Early Year Activity – Positive but with Possible Warning Signs

WALT CUSTER AND JOHN CUSTER-TOPAI

CUSTER AND CUSTER – WALT CUSTER AND JONATHAN CUSTER

2018 is off to a good start, following a strong finish last year.

The Global Purchasing Managers Index (Chart 1), a barometer of world manufacturing activity, is at its highest point since 2010 as almost all countries are currently in growth mode.

Electronic equipment manufacturing is robust (Chart 2). Despite entering its winter “slow season” China had record sales in December and Europe and the USA reported significant growth.

End market demand has been strong. Foxconn, the world’s largest ODM company and a major Apple supplier reported all-time high sales in December, with significant help from Apple’s iPhone X ramp up. Composite December revenues of the Taiwan-listed ODM companies (including Foxconn) were up 9.1% for total 2017 vs. 2016, up 24.5% in December 2017 vs. December 2016 and up 2.9% sequentially from November 2017 (Chart 3). At the same time Eurozone electronic equipment production set a record.

2018 is off to a good start, following a strong finish last year.

The Global Purchasing Managers Index (Chart 1), a barometer of world manufacturing activity, is at its highest point since 2010 as almost all countries are currently in growth mode.

Electronic equipment manufacturing is robust (Chart 2). Despite entering its winter “slow season” China had record sales in December and Europe and the USA reported significant growth.

End market demand has been strong. Foxconn, the world’s largest ODM company and a major Apple supplier reported all-time high sales in December, with significant help from Apple’s iPhone X ramp up. Composite December revenues of the Taiwan-listed ODM companies (including Foxconn) were up 9.1% for total 2017 vs. 2016, up 24.5% in December 2017 vs. December 2016 and up 2.9% sequentially from November 2017 (Chart 3). At the same time Eurozone electronic equipment production set a record.

U.S. electronic equipment production is rebounding also. Both orders and shipments have increased in recent months (Chart 4). Chart 5 summarizes the annualized (12/12) and 3-month (3/12) growth of the domestic electronic supply chain.

The semiconductor industry had a banner year in 2016 driven by strong demand for memory chips and resulting shortages and price hikes. SEMI equipment orders also surged as chip makers, especially in S. Korea rushed to expand capacity. Chart 6 shows 3-month average sales of global semiconductor chips and SEMI equipment. Notice that SEMI equipment revenues appeared to have peaked. And while semiconductor sales were still climbing in November there are now reports that memory chip pricing are dropping signaling the possible end of the current chip boom.

Business conditions remain good but some “corrections” of prior excess ordering may be in process. Keep watching the monthly data.

End Markets

Asia/Pacific (excluding Japan) public sector IT spending is expected to grow at 5.5% CAGR from USD 25.3 billion in 2017 to USD 31.4 billion in 2021. –IDC

India’s domestic production of electronics reached $49.5 billion in 2016-17, which was above the $43 billion spent on imports. –Information Technology Minister

MOBILE COMMUNICATIONS

• Smartphone production increased 6.5% y/y to roughly 1.46 billion in 2017 and is expected to increase by another 5% y/y to 1.53 billion units in 2018. –TrendForce

• All-screen smartphone shipments

CUSTER

will grow from 130 million units in 2017 to 910 million units in 2018. –Sigmaintell Consulting

• Fingerprint-enabled smartphone shipments are forecast to grow from 920 million units in 2017, representing a penetration rate of 64%, to 1.25 billion units in 2020 for a penetration rate of over 75%. –Digitimes Research

• Africa’s smartphone market grew 4.4% q/q to 21.7 million units in 3Q’17 after declining previous two quarters. –IDC

• Taiwan handset shipments from brand vendors and ODMs increased 85.3% y/y to 22.9 million units in 3Q’17. –Digitimes Research

COMPUTERS & PERIPHERALS

• PC shipments declined 2% y/y to 71.6 million in 4Q’17; FY’17 PC shipments dropped 2.8% y/y to 262.5 million units. –Gartner

• AIO PC shipments expanded 3% y/y to 13.9 million units in 2017. –Digitimes Research

• Nordic (Denmark, Finland, Norway and Sweden) personal computing device market, including traditional PCs (desktop, notebook, and workstation) and tablets is expected to decline 4.2% y/y to 7.4 million shipments in 2018. –IDC

• UK’s computer, electronic and optical products production rose 8% y/y and electrical goods output rose by 4% y/y between the end of June 2016 and 3Q’17. –EEF

NETWORK EQUIPMENT

• Cloud computing market value expanded by 24% in 2017 to US$180 billion. –Synergy Research

• Enterprise IT Infrastructure spending increased by nearly 3% on an annualized basis in 2017 as aggregate revenues declined by almost 1% over the last four quarters to $113 billion in 2017. –Synergy Research Group

• Server revenue grew 16% y/y to $14.75 billion in 3Q’17 as shipments expanded 5.1% to 2.83 million units. –Gartner

AUTOMOTIVE

• Automotive electronics market is forecast to grow at 8% CAGR to over USD $390 billion by 2024 as global vehicle production surpasses 130 million units. –Global Market Insights

• Autonomous vehicle sales will grow from 51 thousand units in 2021 to over 33 million units in 2040. –IHS Markit

• Advance driver assistance systems market is expected to expand at 21% CAGR from $25 million in 2016 to $143 million by 2025. –Allied Market Research

ROBOTICS

• Medical robotics market is set to grow at 18% CAGR to USD 14.6 billion by 2022. –market.biz

• Robot population is expected to grow from nearly 300,000 in 2016 to 414,000 by 2019. –HSBC

• Cleaning robot market is expected to grow at 16% CAGR from USD 2.1 billion in 2018 to USD 4.3 billion by 2023. –MarketsandMarkets

• Chinese robot makers produced more than 100,000 industrial robots in first 10 months of 2017. –Xinhua

OTHER

• Artificial intelligence revenue will grow from $3.2 billion in 2016 to $90 billion by 2025. –Tractica

• Enterprise virtual digital assistant users are expected to rise from 145 million active users in 2017 to over 1 billion users by 2025. –Tractica

• Augmented reality and virtual reality market is expected to increase at 62% CAGR from USD 9.9 billion in 2016 to USD 297 billion in 2023. –Energias Market Research

• Defense spending worldwide will increase by 3.3% y/y to $1.67 trillion in 2018. –IHS Markit

• Smart highway market value is exhibiting a 19% CAGR from US$16.9 billion in 2018 to US$40.6 billion by 2023. –Research and Markets

• IoT expenditures spending will increase 14.6% y/y from $674 billion in 2017 to $773 billion in 2018. –IDC

• Smart speaker sales are expected to reach 30-50 million units in 2018. –Digitimes

• Wearable device shipments will grow at 18% CAGR from 113 million in 2017 to 222 million in 2021. –IDC

EMS, ODM & Related Assembly Activity

Global EMS and ODM Market value is expected to grow at 4.3% CAGR from 488 billion USD in 2016 to USD 627 billion by 2022. –Market Study Report

Total electronics assembly value is estimated to grow from $1.4 trillion in 2016 to $1.7 trillion in 2021 while the contract manufacturing industry will grow at 5.3% CAGR from $425 billion in 2016 to $551 billion in 2021. –Research and Markets

European EMS industry is forecast to reach €32 billion by 2021. –Reed Electronics Research

India’s electronic manufacturing investment grew 27% y/y to 1.57 lakh crore in 2017. –MeitY

Benchmark Electronics appointed Roop Lakkaraju, CFO.

Comintel is looking to sell BCM Electronics.

Connect Group added additional 7,000 SM to its manufacturing plant in Oradea, Romania

Firstronic named Jochen Lipp, COO.

FLEX

• appointed Jennifer Li to its Board of Directors.

• opened a 330,000 SF manufacturing center in Israel.

Foxconn/ Hon Hai

• Electronic Industrial Development (Kunshan) bought stake in Fu Sheng Optoelectronics Technology (Kunshan) for $15 million.

• bought 24.4% stake in IDG Energy Investment for a combined HK$1.48 billion (US$190 million).

• launched its first high-performance computing system applying artificial intelligence to precision medicine, sports data analysis and 3D rendering.

• subsidiary, Jusda Supply Chain Management International invested 100 million yuan in Fertile Plan International Logistics.

• PCE Paragon Solutions unit acquired AFE for $55 million.

Incap Group appointed Tero Lehtonen, CFO.

Kinpo Electronics is setting up two more factories in Philippines in 3Q’18, with one for injection molding and the other for assembly.

Libra Industries hired Vincent Mihalek as Purchasing Manager.

Milwaukee Electronics

• consolidated its engineering resources into a single department managed by Clint Hanson and added the San Diego PCB operating group led by David Carmondy.

• standardized the Panasonic equipment platform for all of its three facilities, which include NPM-W2 chip shooters and NMP-W2 multifunctional pick-and-place machines.

Nortech Systems named Connie Beck, CFO.

Pegatron spent NT$715 million purchasing production equipment for newly acquired factory in Chongqing, China.

Poly Electronics named Leonard Hinkson, Purchasing Manager and Derrick McKelvey Quality Assurance Manager.

Prime Technological Services achieved ISO 13485 certification.

Roscan Electronics installed two new pick-and-place machines and two AOI machines and added mezzanine floor space to accommodate extra stock.

Smart Made Simple appointed David Buzalski, Planning Manager.

SMTC named Bob Miller, VP, Customer Acquisition.

Spectrum Assembly upgraded its Quality Management System registrations to ISO 9001:2015 and ISO 13485:2016.

STI Electronics earned its AS9100D certification.

Universal Electronics invested in two additional SMT lines, with DEK wide body printers, Universal Instruments Genesis SMT chip shooters, and Yestech AOI systems, for its Whitewater, Wisconsin plant.

Videoton invested HUF 5 billion ($18.8 million) to build 215,000 SF production hall in Székesfehérvár, Hungary.

PCB Fabrication

Multilayer printed circuit board market is forecast to grow at 1.5% CAGR to $25 billion by 2022. –Market Insights Reports

China’s PCB production grew 8.5% y/y to an estimated $30.6 billion in 2017 as world output expanded 6.9% y/y to about $62 billion. –Dr. Hayao Nakahara

Vietnam PCB investment has reached $1 billion over last two years and flex circuit production is expected to achieve more than $1 billion by 2020. –Dr. Hayao Nakahara

Advanced Circuits appointed Daniel Buxton, Quality Assurance Manager for its Tempe, Arizona Division.

Aspocomp invested EUR 10 million in new technology at its Oulu plant to expand its new customer segment, the testing of semiconductor components and increase production capacity, especially for 5G and automotive industries.

Coast to Coast Circuits appointed CW Cernosek, Corporate Business Development and Marketing Manager.

H&T Global Circuit Factory purchased a 60,000 SF building in Milwaukee, Wisconsin from The Bolen Group.

Murata Manufacturing boosted its capacity to build MetroCirc circuit boards that can be bent, making it easier to pack them into smartphones.

PCB Benesov added a Zmetrix ST600 controlled impedance tester from DALLCO.

PNC purchased a MV-6 OMNI 3D AOI system from MIRTEC.

Printed Circuits appointed Paul Peters to Engineering Manager of their plating and wet processing department.

Royal Flex Circuits received AS9100:2016 (RevD) and ISO9001:2015 certifications.

Materials & Process Equipment

Austin American Technology appointed Jack Harris, Sales Manager.

Cogiscan appointed Ming–Ming Chang, Account Manager –Equipment Partnerships.

Electrolube

• invested in a new customer-dedicated testing environment for its testing and development laboratory facilities.

• installed new PVA Delta-8 selective conformal coating system at their UK laboratories in Leicestershire.

EVS is celebrating 15 years of solder recovery in 2018.

Isola Group transferred its equity ownership to Cerberus Capital Management.

Iteq is investing US$62.4 million to set up a CCL plant in Jiangxi, China.

ITW EAE hired Alejandro Aguilera as Sales Channel Manager for Mexico Operations.

Kingboard Chemical Holdings sold its stake in Shenzhen property project for 3.2 billion yuan (US$483 million).

Kurtz Ersa appointed Ralph Knecht, Managing Director.

LaserVia put its intellectual property portfolio up for sale.

MacDermid Enthone Electronics Solutions and Hitachi-Chemical began dry film slitting operations in Wantage, UK.

Nano Dimension Technologies has been accredited and certified for the ISO 14001:2015 Standard –EMS (Environmental Management System) by the Standards Institute of Israel.

Nordson

• ASYMTEK acquired Infiniti Dosing o.m.s. product lines.

• acquired Sonoscan.

• VP, General Counsel and Secretary, Robert Veillette retired.

Orbotech appointed Alon Rozner, CFO.

Panasonic El Works is establishing a new company in Newark, New Jersey to strengthen solutions business in North America.

Park Electrochemical is conducting a “strategic evaluation,” including a possible sale of its core printed circuit materials business.

Scienscope promoted Don Jeka to National Sales & Marketing Manager for its X-ray division.

Sono-Tek appointed Christine Pennisi to Applications Engineer for Electronics & Advanced Energy Division.

Taiwan Union Technology Corporation broke ground on new Advanced Technology Center adjacent to the current HQ and manufacturing site in Hsinchu, Taiwan.

Ventec’s Managing Director, Thomas Michels was elected to EIPC Board of Directors.

VJ Electronix is celebrating its 15th anniversary in 2018.

Components

SEMICONDUCTORS & PASSIVE COMPONENTS

• Semiconductor revenues grew 22% y/y to nearly $440 billion in 2017 while semiconductor materials posted sales of $48 billion. –SEMI

• Semiconductor manufacturing equipment sales will increase from $57 billion in 2017 to $63 billion in 2018. –SEMI World Fab Forecast 

China

• fab construction spending will grow from $6.2 billion in 2017 to $6.8 billion in 2018. –SEMI

• is building 19 new semiconductor fabs from 2017 onwards, and 10 out of the 19 projects are planned for 300mm wafer facilities. –SEMI

• IC design industry revenue grew 22% y/y to RMB200 billion (about $30.3 billion) in 2017. –TrendForce

GaN power devices market value is growing at a 23.5% CAGR from $330 million in 2016 to $2,200 million by 2025. –Coherent Market Insights

IC industry is projected to increase 7.8% y/y to $377 billion in 2018. –VLSI Research

IoT chip market is expected to expand at 13.2% CAGR to more than US$ 14.8 billion by 2022. –Market Research Engine

Power MOSFET market size is expected to grow at 7.7% CAGR to $6 billion by 2023. –Research and Markets

Power semiconductor switch market is forecast to grow at 5.9% CAGR from $8,450 million in 2016 to $11,900 million by the end of 2022. –Market Insights Reports

Silicon carbide power semiconductor market is projected to grow at 24% CAGR from US$305 million in 2017 to US$910 million by 2022. –Research and Markets

Passive component sales of capacitors, inductors and resistors were up 11% q/q and 12.1% y/y to $6.8 billion in 3Q’17. –ECIA

Transient voltage suppressor diodes market is expected to grow at 4.7% CAGR from $1480 million in 2016 to $1950 million by the end of 2022. –The Market Reports

3D PRINTING

• 3D Printing spending (including hardware, materials, software, and services) will grow at 20.5% CAGR from around $12 billion in 2018 to nearly $20.0 billion in 2023. –IDC

SENSORS

• 3D sensing market value is forecast to reach US$9-10 billion by 2020. –Digitimes Research

• Automotive sensors market is forecast to grow at 8.1% CAGR from $24 billion in 2016 to $40 billion by 2023. –Stratistics Market Research Consulting

• LiDAR sensors market is expected to grow from $230 million market in 2017 to $2.5 billion market by 2026. –IHS Markit

• Image sensor market value will grow at 9.8% CAGR from $14 billion in 2017 to $25 billion by 2023. –MarketsandMarkets

• InGaAs camera market value is expected to grow at 9.1% CAGR from $79 million in 2017 to $133 million by 2023. –MarketsandMarkets

• Optical sensing market is forecast to grow at 16% CAGR from $1.2 billion in 2016 to $3.5 billion by 2023. –Report Sellers

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