most markets will create only modest growth at best. 2016 looks to be a challenging year.

9End Markets

Worldwide IT spending is forecast to grow 0.6% y/y to $3.54 trillion dollars in 2016. –Gartner

MOBILE COMMUNICATIONS

Combined shipments of devices (PCs, tablets, ultramobiles and mobile phones) are expected to increase 1.9% y/y to 2.4 billion units in 2016. –Gartner

Smartphone shipments increased 5.7% y/y to 399.5 million units in 4Q’15. –IDC

China’s smartphone shipments grew 11.5% q/q to 119 million units in 4Q’15. –Digitimes Research

India’s mobile phone production is expected to reach 500 million units by 2018. –Department of Telecom

COMPUTERS & PERIPHERALS

Notebook shipments are expected to fall 2.5% y/y from 157.4 million notebooks in 2015 to 153.5 million units in 2016. –Digitimes Research

PC shipments declined 8.3% y/y to 75.7 million units in 4Q’15. –Gartner

Tablet shipments dropped 13.7% y/y to 65.9 million units in 4Q’15. –IDC

Enterprise solid-state drive market will grow at over 7% CAGR to USD 10 billion by 2020. –Technavio

3D printing spending will grow at a 27% CAGR from nearly $11 billion in 2015 to $26.7 billion in 2019. –IDC

NETWORK EQUIPMENT

Cloud IT infrastructure revenue grew 23.0% y/y to $7.6 billion in 3Q’15. –IDC

Passive optical network equipment market revenue will grow at a 20.7% CAGR from US$24.8 billion in 2014 to US$163 billion by 2023. –Transparency Market Research

FLAT PANELS

Curved LCD TV panel shipments are expected to grow from 6.1 million units in 2015 to 12.5 million in 2016. –Sigmaintell Consulting

Large area LCD market will grow from 738 million units in 2015 to over 820 million by 2019. –Technavio

LCD monitor shipments declined 10% y/y to 123 million in 2015. –Digitimes Research

LCD TV shipments are expected to increase 3.3% y/y to 222 million sets in 2016 after falling 0.6% in 2015. – TrendForce

Notebook panel demand fell 12% y/y in 2015 to 176 million units. –IHS

Smartphone display panel shipments are expected to grow 7% y/y from 1.82 billion units in 2015 to 1.95 billion units. –WitsView

AUTOMOTIVE

Automotive blind spot detection market will increase at an over 21% CAGR to more than US$ 3 billion by 2019. –Technavio

Automotive wiring harness market will expand from US$ 39.7 billion in 2015 to US$ 39 billion in 2016 and US$ 40.2 billion in 2017. –evertiq

ROBOTS

3Consumer drone shipments will increase at a 30.4% CAGR from 4.9 million units in 2014 to over 90 million by 2025. –ABI Research

Humanoid robot market is expected to grow from ¥1.7 billion in 2014 to ¥24 billion in 2020. –Fuji Keizai

WEARABLES

Smartwatch, bracelet sales will reach 100 million units in 2016. –Digitimes

Wearable electronic devices sales will increase 18.4% y/y from 232 million units in 2015 to 275 million in 2016. –Gartner

Wireless-charging-enabled wearable products shipments reached 23 million units in 2015. –HIS

EMS, ODM & RELATED ASSEMBLY ACTIVITY

AEM Suzhou sold its plating business to Jiangsu Yunyi Electric.

BB Electronics was sold to an investor group consisting of representatives from management and the board.

BenQ Materials is constructing new facilities for producing medical products that will go into production in 2017.

CO-EL of Italy added three Yamaha SMT lines to its 3,500 M2 facility in Mozzate, Italy.

Compal set up a smartphone factory in New Delhi, India.

Computrol purchased two MV-7 OMNI 3D In-Line AOI machines from MIRTEC.

Corintech added a Europlacer pick&place machine in Fordingbridge, Hampshire.

Creation Technologies achieved ISO 13485 certification in all of its business units across the USA, Canada, Mexico and China.

Ducommun

…named Doug Groves, CFO and Kevin Wright VP of Strategy and Business Development.

…sold its Pittsburgh, PA. (formerly LaBarge) PCBA busin ess unit to a private investment group for $38.5 million.

Enics Slovakia received ISO 27001:2013 certification.

EPE added a Nordson Dage XD7600NT Ruby FP X-Ray system and a Pillarhouse Jade MKII selective soldering machine.

Fabrinet hired Hong Hou as Exec VP and CTO.

Flex entered into a product development and manufacturing partnership with Enable Injections for wearable medical devices.

Foxconn Electronics increased production of robot Pepper for SoftBank at its factory in Yantai City, China.

Foxconn Electronics’ investment arm, Icreate Investments acquired 10.7% stake in Katerra for US$51 million.

Foxconn/Hon Hai

…set up smartphone-use cover glass production lines in Henan Province, China.

…expanded production of parts for PCs, set-top boxes and IoT in India.

…subsidiary Ennoconn invested US$57.3 million for 49% stake in Kontron Canada.

…subsidiary FIT bought Avago’s optical module business.

…iPhone-manufacturing facility in Zhengzhou, China had a fire which did not cause any production impact.

…laid-off 480 people in Indaiatuba, Brazil, which produces mobile phones for Sony Mobile, due to low demand.

…plans to double capacity at its Andhra Pradesh facility to 2.5 million smartphones a month by year-end 2016.

…started mobile handset production in India for Oppo.

…subsidiary, FIT turned its consumer electronics manufacturing base in Jiangsu, China into a technology tourism factory.

…subsidiary, Socle Technology and Sequans Communications began developing LTE products for IoT/ M2M apps.

…bought Macquarie APTT Management from Macquarie Group.

…is shifting toward advanced technologies, such as big data and smart robots.

…was the largest patent applicant in Taiwan in 2015.

GPV International was acquired by Schouw & Co. for DKK 400 million (EUR 53.6 million).

Hanza merged its production units in Tartu and Aruküla, Estonia.

Inventec Appliances increased overall production efficiency by over 20% and reduced the workforce at its factories in eastern China from 21,000 employees to 17,000-18,000 with addition of automated production lines.

Jabil

…acquired South African energy solutions provider and systems integrator, Inala.

…is celebrating 50th anniversary.

Key-Tech Electronic Systems added two fully automated Yamaha Z:LEXYSM20 modular surface mount machines.

Kitron relocated its Norway facility from Hisøy to Kilsund and consolidated its Swedish operations to Torsvik.

Libra Industries Dallas facility completed audits for ISO 9001:2008, AS9100 and ISO 13485-2012.

Lite-On Technology plans to focus 2016 operations on cloud technologies, LED lighting, automotive electronics, biomedicine and industrial automation.

MC Assembly moved into a 58,000 SF facility in Billerica, Massachusetts.

New Kimpo Group plans to expand production capacities in the Philippines and Brazil in 2016.

Newbury Electronics purchased an Antares 700 X X-ray reference hole drilling machine.

Note AB appointed Stefan Hedelius, President and CEO.

Partnertech closed operations at its Norwegian subsidiary, PartnerTech AS.

Pegatron opened a repair and maintenance service center in Japan for smartphone devices (primarily Apple iPhones).

PPI-Time Zero acquired New Age EMS.

Probe Manufacturing changed its name to Clean Energy Technologies.

Quanta Computer

…began mass production of second-generation Apple Watch.

…increased investment in subsidiary, ThinkTech (Brazil) by US$27.2 million.

…was the largest notebook ODM in 2015 with 43.3 million notebooks shipped.

Quicktronics Group acquired Elcon in Horsens and renamed it Quicktronics Scandinavia.

Saline Lectronics purchased a StorageSolutions Fortress (ISM2000XL) unit from Juki.

Scanfil completed acquisition of Partnertech.

SMTC

…(Dongguan, China) received ISO 13485 certification for medical devices.

…appointed Roger Dunfield, CFO.

Sparton named Joseph Harnett, Interim President and CEO following resignation of Cary Wood.

Speedboard Assembly Services appointed Martin Bullimore, Operation’s Director and promoted Karen Heath to Supply Chain Director.

SVI (Austria) acquired Seidel Electronics Group Companies.

TPV closed its TV and monitor manufacturing plant in Jundiai, Brazil.

Valtronic purchased a Kurtz North America HR600 hybrid rework system and a Nordson ASYMTEK Quantum Q-6800 dispensing unit for encapsulation.

VirTex Enterprises hired Rick Polansky as Sr. VP of Business Development.

Wistron invested in a KISS-101IL in-line selective soldering system from ACE Production Technologies.

Zentech Manufacturing named Greg Rodgers Director, Business Development / Delaware Valley region.

Zober Industries (Croydon, PA) achieved ISO 13485:2003 quality certification for contract manufacturing of medical devices.

Zollner opened a production plant in Cartago, Costa Rica.

PCB Fabrication

Global FPCB market grew 3.4% y/y to about USD13.4 billion in 2015 and is expected to expand another 2.2% y/y to USD13.7 billion in 2016. –Research and Markets

Malaysia, Indonesia, Singapore and Philippines’ combined PCB revenue growth was most likely flat, at around $1.6 billion in 2015. –Dr. Hayao Nakahara

Thai PCB industry generated about $2.5 billion revenue in 2015. –Dr Hayao Nakahara

Vietnam’s PCB revenue was approximately $960-1,000 million in 2015. –Dr. Hayao Nakahara

American Standard Circuits integrated an Orbotech Paragon 9800 LDI system, Sprint 120 Inkjet system and an InPlan and InSolver impedance solver pre-production engineering solution into its West Chicago facility.

AT&S established partnerships with Adapt Electronics and Schillinger Associates to expand PCB sales support in U.S.

Bay Area Circuits added an Accu-Score AS-100-MAX V-scoring machine.

Calumet Electronics became certified to process Isola’s I-Tera MT40 laminate materials.

Cambridge America rented a 5,600 SF facility in Branford, Connecticut to expand PCB business.

Canadian Circuits appointed Jack Driver Sales Representative for U.S. Southwest.

Eltek purchased a Diamond 8 solder mask system from Orbotech for its production facility in Petach Tikvah, Israel.

Enzmann closed its small batch production facility in Geretsried, Germany.

Gul Technologies (Jiangsu) added an Orbotech InCAM and InPlan pre-production solution.

Lab Circuits installed a Pluritec Inspecta Combo X-ray drilling and display unit and a Shoda Techtron flash cutting and perimeter polishing machine.

MFLEX was acquired by Suzhou Dongshan Precision Manufacturing.

Nippon Mektron Mektec deployed Orbotech DI and AOI systems in multiple factories.

Nova Drilling added an advanced UV/ CO2 laser drill from Nano System.

PCi purchased two flying probe testers from CLTech.

Printline A/S (Odense, Denmark) was acquired by Jörgen and Flemming Buhl, Jette Grinderslev and Lars Baun.

Quadrivio acquired the majority of Somacis for €100 million

Sumitomo formed a JV with Alpine Electronics in Poipet, Cambodia to produce circuit boards used in car navigation systems for Japanese manufacturers in Thailand.

TTM Technologies had an industrial fire in Costa Mesa that burned a manufacturing warehouse.

Materials & Process Equipment

China’s AOI market for PCB industry reached RMB4.9 billion in 2015. –Research in China

Electronics conformal coating market is estimated to grow at a 5.99% CAGR from USD 1.7 billion in 2014 to USD 2.4 billion by 2020. –Research and Markets

Europe electronics adhesives market will grow at a five-year 7.85% CAGR from $709 million in 2014. –Research and Markets

LED production equipment market is expected to grow at a 5% CAGR to US$1.5 billion by 2019. –Technavio

Quantum dot market will grow from USD 306 million in 2014 to 4.6 billion by 2021. –Radiant Insights, Inc.

AIM Solder’s Mexico Sales Coordinator Fabiola Nuñez and Latin America Sales Manager Rodrigo Cacho were appointed SMTA Mexico Chapter Officers.

Alpha selected Yamaha YCP10 high-performance compact printer for key laboratory facility in New Jersey.

China National Chemical acquired KraussMaffei Group from Onex.

Cobar Solder Products

…relocated its sales office to South Carolina

…began producing SN100C wire and bars in the U.S. and solder paste and fluxes in Mexico.

Dow Chemical CEO Andrew Liveris plans to step down by mid-2017, following the DuPont merger.

Dymax Steven named Steven Suzuki, Global Account Manager for U.S. Western Region.

Electrolube appointed Jade Bridges to lead its technical support team in Ashby-de-la-Zouch, Leicestershire.

Electrolube hired Alistair Little for the position of Global Business Technical Director for resins division.

Emil Otto is celebrating its 115th anniversary in 2016.

ESI introduced RollMaster roll-to-roll material handling system for automating flex printed circuit manufacturing.

European Space Agency commissioned four European tech companies to develop an additive layer manufacturing breadboard machine capable of 3D printing electric circuit boards within the International Space Station.

Europlacer Americas is celebrating 10-year anniversary in 2016.

Fischer Technology opened a sales office in Livonia, Michigan.

Fisnar Europe appointed Robert Campbell, Product Line Manager.

HumiSeal expanded sales, support and manufacturing operations in Pune, India.

Insulectro

…hired former Isola OEM Sales Manager, Leena Gulia as a Technical Sales Manager.

…promoted Norm Berry to Director of Laminates and OEM Marketing in the Sales and Marketing Group.

inTEST combined electrical and mechanical product segments to form new entity, EMS Products Division.

Isola

…named Jeff Waters, President and CEO.

…former plant (and equipment) in Elk Grove, California were put up for sale.

Juki Automation Systems

…hired Greg Brown as Selective Solder Applications Engineer.

…promoted Jose Carlos Rodriquez to Sales Manager, Mexico.

Keysight Technologies and Tsinghua University established an EDA Laboratory for Information and Communication System Design.

Koh Young sold its 1000th in-line AOI system.

LPKF Laser & Electronics launched a new laser drilling and cutting system specifically tailored to flexible circuit industry.

Manncorp purchased an 18,000 SF facility in San Diego, California.

Mek (Marantz Electronics) introduced an ISO-Spector, inline 3D topographical & imaging AOI.

Mycronic purchased RoyoTech and Kognitec.

North Branch Capital acquired Circuit Check from Tonka Bay.

NuSil appointed Charles Kummeth to Technology Board of Directors.

Orbotech received an order for seven Emerald UV laser drilling systems from a leading Japanese manufacturer of ceramic-based electronic components and solutions.

Rockwell Automation acquired MagneMotion.

Rogers sold its polyimide and thermoset epoxy laminate unit to CriticalPoint Capital.

SAKOR Technologies moved from Okemos, Michigan to a 20,000 SF facility in Owosso, Michigan.

SEHO North America appointed Jessica Andrews-Griffin, Key Account Manager for DENSO.

Showa Denko developed solder mask resist for 20 to 30 micron class COF modules of flat displays.

SST International named A.J. Wilson, President.

TestEquity established a Canadian subsidiary in Montreal.

Ventec International Group appointed Mark Nemecek, Technical Sales Engineer.

Yamaha

…IM America launched new, interactive web site at www.yamaha-motor-im.com

…integrated Aegis FactoryLogix software with its Programming PTools.

…IM Europe appointed Andreas Grünewald, Application Engineer / Inspection Solutions AOI AXI.

…introduced its YSi-V 12M TypeHS 3D inspection machine for assembled high density circuit boards.

ZESTRON Americas appointed Steve Williamson, Regional Sales Manager.

Semiconductors & Other Components

Global semiconductor industry sales decreased 0.2% y/y to $335 billion in 2015. –SIA/ WSTS

Semiconductor assembly & testing services market will expand at a 4.7% CAGR from $29.6 billion in 2015 to $39 billion by 2021. –Persistence Market Research

Semiconductor capital spending is projected to decline 4.7% y/y to $59.4 billion in 2016. –Gartner

Semiconductor R&D expenditures grew 0.5% to $56.4 billion in 2015. –IC Insights

Silicon wafer area shipments increased 3% y/y in 2015 to 10,434 million square inches. –SEMI

Top 10 wafer fab leaders had an installed capacity of 11,737K wafers/month at the end of 2015, which equates to 72% of global capacity. –IC Insights

Korea’s semiconductor fab combined equipment and materials spending will likely top $15.3 billion in 2016. –SEMI

N America-based semiconductor equipment manufacturers posted $1.34 billion in orders worldwide in December 2015 (3-month average basis) and a book-to-bill ratio of 0.99. –SEMI

Advanced packaging technologies in the semiconductor industry will account for 44% of packaging services with revenue increasing from $9.8 billion in 2014 to $30 billion by 2020. –Yole Développement

Handset baseband IC market declined 12% y/y to US$5.1 billion in 3Q’15. –Strategy Analytics

High-brightness LED shipments will grow 31.8% y/y in 2016 to 245 billion chips with a shipment value of US$12.8 billion. –Digitimes Research

IC market will expand 4% y/y to $47.5 billion in 2016. –IC Insights

IoT chip market will grow at an 11.5% CAGR from US$ 4.6 billion in 2015 to US$ 10.8 billion by 2022. –MarketsandMarkets

Samsung Electronics and Apple purchased 17.7% (US$59 billion) of global semiconductors in 2015. –Gartner

Smartphone AP market declined 9% y/y in 3Q’15 to US$5.3 billion and tablet AP market fell 38% y/y to US$828 million. –Strategy Analytics

Thin wafer market is expected to grow at a 3.7% CAGR from USD 6.8 billion in 2015 to USD 9.2 billion by 2022. –Markets and Markets

Advanced sensor revenue is expected to grow from $1.2 billion in 2016 to $3.2 billion in 2025. –Navigant Research

Fingerprint sensor market shipments grew from 316 million in 2014 to 499 million in 2015 and are projected to increase to 1.6 billion in 2020. –IHS

Image sensor market is forecast to grow at a 4.1% CAGR to $12.9 billion by 2020. –Research and Markets

Sensor hub market will grow from 1.0 billion units in 2015 to nearly 2.0 billion in 2018, driven by the smartphone market. –IHS

Non-volatile memory market is estimated to expand at of 9.9% CAGR to US$ 80.5 billion by 2022. –MarketsandMarkets

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