What is the “New Normal” for Semiconductors? 2016 Gartner Luncheon Presentation.pdfCONFIDENTIAL...
Transcript of What is the “New Normal” for Semiconductors? 2016 Gartner Luncheon Presentation.pdfCONFIDENTIAL...
CONFIDENTIAL AND PROPRIETARY This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other intended recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
What is the “New Normal” for Semiconductors?
Jim Walker
Meptec Luncheon
September 28, 2016
1 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
Semiconductor Market Conditions and Outlook
Application Markets
Device Markets
Outsourcing Services – Foundry & SATS/OSAT
Mergers, Acquisitions & China
Summary & Recommendations
Presentation Overview
2 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
Semiconductor Market Conditions and Outlook
3 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
Key Assumptions: Semiconductors and Electronic Equipment Forecast, 3Q16 Preliminary Update
1. Consumer demand continues to remain weak. Slight spending increase
developing in Q3 and Q4.
2. No significant near-term, large volume demand driver expected to emerge that
will dramatically affect current market conditions.
3. Inventory levels in traditional PC, ultramobile, smartphone and industrial
equipment channels still impacting production levels and equipment ASPs.
4. iPhone 7 momentum increasing, positively impacted by Samsung Galaxy Note7
problems (1/3 of Note7 users opt for refund vs. exchange).
5. NAND and DRAM in oversupply for the rest of 2016, impacting prices.
6. Uncertain macroeconomic climate following Brexit.
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Worldwide Semiconductor 2Q16 Revenue Forecast: 2016 Goes Deeper into Negative Territory
0
50
100
150
200
250
300
350
400
450
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
1Q16 Forecast 2Q16 Forecast
Billions of Dollars and Revenue Growth
1Q16 Forecast
$340 4.7%
$301 31.8%
$308 2.1%
$300 -2.6%
$315 5.2%
$343 8.6%
$335 -2.3%
$325 -3.0%
$359 5.7%
$369 2.6%
$333 -0.6%
$351 5.4%
$367 4.7%
$379 3.2%
$378 2.6%
$391 3.2%
Source: “Semiconductor Forecast Database, Worldwide, 2Q16 Update”
5 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
Semiconductor Quarterly Revenue Profile: Dismal First Half Drives Full-Year Growth into Negative Territory
-4.2
4.9
6.3
0.7
-7.7
0.3
2.5
-1.5
-7.2
1.5
5.8
1.2
-4.5
2.5
6.0
1.5
-10
-8
-6
-4
-2
0
2
4
6
8
70
72
74
76
78
80
82
84
86
88
90
92
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Revenue Quarterly Sequential Growth
Revenue ($B) Quarterly Sequential Growth (%)
Source: “Semiconductor Forecast Database, Worldwide, 2Q16 Update”
6 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
2Q16 Semiconductor Inventory Index Enters the Severe Excess Zone
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
Severe Excess Zone
Caution Zone
Source: “Semiconductor Forecast Database, Worldwide, 2Q16 Update”
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Key Electronic Equipment Market
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0
100
200
300
400
500
600
700
2014 2015 2016 2017 2018 2019 2020
Ultramobile Notebook Deskbased PC
PC and Ultramobile: 2Q16 Production Forecast Update
Weak consumer demand will negatively
impact production of PC and ultramobile.
Through 2016-17 consumers in Eurasia,
sub-Saharan Africa, Middle East and North
Africa and LATAM will extend the lifecycles
of their Notebooks by 6 months.
In emerging markets, smartphones will take
the majority of disposable income, removing
new PC and ultramobiles purchases by 10%
through 2020.
One third of basic ultramobile consumer
tablets users will not replace their device
through 2020.
PC and Ultramobile Unit Production (Millions of Units)
2.5% -0.2% 1.1% -11.2%
3.8%
-15.2%
64.6 55.0 46.1 46.8 48.0 47.9 46.7
18.8% 16.4% 14.2% 13.8% 13.4% 13.0% 12.4%
Semi Revenue and Share of Market (Billions of Dollars)
4.1%
Source: “Semiconductor Forecast Database, Worldwide, 2Q16 Update”
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Smartphone: 2Q16 Production Forecast Update
0
500
1,000
1,500
2,000
2,500
2014 2015 2016 2017 2018 2019 2020
Th
ou
sa
nd
s
Phone, Utility, Traditional OS Phone, Premium, Smart OS
Phone, Utility, Smart OS Phone, Basic, Smart OS
Phone, Basic, Traditional OS
Smartphone Unit Production (Millions of Units)
3.1% 0.6% 1.1% -0.1% 2.5% 0.4%
74.1 80.3 82.1 86.4 91.7 91.6 91.2
21.6% 24.0% 25.3% 25.4% 25.5% 24.9% 24.1%
1.0%
Source: “Semiconductor Forecast Database, Worldwide, 2Q16 Update”
Softness to continues in China smartphone
market with high inventory through 2016.
Rising inventories and declining smartphone
ASPs put Smartphone application processor
prices come under severe pressure.
Shift to midrange basic smartphones
continues at the expense of premium and
low-cost utility smartphones. Premium
smartphone will decline in 2016.
Shift to LTE remains the key driver for
semiconductor content.
The iPhone SE will help to drive additional
sales in 2016 as users look to upgrade their
dated iPhones.
Semi Revenue and Share of Market (Billions of Dollars)
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Automobile: 2Q16 Update Production Forecast
0
20
40
60
80
100
120
2014 2015 2016 2017 2018 2019 2020
Japan EMEA Asia/Pacific China Americas
Auto sales strengthening in China in
response to stimulus programs
EV and PHEV incentives in China driving
demand
ADAS and infotainment adoption
accelerating in mature markets
Japan production will recover by year-end
Brazil and Russia remain weak
Production CAGR '15-‘20 is 2.7%
Semi TAM CAGR '15-‘20 is 6.2%
Source: Gartner and IHS Automotive, June 2016
Light Vehicle Production and Growth (Millions of Units)
30.0 30.3 31.4 33.4 36.0 38.6 41.0
8.8% 9.1% 9.7% 9.8% 10.0% 10.5% 10.8%
2.0%
3.1 % 2.7% 3.5%
1.5% 3.1 % 2.3%
Source: “Semiconductor Forecast Database, Worldwide, 2Q16 Update”
Semi Revenue and Share of Market (Billions of Dollars)
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Semiconductor Devices and Memory Market
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Semiconductor Device Revenue and Annual Growth, 2Q16 Update
Billions of Dollars 2014 2015 2016 2017 2018 2019 2020 CAGR
2015-2020
Memory 80.3 79.3 70.9 75.0 82.5 80.3 79.5 0.1%
16.7% -1.3% -10.6% 5.8% 10.0% -2.7% -1.0%
Microcomponents 63.8 60.9 60.7 63.1 65.4 67.9 69.5 2.7%
6.4% -4.5% -0.3% 3.9% 3.7% 3.8% 2.3%
Logic IC 12.9 12.2 12.0 12.4 13.1 13.7 14.1 2.9%
4.8% -4.9% -1.9% 3.5% 5.3% 4.4% 3.1%
ASSP 88.9 86.0 84.0 86.5 89.1 92.1 94.3 1.9%
4.0% -3.3% -2.3% 3.0% 3.0% 3.4% 2.4%
ASIC 21.2 22.3 22.3 23.5 24.3 25.0 26.3 3.3%
7.4% 5.2% -0.3% 5.6% 3.5% 2.5% 5.5%
Analog IC 21.0 21.0 21.2 21.6 22.2 22.6 23.5 2.3%
8.4% 0.2% 0.7% 2.0% 2.9% 1.4% 4.3%
Discrete 19.2 17.7 17.5 18.5 19.1 19.9 20.8 3.3%
7.9% -8.0% -1.2% 5.6% 3.5% 4.4% 4.3%
Optical 27.4 26.9 27.1 29.1 32.1 34.7 37.1 6.6%
7.1% -1.9% 0.7% 7.4% 10.2% 8.3% 6.8%
Non-optical Sensor 7.9 8.4 9.1 10.3 11.4 12.3 12.8 8.9%
24.4% 6.5% 8.7% 13.2% 10.2% 8.6% 4.1%
Total Market 342.6 334.8 324.7 340.0 359.3 368.6 378.0 2.5%
8.6% -2.3% -3.0% 4.7% 5.7% 2.6% 2.6%
Total Excluding Memory 262.3 255.5 253.9 265.0 276.8 288.3 298.5 3.2%
6.4% -2.6% -0.6% 4.4% 4.4% 4.2% 3.6%
Source: “Semiconductor Forecast Database, Worldwide, 2Q16 Update”
13 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
DRAM Market Metrics – The Cycles Continue
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10
20
30
40
50
2012 2013 2014 2015 2016 2017 2018 2019 2020
Reven
ue
(Billio
ns o
f D
ollars
)
32.0%
-20.0%
17.7%
-17.7% 3.9%
33.2% -13.7% CAGR
15-20 -7.0%
-3.3%
-11.3%
Megabytes Bn 3,837 4,716 6,156 7,403 9,091 11,455 15,020 18,870 22,893 CAGR 15-20
Bit Growth 31.9% 22.9% 30.5% 20.3% 22.8% 26.0% 31.1% 25.6% 21.3% 25.3%
ASP 4Gb eqv. 3.50 3.79 3.83 3.08 2.01 1.66 1.49 0.97 0.69 -25.8%
ASP Change -32.7% 8.4% 1.1% -19.6% -34.9% -17.5% -10.3% -34.5% -28.9%
ASP 4Gb eqv.* 2.08 2.80 3.52 2.47 1.19 1.13 1.10 0.66 0.48 -28.1%
ASP Change -42.7% 34.7% 25.7% -29.7% -52.1% -4.7% -2.8% -39.7% -28.2%
* Commodity pricing, the blended average of device densities being sold into the PC market.
Low Power DRAM
Standard DRAM
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2Q16 NAND Flash: SSDs Drive Market Growth
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10
20
30
40
50
2014 2015 2016 2017 2018 2019 2020
SSD Other
Billions of Dollars
3.1% 3.5% 2.1% 9.0%
3.0%
14.7%
8.3%
Oversupply in 1H 2016 due to weak
end markets, increased output of
3B/cell planar
Initial 3D NAND ramp timing uncertain
– 19% of total PB in 2016; 70% by 2019
SSDs lead growth:
– 55% of total PB by 2020
– 84% of SSDs will use 3D NAND
Assume China entering NAND market
2018-19 with at least one new fab
2015-2020 CAGR: 7.3%
Semiconductor Revenue
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Outsourced Manufacturing Services:
Foundry and SATS/OSAT)
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Slow growth in the device market will cause foundry revenue to grow only by 4.0% to $50.8
billion
The optimistic business outlook guided by foundries and the impact of Brexit result could
cause high wafer inventory levels later in 2016
Foundry wafer demand in 2016 is driven by the feature advancement of Android smartphones
10nm and 7nm are considered as the same technology
More foundry activities in China are announced in recent months
Fab utilization rate of foundries in 2016 will be 93% in advanced nodes and 81% overall
Capital investment by foundries will increase from $19.2 billion in 2016 to $20.4 billion in 2017
2Q16 Foundry Forecast Highlights
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2Q16 Foundry Revenue Forecast
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10
20
30
40
50
60
70
80
2014 2015 2016 2017 2018 2019 2020
1Q16
2Q16
Billions of Dollars and Revenue Growth
1Q16 Forecast
$48.9
4.4%
$50.8
4.0%
$53.7
5.7%
$57.5
7.1%
$60.6
5.4%
$64.9
7.0%
$46.8
16.0%
2015 - 2020 CAGR Foundry = 5.8%
The impact of Brexit is not factored in the
current foundry forecast
Breaking the three years of double digit
growth streak, foundries revenue increase
just by 4 - 6% in recently years
Only minor adjustment is made on foundry
revenue from the last forecast
Foundry percent growth in US dollars
could be affected as currency exchange
rates continue to come into play
Foundries gear up the value-added
services on fan-out and wafer level
packaging business
$51.1
4.5%
$54.5
6.7%
$58.2
6.7% $61.3
5.4%
$65.0
6.1%
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2Q16 SATS Forecast Highlights
Packaging demand improves in Q3 and into Q4. Utilization rates increasing
Test Services growth now faster than packaging, with record revenues in first half 2016 for KYEC
Advanced packaging capital costs forcing stratification of SATS market:
Advanced Packaging
Mature/Sunset players..
SiP and WLP ramp up expanding as new phones adopt FOWLP and POP (iPhone7). IoT and
wearable markets considering the technology for faster time-to-market and lower product costs.
2016 China investment in SATS companies will increase further as China targets back-end
packaging/test. Industry consolidation among the top 25 leaders continues.
Currency fluctuations/devaluations versus a strong US dollar in 2016 will affect SATS market
growth negatively, resulting in negative growth in dollars.
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2Q16 SATS Revenue Forecast
0
10
20
30
40
2014 2015 2016 2017 2018 2019 2020
1Q16 2Q16
Billions of Dollars and Revenue Growth
$26.3
6.4%
1Q16 Forecast
$27.1
8.2% $25.5
-5.9% $24.7
--3.0%
$29.6
4.8% $28.2
7.3%
$31.1
4.9%
2015 - 2020 CAGR SATS = 4.0%
SATS revenue drops in 2016 as
product drivers - smartphones and
tablets - demand decreases further.
SATS percent growth in US dollars is
reduced - currency exchange rates
fluctuate vs. strong US dollar
SATS competition with foundries for
value-added services on bumping,
fan-out and wafer level packaging
businesses.
$25.5
-5.9% $24.8
-2.8%
$26.5
7.0% $28.4
6.9%
$29.85.1%
$31.5.5.6%
20 © 2016 Gartner, Inc. and/or its affiliates. All rights reserved.
SATS Industry Maturing
this
is
• SATS growth is single digits
• No new “Killer App” growth driver.
• Typical price decline of 2-5%/yr. for past 20+ years
• Foundry now competing with SATS
• China-based packaging nearing half of all worldwide packaging value
0
10
20
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60
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
199
7
199
8
199
9
200
0
200
1
200
2
200
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201
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201
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201
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201
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201
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201
7
201
8
201
9
202
0
Percent Outsourcing Millions of Dollars
Revenue Ratio
Revenue CAGR
1997-2003 = 12.6%
Revenue CAGR
2010-2020= 2.8%
Revenue CAGR
2003-2010= 10.6%
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Top 20 SATS/OSAT Company Sales, 2015 (Millions USD)
2015
Rank
2014
Rank Company Region
2014
Revenue
2015
Revenue
2014
Market
Share
2015
Market
Share
Change
2014-2015
1 1 ASE Taiwan 5,170 4,769 19.1% 18.7% -7.7%
2 2 Amkor Technology U.S. 3,129 2,885 11.5% 11.3% -7.8%
3 3 SPIL Taiwan 2,741 2,612 10.1% 10.2% -4.7%
4 6 JCET China 982 1,678 3.6% 6.6% 70.9%
5 5 Powertech Technology Taiwan 1,321 1,339 4.9% 5.2% 1.4%
6 8 UTAC Singapore 734 878 2.7% 3.4% 19.6%
7 4 STATS ChipPAC Singapore 1,586 842 5.8% 3.3% -46.9%
8 7 J-Devices Japan 864 816 3.2% 3.2% -5.6%
9 12 Tianshui Huatian Microelectronics China 519 617 1.9% 2.4% 18.9%
10 9 ChipMOS Technologies Taiwan 696 606 2.6% 2.4% -13.0%
11 10 Chipbond Technology Taiwan 575 525 2.1% 2.1% -8.7%
12 13 King Yuan Electronics Taiwan 477 478 1.8% 1.9% 0.2%
13 11 STS Semiconductor S. Korea 522 456 1.9% 1.8% -12.6%
14 14 Nantong Fujitsu Microelectronics China 343 370 1.3% 1.4% 7.7%
15 15 Carsem Semiconductor Malaysia 336 360 1.2% 1.4% 7.1%
16 17 Unisem Malaysia 319 323 1.2% 1.3% 1.5%
17 18 OSE Taiwan 317 315 1.2% 1.2% -0.5%
18 20 Formosa Advanced Technologies Taiwan 304 276 1.1% 1.1% -9.2%
19 19 AOI Electronics Japan 306 264 1.1% 1.0% -14.0%
20 16 Walton Advanced Engineering Taiwan 331 251 1.2% 1.0% -24.1%
Top 20 Total 21,572 20,659 79.5% 80.9% -4.2%
Other Companies 5,558 4,871 20.5% 19.1% -12.4%
Total Market 27,130 25,530 100.0% 100.0% -5.9%
Notes: Numbers may not add to totals shown because of rounding.
JCET includes STATS ChipPAC starting in August 2015, when the company was acquired.
STATS ChipPAC revenue is for part of the year.
Source: Gartner (April 2016)
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The China Effect
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National IC Fund invests in 31% in JCET (2014)
JCET acquires STATSChipPAC (2015)
JCET/National IC Fund invests in SJ SEMI (2015)
Tsinghua Unigroup invests in 25% of ChipMOS (2015)
Tsinghua Unigroup Invests in 25% of Powertech (PTI) (2014)
Tsinghua Unigroup offers on SPIL (2015)
Hua Capital Fund in China WLCSP via Omnivision acquisition (2016)
China WLCSP acquired Gerad Suzhou (2014)
Tianshui Huatian buys Flip Chip Technology (US) (2014)
Nantong Fujitsu forms JV, acquiring AMD plants in Penang and Suzhou (2015)
International Brand Marketing acquires Kingpak Technology (2015)
China SATS Investment: 2014-2016
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Percent Worldwide Semiconductor Packaging, Assembly and Test Factory Space by Country/Region
Source: Gartner (November 2015)
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33% of the entire worldwide IDM and SATS Packaging/Test
manufacturing floor space (sq ft) is located in China (Taiwan is 2nd
with 23%)
25% of the entire worldwide IDM and SATS Packaging/Test
employees are in China (Taiwan 2nd with 19%)
22% of the entire worldwide IDM and SATS Packaging/Test factory
locations are in China (122 factories)
43% of the entire worldwide IDM and SATS Packaging/Test
production value is done in China-based factories
Is China Already a Done Deal?
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GDP Semi Industry Percentage of
GDP
USA $17.4 Trillion $172 Billion < 1%
China $10.4 Trillion $77 Billion < 1%
Taiwan $530 Billion $72 Billion >13%
Korea $1.4 Trillion $52 Billion <4%
Taiwan and Korea: Watch Out The Big Red Machine is Coming Fast
Semiconductor Industry as a Percentage of Country GDP
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Until inflation increases and interest rates rise, slow growth is here to stay
Expect inventory corrections in 3Q16 with the traditional holiday season build;
but be cautious of double booking.
Collaborate with, and invest in, research and manufacturing in the China market
But do not overly commit to China; protect your IP and core value; move up
your capability by continuous innovation in technology and ecosystem
Urge your government to support semiconductor development. It will be difficult
to stay competitive in the future unless the country is investing in the business
Summary – The “New Normal”