Weekly Global Update for July 17, 2014
07.17.2014 // Walt D. Custer // Industry Conditions
June 2014 revenues of Taiwan stock exchange listed companies (many with manufacturing in China) were just released:
Source: Financials of Taiwan-listed companies with Custer Consulting Group interpretation
Global Semiconductor Sales Increase in All Regions in May (Charts 13-19)
Americas show strongest year-over-year growth; global sales remain well ahead of 2013 pace
The Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors reached $26.86 billion for the month of May 2014, 8.8% higher than the May 2013 total of $24.69 billion and 2.0% more than last month’s total of $26.34 billion. Sales in the Americas increased 10.6% year-over-year in May, marking the region’s twelfth consecutive month of double-digit growth. 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 posted healthy growth throughout all regions in May, led by continued strength in the Americas," said Brian Toohey, president and CEO, Semiconductor Industry Association. "Year-over-year sales increased across nearly all semiconductor product categories, with DRAM and analog products leading the way. Overall, the global market has posted growth each month for over a year, and sales are expected to increase for the foreseeable future."
Year-over-year and month-over-month sales increased across all regions for the first time since August 2010. Sequential monthly sales were up 2.1% in Asia Pacific, 2.1% in Europe, 1.8% in the Americas, and 1.6% in Japan. Compared to May 2013, sales increased in the Americas (10.6%), Europe (10.1%), Asia Pacific (8.6%), and Japan (5.3%). Japan posted three straight months of year-to-year growth for the first time in nearly two years.
Worldwide Semiconductor Sales on Pace to Total $336 Billion in 2014, up 6.7% from 2013 (Chart 20)
Worldwide semiconductor revenue is on pace to reach $336 billion in 2014, a 6.7% increase from 2013, and up from the previous quarter's forecast of 5.4% growth, according to Gartner, Inc. Sequential growth in the second quarter of 2014 is outpacing expectations, as can be seen in many companies including foundry leader TSMC, which is expecting second-quarter sequential growth of over 20%.
"2014 semiconductor growth is widespread across many chip types and applications," said Bryan Lewis, research vice president at Gartner. "DRAM is once again expected to lead in 2014 with 18.8% annual growth, but other areas are also doing well, including analog, FPGAs, ASICs, and non-optical sensors. ASICs are driven by Apple, with strong sales of its iPhone expected in the second half of 2014. ASICs will also benefit from the strong ramp of the latest video game console generation, particularly the Sony PS4 and Microsoft Xbox One. Overall semiconductor growth is widespread, with the non-memory segment growing 5.2% in 2014, compared with only 0.8% in 2013."
"Smartphones and ultramobile devices, including tablets, are the growth areas from a system point of view," said Ranjit Atwal, research director at Gartner. "Traditional desk-based PCs and notebook units are continuing to decline 6.7% in 2014. Total production unit growth for ultramobile devices, including tablets, is expected to rise over 30% in 2014. Low-cost utility tablets (white box) continue to drive new growth in the tablet market."
DRAM pricing remains firm, and this, coupled with growth in key system markets, is helping propel the DRAM market to exceed $41 billion in 2014. Memory is a feast-and-famine market due to big supply and demand cycles, and Gartner predicts the next big memory oversupply downturn to hit in 2016, weakening overall semiconductor growth.
Semiconductor Equipment Market to Grow 20.8% in 2014 to $38.4 Billion and Expand an Additional 10.8% in 2015 to exceed $42.6 Billion (Charts 21-23)
SEMI projects back-to-back years of double-digit growth in worldwide semiconductor equipment sales according to the mid-year edition of the SEMI Capital Equipment Forecast, released at the annual SEMICON West exposition. The SEMI outlook calls for the total semiconductor equipment market to grow 20.8% in 2014 to reach $38.4 billion and to expand another 10.8% in 2015 to exceed $42.6 billion.
Following two years of spending declines, key drivers for equipment spending are investments by foundry and logic fabs for sub 20nm technology, NAND flash makers for leading edge technology (including 3D NAND) and capacity, DRAM technology upgrades for mobile applications, and expansion of advanced packaging capacity for flip chip, wafer bumping, and wafer-level packaging. All regions of the world are projected to see equipment spending increases in 2015. Front-end wafer processing equipment is forecast to grow 11.9% in 2015 to $34.8 billion, up from $31.1 billion in 2014. Test equipment and assembly and packaging equipment is forecast to experience growth next year, rising to $3.1 billion (+1.6%) and $2.6 billion (+1.2%), respectively. The forecast indicates that next year is on track to be the second largest spending year ever, surpassed only by $47.7 billion spent in 2000.
"Mobility and interconnectivity require leading-edge process technologies, both at the fab level and in packaging, and are key factors for growth in equipment spending," said Denny McGuirk, president and CEO of SEMI. "We expect capital spending to increase throughout the remainder of 2014 and into 2015."
Growth is forecast in all regions except ROW in 2014 and all regions in 2015. Taiwan is forecast to continue to be the world’s largest spender with $11.6 billion estimated for 2014 and $12.3 billion for 2015. In 2014, North America is second at $7.2 billion, followed by South Korea at $6.9 billion. For 2015, South Korea is in second ($8.0 billion) in spending, followed by North America ($7.3 billion).
In 2014, year-over-year increases are expected to be largest for China (47.3%), North America (35.7%), South Korea (33.0%), and Europe (29.7%). Year-over-year percentage increases for 2015 are largest for Europe (47.8% increase), ROW (23.5%), Japan (15.6%), and South Korea (15.0%).
The following results are given in terms of market size in billions of U.S. dollars and percentage growth over the prior year:
Worldwide Semiconductor Capital Equipment Spending to Increase 15% in 2014 (Chart 24)
Worldwide semiconductor capital equipment spending is projected to total $38.5 billion in 2014, an increase of 15% from 2013 spending of $33.5 billion, according to Gartner, Inc. Capital spending will increase 7.1% in 2014 as the industry begins to recover from the recent economic downturn and total spending will follow a generally increasing pattern in all sectors through 2018.
"While capital spending outperformed wafer fab equipment (WFE) spending in 2013 that is not true for 2014," said Bob Johnson, research vice president at Gartner. "Total capital spending will grow by 7.1%, while WFE will increase 16% as manufacturers pull back on new fab construction and concentrate on ramping new capacity instead. Momentum from exceptionally strong fourth-quarter 2013 sales was carried forward through the first quarter. Sales are expected to bounce around a flat trend line through the remainder of 2014. In the longer-term profile, growth continues through 2015, dips slightly in 2016 and increases through 2018."
Logic spending remains the key driver of capital spending throughout the forecast period, but due to the anticipated softening of mobile markets it will grow less than memory. Memory will provide most of the growth in capital spending through 2018, with NAND Flash being the primary impetus.
Capital spending is highly concentrated among a handful of companies. The top three companies (Intel, TSMC and Samsung) continue to account for more than half of total spending. Spending by the top five semiconductor manufacturers is nearly 63% of total projected 2014 spending, with the top 10 accounting for 77% of the total.
Gartner predicts that 2014 semiconductor capital spending will increase 7.1%, followed by 9% growth in 2015. The next cyclical decline will be a slight drop of 3.5% in 2016, followed by a return to growth in 2017 and 2018.
The positive outlook for capital spending in 2014 is a result of strong demand across most semiconductor segments. Strong anticipated sales in the smartphone and ultramobile product areas are stimulating investment in the more advanced logic facilities. In memory, a favorable DRAM pricing environment is anticipated to produce strong revenue growth that will stimulate investments in new facilities. Propelled by the success of solid-state drives, NAND Flash is increasing investment in additional capacity.
Overall, the long-term outlook is for continued investment in leading-edge logic as foundries and major integrated device manufacturers (IDMs) move into the FinFET era. In memory, the outlook for NAND Flash is especially strong as it begins to become a major presence in data centers. The result will be steady growth in spending for semiconductor equipment through 2018, with only a minor dip in 2016 as DRAM spending responds to an anticipated oversupply condition.
The capital spending forecast estimates total capital spending from all forms of semiconductor manufacturers, including foundries and back-end assembly and test services companies. This is based on the industry's requirements for new and upgraded facilities to meet the forecast demand for semiconductor production. Capital spending represents the total amount spent by the industry for equipment and new facilities.
The WFE forecast estimates market revenue based on future global sales of the equipment needed to produce the wafers on which semiconductor devices are fabricated. WFE demand is a function of the number of fabs in operation, capacity utilization, their size and their technology
Worldwide PC Shipments Experienced Flat Growth in 2Q’14 after Two Years of Decline (Charts 25-28)
PC Industry Experiences Mixed Results as Mature Markets Return to Growth, While Emerging Market Shipments Continue to Decrease
After eight quarters of declining shipments, worldwide PC shipments experienced flat growth in the second quarter of 2014, according to preliminary results by Gartner, Inc. Worldwide PC shipments totaled 75.8 million units in the second quarter of 2014, a 0.1% increase from the second quarter of 2013.
"While the worldwide PC market stopped two years of declining shipments in the second quarter, there were mixed results, as stabilization in developed markets was offset by a decline in emerging markets," said Mikako Kitagawa, principal analyst at Gartner. "The PC industry in emerging markets has been impacted by the allure of low-cost tablets. These low-cost tablets continue to take spending from new PC units, meaning that it will take more time for PC sales to stabilize in emerging markets.
"The PC market's installed based has been declining as buyers switched to tablets and smartphones for entertainment and social media consumption. The 2Q14 results suggest that the consumer installed base restructuring peaked during 2013. We are seeing a slowdown in premium tablet sales, which have already penetrated a large number of households. PCs are now growing off a smaller installed base of newer devices, with more engaged users. Therefore, we expect to see slow, but consistent, PC growth. While the end of support for Windows XP drove some of the sales in developed markets, it is the underlying business replacement cycle that will stabilize the market."
Worldwide Traditional PC, Tablet, Ultramobile and Mobile Phone Shipments to Grow 4.2% in 2014 (Charts 29 & 30)
Worldwide PC Market to Show Relative Revival in 2014 after Falling 9.5% in 2013
Worldwide Tablet Market to Slow Down in 2014 and Reach 256 Million Units
Worldwide combined shipments of devices (PCs, tablets, ultramobiles and mobile phones) are projected to reach 2.4 billion units in 2014, a 4.2% increase from 2013 according to Gartner, Inc.
"2014 will be marked by a relative revival of the global PC market," said Ranjit Atwal, research director at Gartner. After declining 9.5% in 2013, the global PC market (desk-based, notebook and premium ultramobile) is on pace to contract only 2.9% in 2014.
"Business upgrades from Windows XP and the general business replacement cycle will lessen the downward trend, especially in Western Europe," said Atwal. "This year, we anticipate nearly 60 million professional PC replacements in mature markets." The traditional PC market (desk-based and notebook) will follow the same downward trend and is on pace to contract 6.7% in 2014 and 5.3% in 2015.
As with any devices, adoption goes through phases from the early to the late adopter; tablets are currently moving onto the latter part of that curve in mature markets. Gartner estimates that sales of tablets will see a relative slowdown in 2014 to reach 256 million units, an increase of 23.9% from 2013. Lower demand from users for tablets with smaller screens, some in favor of larger screens, in mature markets, and the shift toward phablets in South-East Asia are slowing global tablet penetration. "The next wave of adoption will be driven by lower price points rather than superior functionality," said Atwal.
Sales of mobile phones are expected to reach 1.9 billion units in 2014, a 3.1% increase from 2013. Sales of smartphones, which exceeded those of the rest of the market in 2013, will continue to do well, and Gartner estimates that smartphone sales will represent 88% of global mobile phone sales by 2018 — up from 66% in 2014.
In the operating system (OS) market, Android and iOS are driving the growth with a 30% and 15% increase, respectively, in 2014. "We expect the announcement of the new Apple iPhone 6 will attract pent-up demand for users who want a larger screen," said Annette Zimmermann, research director at Gartner. "Windows phones will exhibit strong growth from a low base in 2014, and are projected to reach a 10% market share by 2018 — up from 4% in 2014."
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