The Internet has altered the ways in which individuals and businesses worldwide function, communicate, and connect. The hardware that enables this, and the need for more bandwidth to support it, are driving technological advances in many ways. Much progress has been made in front-end manufacturing, and much of the current focus on increasing Internet speeds is on the “back end,” or the packaging end of the chip-making process, known as “More than Moore,” after Moore’s Law.
A number of packaging solutions are designed to enhance chip performance, while at the same time maintaining a space-constrained footprint. These package solutions and options include:
• Stacked packages
• Through-silicon vias (TSVs), including 3-D and 2.5-D
• System in package (SiP)
• Fan-in QFN packages
• WLPs, including fan-out WLPs
• Flip chip interconnection
Stacked packages stack the die vertically for close coupling of the die while consuming very little space on the PCB. This packaging solution can be applied to a number of different IC packages, with the FBGA being prominent. Stacked packages have a 13.7 percent compound annual growth rate (CAGR) from 2011 through 2016.
Through-silicon vias (TSVs) are a newer form of interconnection, connecting the die in a stack either through the bulk silicon (3-D interconnection) or through a substrate or interposer within the stack (2.5-D). TSVs that connect ICs together using these methods have enormous growth potential, and have begun to be produced in volume.
System in package (SiP) is a functional block, pulling devices needed for certain functions into a unit for close coupling for superior performance and space saving. Cell phones are the primary candidates for this technology. SiPs have a unit growth rate of 13 percent CAGR through 2012.
Fan-in QFNs extend the number of rows of leads from the usual one with a traditional QFN to two or three rows of leads. The leadframe is stamped or etched as in any other leadframe solution, but the leads are of various lengths, either two or three different lengths. When bent downward for connection to the PCB by trim and form equipment, the result is a multirow, array-patterned package solution with a hole in the center, or fan-in QFN. This allows the number of package leads to extend into the hundreds, up from generally fewer than 50. The resulting package is a high-density, leadframe array package. The fan-in QFN and fan-in QFP market will experience unit growth of 38.6 percent CAGR for the years 2011 through 2016.
Reconfigured or fan-out wafer-level packages were introduced in 2006. After devices are manufactured on a wafer, the devices are sawn and transferred on a carrier to another larger wafer that has gaps between die, which are filled with overmold material that also coats the back side of the devices for protection. This allows for a larger surface on which to extend a redistribution layer, thus allowing for far more I/Os than would be possible on the original smaller surface. Solder balls or bumps can be added to this surface for interconnection to a printed circuit board. Fan-in WLPs will experience an 11.6 percent CAGR through 2016.
Flip chip is an interconnection style that “flips” the die upside down (or active side down) so that the circuitry faces the substrate. This requires putting bumps on the pads to make the electrical connectivity points protrude from the face of the chip. The bumps then carry the electrical signal in lieu of wire bonds. Because the entire face of the die is available for electrical connections, a higher number of I/O (input/output) signals can fit in a smaller footprint. Superior electrical performance can also be achieved due to the shorter electrical length and fewer parasitics. The use of flip chip becomes mandatory on any die with an I/O count so high that the pads cannot fit around the die perimeter. Flip chip is also used for some high-frequency RF devices. This technology, used in IC packages, will have unit growth of 12.6 percent CAGR through 2016.
Sandra L. Winkler is a Senior Industry Analyst with New Venture Research Corp. and has been writing and researching the semiconductor packaging industry for more than 20 years. More information on these topics and others can be found on New Venture Research’s website at: www.newventureresearch.com/
The public has continued to invest in wireless mobility products, prompting OEM suppliers to produce a wide range of cutting-edge, yet overlapping devices. This growth in demand for wireless mobility products is expected to evolve special product configurations ranging from high-end ultrabooks all the way down to simple e-reader devices. End-user markets and vertical applications will differentiate product models along the lines of medical, automotive, aerospace and industrial applications.
During 2012, the total worldwide total cost of goods sold (COGS) market for all wireless products (notebooks/ultrabooks, tablets, smartphones, traditional cell phones, and e-readers) is estimated to reach $348 billion in assembly value, or almost one-third the assembly value of all electronics products manufactured worldwide. Due to the ever increasing demand for these products and the staggering overall total unit shipments (over 2 billion), manufacturers have a powerful incentive to develop new technological innovations and product iterations on a regular basis. This is starting to flood the market with so much product choice that it is blurring the distinctions between device segments so that tablets are now competitive with notebooks and e-readers are competitive with smartphones. All products segments are starting to become competitive with each other.
This trend will drive down the average assembly value of each product by an estimated 1.2 percent CAGR over the next five years with smartphones suffering the highest decline and notebooks experiencing positive growth due to the introduction of ultrabooks. It is projected that by 2017, the total assembly value of all wireless mobility products worldwide will achieve $559 billion, or a 9.9 percent CAGR.
End user applications for notebooks are expected to follow the trend toward verticalization, where business and professional needs will be customized accordingly. Vertical markets include entertainment, healthcare, scientific research, legal services and government. Tablets in particular will follow this trend as buyers migrate away from games and music and embrace entertainment (video), shopping, and traditional email/communications and web browsing. This pattern will be similar in smartphones since these products will become pocket-size versions of tablets over the next several years. E-readers hold the greatest potential for evolution of end-user applications when the education (textbook) market is realized, but are expected to open up over the forecast period for other reasons, i.e. when published content (magazines, catalogs, etc.) becomes digitally available. The e-reader is thus likely to evolve into a low-cost smartphone with limited capabilities.
The wireless mobility product assembly market will be led by many interesting OEM suppliers. First among them is Apple, which is probably experiencing its peak in terms of brand recognition and revenue in 2012. Samsung will represent the biggest threat as the company flexes its design and distribution muscles to make an equal or superior smartphone, tablet and possibly e-reader product. Another important player will be Google, which will be launching its own hardware products (formerly Motorola) to capitalize on the search and advertising business. A less than obvious powerhouse will be Amazon, which is attempting to seed the market with low-cost e-readers that can eventually be upgraded to be computational and interactive. Suppliers that will face the most brutal competition include Acer, Dell, Huawei, Lenovo, Nokia, RIM and ZTE. There may be some life for innovators like Barnes&Noble, HTC, LG, and Sony but the field is already too crowded. While some suppliers may exit the market, one thing is for sure—demand for wireless mobility markets will be very strong over the next several years.
The Wireless Mobility Assembly Markets – 2012 Edition report provides critical information on the electronics COGS manufacturing assembly. For more information, see http://www.newventureresearch.com/wp-content/uploads/2012/11/mm12bro-rs.pdf
The Worldwide Semiconductor and Manufacturing Assembly Markets – 2012 Edition is a special report consisting of an Excel database and Word document discussion. The report examines the total assembly costs of 47 different electronics products starting with their semiconductor value, non-IC related costs, assembly of printed circuit board (PCB) and final box assembly. As such, it provides a unique understanding of the total cost of goods sold (COGS) for leading electronics products.
New Venture Research (NVR) has followed the electronics assembly industry for over 20 years with numerous research reports that focus on semiconductor packaging, printed circuit board assembly, as well as the EMS subcontracting markets. This latest report, The Worldwide Semiconductor and Manufacturing Assembly Markets – 2012 Edition, is designed to help our customers understand the true cost of electronics manufacturing within seven critical electronics market segments including:
Automotive
Communications
Computers /Peripherals
Consumer Electronics
Industrial
Medical
Aerospace/Military/Other Transportation
Within these seven market segments are 47 unique product categories that are quantified for their electronics assembly value. The following production data is provided for each individual product category in terms of units shipped, average assembly value (AAV), and assembly revenue:
Semiconductor ICs
Passives/Discretes
Non-PCB Assembly
PCB Assembly
Box Assembly
Total Assembly
A separate Word document provides a discussion of each market segment, leading and emerging products, and dominant trends. High growth products are examined for their market leadership and impact on the semiconductor, PCB and Box assembly markets.
By Sandra Winkler, Senior Industry Analyst, New Venture Research
If you are a hungry smart phone owner who wants to know the whereabouts of local restaurants, there is an app for that. Want to know how foods with bar codes are rated nutritionally? There is an app for that as well. More and more people are obtaining smart phones, giving them access to a wealth of information literally at their fingertips through the Internet.
In 2011, 242 million smart phones were sold. With an outstanding compound annual growth rate (CAGR) of 15.2 percent through 2015, 416 million will be sold in that year.
The more sophisticated the phone, car, or what-have-you, the more electronics are stored within. This makes for good business for the IC industry, which has a unit CAGR of 7.3 percent through 2016 (see Figure 1).
Figure 1 IC Unit Forecast, 2010–2016
IC revenue is growing at an even faster CAGR of 7.8 percent through 2016, with packaging revenue being about 15 percent of that total, as seen in Figure 2.
Figure 2 IC Revenue Forecast, 2010–2016
The packages with the highest unit growth rate to house all these ICs include the WLP at 13.9 percent CAGR through 2016, QFN at 11.8 percent, DFN at 10.7 percent, and BGA at 10.5 percent. SOs, however, still garnish the largest share of the unit sales, as seen in Figure 3.
Figure 3 IC Unit Forecast by Package Family, 2011 vs. 2016
Within the huge variety of ICs, those being created in the greatest numbers include voltage regulators, standard logic, DRAM, and flash. From a revenue standpoint, the highest performing devices include special-purpose logic (SPL) for computers (including graphics, chip sets, etc.), DRAM, SPL for communications, standard cell and PLD, and flash. The most popular packages and I/O counts within each of these categories are:
Device Type
Most Popular Package andI/O CountRange
SPL—computer (graphics, chip sets, hard disk drives, etc.)
BGA 300 I/Os and up
SPL—consumer
FBGA 104–304 I/Os
DRAM
FBGA 34–100 I/Os
Flash
FBGA 34–100 I/Os
Standard logic
SO 4–32 I/Os
Standard cell and PLD
BGA 104 I/Os and up
Voltage regulators and references
SOT, SO 4–18 I/Os, DFN 4–18 I/Os, WLP 4–18 I/Os, QFN 4–32 I/Os
Increasing Capability
The demand for increased high-speed bandwidth is generated by the use of the Internet. YouTube and other graphic media consume an enormous amount of bandwidth. I once heard a statistic to the effect that if all the information provided in all of the yellow pages ever published in theUnited Stateswere uploaded onto the Internet, it would be less data than is uploaded onto YouTube in a single day, or something of that order. People are expressing themselves on YouTube, Facebook, Twitter, and the like, and sharing camera phone photos by uploading this information onto the Internet and e-mailing it to friends, all at an amazing rate. People want to be able to take streaming videos at a vacation spot, as the scenery unfolds before them, and immediately send them to their friends and loved ones so they can share that sense of ahh in real time. The demand for social media is ever increasing, and technology must be furthered to meet this demand. One method of meeting these demands is with the use of TSVs.
Devices that are high on the overall revenue list—DRAM, SPL for communications, standard cell and PLD, and flash, plus MPU—also incorporate through-silicon vias (TSVs) within their packages for 3-D interconnection.
3-D TSVs are incorporated into IC packages as a method to interconnect two or more stacked die, with vias going through the bulk silicon of the lower die to connect to the package substrate. A variation on this idea is the notion of 2.5-D, where devices are sitting side by side on a common interposer. This interposer can be used to fan out or reroute the electrical traces of a device while routing the traces to the package substrate below, connected with microbumps. Silicon interposers accommodate the CTE mismatch between the silicon die and package substrate, acting as a stress reducer, thus improving reliability.
By moving to 3-D interconnection, the device can achieve 100 times the connectivity or bandwidth, with less power consumption. With lines and traces on the silicon die moving to 45-, 32-, and 22-nm lithographies, utilizing TSVs is a way for the back-end interconnection to keep pace with the front-end manufacturing. Reduced parasitics and smaller form factors are other benefits of 3-D interconnection.
Potential markets for TSVs as described above will grow from 39 billion units in 2011 to 54 billion in 2015, with a 9.1 percent CAGR during that time period. The revenue for these markets is substantially higher, at $154 billion in 2011, growing at a CAGR of 8.1 percent to $214 billion in 2015.
TSVs are found in FBGAs, BGAs, and WLPs. These packages, along with QFN and DFN packaging solutions, have the highest unit growth rate of all IC package types. Advances within these package families, such as fan-in WLP and fan-out QFN, are extending the reach of these packages, and are allowing for new products to be developed and ushered into the marketplace at prices that consumers are willing to pay.
More information on IC packages, their advancements, and the markets they serve can be found in The Worldwide IC Packaging Market and Advanced IC Packaging Technologies, Materials, and Markets, available at New Venture Research (www.newventureresearch.com/).
The worldwide contract manufacturing (CM) market took another large jump upward in 2011, increasing nearly 12 percent in revenue, following an extraordinary year in 2010 in which the industry expanded by 37 percent. Whereas most industry observers expected a modest growth rate in 2011, no one anticipated this strong a market, which was driven by the continued demand for smart phones and new mobility devices (iPhones, iPads, and e‑readers). The largest beneficiary of this growth was Foxconn, the dominant subcontractor of these devices for a variety of key OEM companies. So long as Apple continues its spectacular growth in revenue, as most analysts predict, Foxconn will continue to be lifted by this company’s rising tide.
The really good news is that virtually all industry participants made money in 2011, with very few exceptions. In fact, the contract manufacturing industry made more money in 2011 than at any time in history, although this may not continue if the past is any example. Foxconn once again set the record ($2.7 billion—not a great result given its total revenue of $111 billion), followed by HTC ($2.1 billion), and to a lesser extent by a number of Asian ODMs. Only a minority of EMS firms did not grow or make money in 2011.
Table 1 below presents the summary forecast for the worldwide revenue growth of the CM market from 2011 to 2016. Given the minor differences in business models between EMS firms and ODMs, NVR foresees little separation between the two types of suppliers with regard to customer services and revenue growth. ODMs should underperform EMS companies over the forecast period as a result of their riskier business model that relies on giving preference to branded and low-end computer, communications, and consumer products. To their credit, ODMs are usually better able to streamline their production methods and create economies of scale through the concentration of components and vertical integration, but ultimately all profits get driven to the margin over time. Because EMS firms manufacture a wider range of products, and can leverage their operations in different ways, it is believed that they will experience a slightly higher growth rate over the forecast period.
Revenue ($M)
2011
2016
CAGR
EMS
252,516
401,487
9.7%
ODM
160,237
252,779
9.5%
Total CM
412,754
654,266
9.7%
The shift in production to low-cost regions has been fully accomplished over the last several years. Today, we are seeing OEM customers requiring their CM partners to manufacture products near the regions where they are to be sold. For certain high-volume products like mobile phones and PCs, OEMs need to leverage the lowest cost in manufacturing. However, for other products the labor cost differentials are becoming less significant when weighed against the total cost of production (including transportation and logistical challenges). Offshore product migration will still take place, according to NVR’s forecasts, but it will be at a more moderate pace.
Both EMS firms and ODMs will experience the strongest growth from production in the communications, computer, and consumer market segments. Specifically, EMS companies will find very strong growth in E-readers, tablets, enterprise storage systems, and personal navigation systems, while ODMs are projected to experience very strong growth in tablets, E-readers, cellular handsets, notebook PCs, and digital cameras. In general, EMS firms will tend to excel in technology-intensive product areas and complex board assemblies. ODMs excel in manufacturing commodity/high-volume products such as motherboards, monitors, handhelds, and consumer electronics.
Every year, NVR conducts and financial performance comparison and ranks the top ten overall CM companies by a variety of metrics. In 2011, HTC emerged as the CM supplier with the highest total score, followed somewhat distantly by Quanta Computer and Wistron, according to NVR’s financial scores. Note that all of these high-performing companies were Asian ODMs. Jabil Circuit scored a respectable fourth level in rankings.
Foxconn continued its extraordinary dominance as the leading EMS firm in the industry, outdistancing its closest contender by more than three times in terms of revenue. Flextronics remained steadfastly in the number-two position, followed by two ODMs (Wistron and Quanta Computer), and Jabil Circuit in fifth position.
New Venture Research has just published it’s widely acclaimed market research study on the contract electronics manufacturing services market in a report titled, “The Worldwide Electronic Manufacturing Services Market, 2012 Edition.” More details can be seen at: http://www.newventureresearch.com/wp-content/uploads/2012/06/ems2012-RS.pdf
Nothing could be more relevant to the Merchant Embedded Computing (MEC) business today than the saying, “With change comes opportunity.” The recent recession has impacted application segments that drive MEC purchases in both positive and negative ways. Many MEC applications are fragmenting into areas with highly focused product requirements, consisting of many options—the type of business model that competing EMS subcontractors who “design once; build many” are simply not good at. Another trend is the escalating Asian ODM manufacturing model, which threatens to capture an increasing proportion of this market. Moreover, there is the changing political climate to bring manufacturing back in-house (“insourcing”). Finally, next-generation high-integration silicon at 28 nm is bringing enormous capabilities to board-level systems that only a few years ago would have been possible only with a roomful of computers. Improvements include lower energy consumption and very high-speed serial bus interconnects, all within small form factors (SFF).
While “green” may be the new color with respect to energy consumption features, “red” was the color on many MEC suppliers’ financial sheets during 2009 and 2010. 2011 showed significant improvements in many application areas but the first half of 2012 is burdened by the situation in Europe and to a lesser degree a slowdown in China and both factors are clearly causing an industry and economic slowdown. Whereas the overall MEC market is slowly recovering from the trauma of the economic meltdown, the performance of various market segments, bus architectures, and companies is recovering at different rates and in different forms. Most economist don’t believe a “double-dip” recession in the United States will occur in 2012, but most agree on a sluggish economy that effects nearly all MEC industry sectors. For example, the USA auto industry clearly has recovered in the USA but is being slammed by the European sector. The table below shows MEC revenue forecast from 2011-2016.
2011
2012
2013
2014
2015
2016
MEC Revenues ($M)
5,193
5,569
6,025
6,547
7,108
7,716
Annual Growth
7%
7%
8%
9%
9%
9%
MEC markets tend to have very specific computer requirements that differentiate them from other computing segments such as PCs and the general embedded electronics markets. These requirements may include operating in harsh environmental conditions of temperature, humidity, or vibration, greater reliability and security, and specific real-time computing functionality. Hence, the market leaders, competitive forces, growth rates and sizes of the different application segments vary widely. In all cases, the merchant market for MEC products represents only a small portion of the total value of the electronics consumed by these markets which change substantially over time.
In the communications sector, the wireless segment is driven by smart phone traffic expansion and the network providers upgrading system to 4G. This sector performed much better than the wireline telecom sector. 3G and 4G services are providing profits are for carriers going forward; however, the wireline and optical networks are gearing up for upgrades to support the ever-increasing traffic. The ROI for text messaging has proved to be phenomenal because most people now spend more time looking at their cell phones than talking into them, thereby increasing the need for more data services. People are not only looking at text messages but websites (Facebook) and watching video as well. These factors are putting enormous demand on the network and carriers are moving to 4G as fast as possible.
The recent announcement of the new Intel “Romley” architecture, and some recovery in the economy have inspired increases in capital expense budgets. The Romley microprocessor was delayed by about 6-9 months are in May, HP, IBM and Dell all announced new servers and it is kicking off the server upgrade cycle in data centers.
Corporations are gearing up to upgrade their circa-2007 systems with the new energy-efficient systems that can replace 10 servers with one new multicore server and allow an energy payback in less than 18 months! Virtualization trends are now moving massive amounts of data in and out of systems, requiring interconnect speeds to grow from 1 Gbps today to 10 and 40 Gbps. This is good news for MEC communication suppliers.
The financial crisis significantly damaged the industrial automation market and also took its toll on industries such as capital equipment, aerospace, and automotive, which use MEC systems to automate production testing and process control. Just as these segments are recovering in the USA, they got slammed with the European crisis.
The medical segment was also hit hard by the financial crisis, which made MEC-based purchases of large equipment much more difficult, especially with the buzz and confusion surrounding Obama’s Healthcare plan which delayed capital purchase. This coupled with the changing political climate surrounding health care in the industrialized countries also stalled and slowed demand.
Until recently, the ever healthy Mil/Aero segment has been impacted by the financial virus and is facing declines in in the USA defense department funding (larger than all the rest of the world’s defense spending). That is likely to cause a restructuring, not seen since the end of the cold war. Counter to this the cut backs in personnel, is creating opportunities for computerized battle ROVs and electronic-enabled soldiers.
Each special MEC bus architecture has a different rate of adoption depending on the needs of individual application segments. Key trend catchphrases for architectures are “power is up and down”; “green is the new color”; and “small is big.” Older bus structures are giving way to newer ones that offer smaller form factors, more serial buses and interconnects, and lower operating power. New 28- and 32-nm silicon architecture for microprocessors, graphics, DSPs, and high-integration I/O chips packs unprecedented processing power while greatly reducing power consumption. This is especially important today as many MEC systems operate 24×7 and the operating costs relative to energy consumption are playing a more important role in the total cost of ownership beyond initial price/cost. Moreover, high-integration silicon and serial buses enable smaller form factors than in the past and are making many older, parallel bus structures, such as PCI, look like “clunkers.” Though technology transitions often move slowly, this is clearly the new direction and is likely to accelerate.
Bus structures continue to proliferate around the major and long-established buses but the number of variances is past 100! Although this may seem like a bad thing and difficult to track, it is all part of the “customization” strategy that MEC suppliers are using to fill customer needs and fend off competing generic manufacturers, who build in high volumes once a specific board design has been optimized. There are not any major shifts in bus architectures on the near term horizon. Older stagnant buses are dying off (PCI). Busses that constantly renew their features and stay current with the latest technology maintain their positions (VMEbus). ATCA in communication and AMC could show some significant growth over the forecast period.
New Venture Research has just published an in-depth study of the Merchant Embedded Computing Market – 2012 Edition. Further details can be seen at: http://www.newventureresearch.com/wp-content/uploads/2012/05/mec12bro-RS.pdf
The worldwide industrial electronics assembly market is one of the most interesting and profitable segments for EMS companies to engage in. While growth of the total available industrial market is modest (between 5-6% annually), the growth of the EMS services sector is more than double depending on the product. Some of the most promising opportunities can be found in the Test & Measurement and Process Control sectors where advanced electronics are making a huge impact in efficiency and cost reduction. Both of these segments rely on semiconductor technology to improve performance, accuracy and payback for OEM product development. As a result, EMS companies are helping OEM suppliers to reduce cost, efficiency and time to market. As with most product markets, electronics innovation is key to overall market growth.
New Venture Research (NVR) has followed the electronics manufacturing industry for over 20 years and is pleased to now offer this special study—The Worldwide Industrial Electronics Assembly Market, 2012 Edition—the most comprehensive and in-depth market research report available on this industry. In 2011, EMS suppliers achieved only a total available market (TAM) penetration rate of 22.6%, however, by 2016 the penetration rate is projected to reach 26.9% – an increase of more than $10 billion in revenue worldwide. This represents a compounded annual growth rate of 8.2% – nearly double that of the OEM annual market growth rate.
The report begins with an examination of the various kinds of electronic assembly products in the industrial sector. Certain assemblies are very electronics-intensive (that is, they are suitable to semiconductor innovation). Examples include programmable electronics controllers (PLCs) which dominate the process control industrial sector, and electrical inverters found in clean energy technology. Other industrial products, such as HVAC, laundry and LEDs are mixed in terms of outsourcing opportunity due to the high percentage of mechanical assembly labor involved.
A total of 29 industrial products across four product segments are examined for electronics assembly content, in terms of cost of goods sold (COGS) and outsourcing opportunity. The result is a mixed summary of high growth versus high volume manufacturing opportunities that are likely candidates for outsourcing (other products are better left to the OEM to address and manufacture). As a result, electronics-intensive products such as test equipment will experience the highest revenue growth over the next five years, whereas there will be modest growth for most electro-mechanical industrial product assemblies.
All 29 industrial electronics product opportunity segments are examined for electronics/semiconductor content and manufacturing challenges, as well as potential partnerships with the leading OEM suppliers. In general, most Western OEM companies are open to subcontracting, whereas many Eastern OEMs prefer to maintain in-house manufacturing service capabilities–mostly for reasons of revenue capture as opposed to efficiency. The result will be a contrast in the dynamics between the different geographic regions with regard to manufacturing fulfillment and distribution. These conflicting forces will disrupt the industrial economic picture over the next five years, resulting in displacements in leadership and innovation.
All of these products and markets are analyzed from 2011–2016 in terms of OEM revenue and EMS subcontracting potential, in addition to production by region. An Excel spreadsheet allows for easy understanding and manipulation of the production data and ranking of OEM leadership.
For more information, please contact New Venture Research at 530-265-2004 or see the website at www.newventureresearch.com/
Perhaps the most frustrating thing of enduring the electronic manufacturing industry year by year, is the inevitable nature of its cyclic nature. For some reason, equipment manufacturers and OEM product manufacturers cannot escape the desperate cycles that this industry suffers. While there are natural cycles of consumption and excess, it usually is a result of consumer spending variations that thread down through the supply chain and create havoc with the supplier base and end product life-cycles.
Every supplier wishes it would stabilize, yet it does not. The worst hit is the equipment suppliers who are whipped by the combination of end user demand and OEM manufacturer whims concerning predicted fulfillment. The chain reaction of supply series makes this boom/bust scenario chaotic and excessive in terms of forecasting revenue. It is often an accumulative effect in which the tail-end of the chain gets whacked the most – usually the equipment/manufacturing guys, while the distributors and EMS suppliers get left with excess or deficient inventory.
This is all specific to product industries – things like PCs, notebooks, LCD monitors/TVs, set-top boxes and video console games, just to mention a few. To be sure, the OEMs are their own worst enemies – that is, they hedge against upside demand and over-predict against down-side supply – to their, and their supplier’s demise. Yet, who can claim to be accurate and wise after the fact? As a forecaster, I can truly claim that when we are spot-on, it is sheer luck, and when we are wildly off, we simply hide undercover until the storm passes.
One hopes that time will provide wisdom and sanity to such swings of prediction. Yet, there are always new and emerging pundits willing to state an option as to the market trends. Who to believe – the experienced or the lucky prognosticator?
We try and integrate the knowledge gained from watching such cycles time and again with our current forecasts. Conservatism seems to pay dividends, yet we have often been wrong, regardless. Sometimes we have been astoundingly accurate – shockingly – yet we know that we must attribute it to luck.
A few examples can make this point. In 2000, when the market was booming, we accurately predicted the growth of the electronic manufacturing services (EMS) market to a very concise degree, however, this was because it was exploding and there seemed to be no end in sight. When the downturn arrived, it was very embarrassing to revise our forecasts, chagrined with the entire industry downturn. Similarly, we expected a solid 2009 year without the unpredicted contraction. We lick our wounds and beg for forgiveness and forgetfulness.
Yet, who could know? Such cyclic cycles exist that seem to beyond our awareness. The Center for Cyclic Studies is well aware of this, if you believe in such things as planetary or cosmic/organic cycle studies. It is a fascinating organization, that examines not just economic cycles, but other systemic cycles in nature and life that seem to follow patterns that go outside our predictive natures. I can’t say that I agree with all these predictions, but I am interested in them in so far as they help us to understand our businesses.
The Foundation for the Study of Cycles makes this bold statement, “Cycles are meaningful, and all science that has been developed in the absence of cycle knowledge is inadequate and partial. …any theory of economics, sociology, history, medicine, or climatology that ignores non-chance rhythms is as manifestly incomplete as medicine was before the discovery of germs.” – Edward R. Dewey[1], Harvard Economist – 1967.
Cyclic prizes have been awarded for solar and lunar cycles in the ‘El Nino’ which correspond the droughts in Northeastern Brazil, Morrocco and the American Southwest, specific markets, economics, and forecast turning points in the international business cycle, and even go so far as to predict the systematic cycles of war, cycles of tree ring widths, weather forecasting, biophysical science, civil violence, insurance, motivation and yes, corporate lifecycles! It can all become a little esoteric when it comes down to biocybernetics and new option markets, but so it goes.
Coming back to earth, cycles do exist and seem to re-occur. In electronics it seems to be one of boom and bust, much to the consternation of the participants. Yet, growth endures and we look forward to new gains every year. In this regard, I can positively predict that the EMS, electronics assembly market and corollary industries will continue to grow, albeit at varying rates. The recession cycles are the most disturbing and unpredictable.
I am not advocating cyclic studies to help us understand the economics of electronic manufacturing. Yet, it is something we must consider in the larger context of things. Macroeconomic cycles are real despite our subtle denial. I wish we were able to harness them better to help us in our work. In the meantime, we will try our best to work with our best knowledge, intellect and intuition to help our clients to predict future product demand. Otherwise, suppliers must rely on their own intelligence, and where does that come from? Is it best guess, economic indicators, prognosticators – cyclic studies? We would be silly to promote such a view as cyclic studies, yet it introduces a fascinating dimension to a world that has not been completely proven.
New Venture Research continues to monitor the emerging electronics industries with reserve and hope. Please feel free to contact us concerning your concern.
[1] In 1931 the Department of Commerce assigned Edward Dewey the task of discovering the cause and underlying dynamics of the Great Depression. As Chief Economic Analyst for the Department, Dewey had unprecedented access to resources and information. Dewey’s work on understanding the Great Depression led him to his lifelong calling in cycles. He combined his enormous research in business cycles with research from leading biologists on cycles in nature and in wildlife. Dewey was astonished to discover that cycles of identical length were found in both disciplines and that similar cycles from different areas reached their peaks and troughs at the same time.
Although Dewey’s work was generally regarded as inconsistent with mainstream economists, his research has held great credibility amongst those searching for a new paradigm to understand the inter-relationship of all of life.
The Most Comprehensive Study Available on the Worldwide EMS Market
New Venture Research is scheduled to release its definitive report on the EMS industry in July, 2011. The following is a summary of the research findings.
The overall market for electronic components (semiconductors, passives, connectors, etc.) recovered strongly in 2010 and remains more stable throughout the forecast period as a result of resumed demand for manufactured electronics products. NVR expects overall market growth to remain reasonably healthy over the next five years, barring another unexpected downturn. Figure 1 presents the worldwide electronics assembly forecast for 2010–2015.
Figure 1 – Worldwide Electronics Assembly Market ($B), 2010-2015
Consumer, communications, and computer products will continue to be the leading segments driving the largest growth of the electronics industry. In 2015, the total industry is expected to exceed $1.4 trillion in annual assembly value (COGS), as consumption and replacement of electronic products continues and new products fuel demand. Outsourcing has become a critical element in keeping the electronics assembly industry expanding and driving costs to the margin each year—a leading attribute in stimulating continuous consumer demand. The trend to move price-sensitive manufacturing to low-cost regions will impact the manufacturing footprint in the future market for all suppliers.
Figure 2 compares the worldwide EMS market by region for 2010 and 2015. The shift in production to low-cost regions is starting to wane. Today, we are seeing OEM customers requiring their EMS partners to manufacture products near the regions where they are to be sold. For certain high-volume products like mobile phones and PCs, OEMs need to leverage the lowest cost in manufacturing. However, for other products the labor cost differentials are becoming less significant when weighed against the total cost of production (including transportation and logistical challenges). Offshore product migration will still take place, according to NVR’s forecasts, but it will be at a more moderate pace.
Figure 2 – EMS Market by Region, 2010 & 2015
Figure 3 compares the worldwide EMS market by market segment for 2010 and 2015. Both CMs and ODMs will experience the strongest growth from production in the consumer, communications, and medical equipment markets. Specifically, CMs will find very strong growth in personal navigation, digital television, and cellular infrastructure, while ODMs are projected to experience very strong growth in enterprise storage systems, personal navigation systems, and set-top boxes. In general, CMs will tend to excel in technology-intensive product areas and complex board assemblies. ODMs excel in manufacturing commodity/high-volume products such as motherboards, monitors, handhelds, and consumer electronics.
Figure 3 – EMS Market by Segment, 2010 & 2015
Table 1 ranks the top ten overall EMS companies by revenue for 2010. Foxconn continued its extraordinary dominance as the leading CM in the industry, outdistancing its closest contender by almost 4 times. Flextronics remained steadfastly in the number-two position, followed by two ODMs (Quanta Computer and Wistron). Jabil Circuit dropped to fifth position followed by five leading ODMs.
Table 1 – Ten Leading EMS Firms by Revenue ($M), 2010
Company
EMS Rev. ($M)
Mkt. Share (%)
Foxconn (Hon Hai)
95,155
25.7%
Flextronics
27,761
7.5%
Quanta Computer
19,635
5.3%
Wistron
19,531
5.3%
Jabil Circuit
14,403
3.9%
Compal Electronics
13,829
3.7%
TPV Technology
10,845
2.9%
Pegatron
9,432
2.5%
Inventec
6,673
1.8%
HTC
6,613
1.8%
Total
223,878
60.4%
Although a simple ranking of EMS companies by revenue is informative, there are many other meaningful financial measures of EMS performance. To summarize these measures, this report uses a total performance rating based on a weighting of these other measures. The EMS companies having the highest total scores were deemed the best performing companies in the EMS industry; conversely, those companies having the lowest total scores were viewed as the worst performing EMS companies for 2010. Table 2 lists the five highest rated companies in the EMS industry in 2010.
In 2010, HTC emerged as the EMS company with the highest total score, followed fairly closely by Wistron according to NVR’s financial performance metrics. Note that all of these high-performing EMS companies were ODM Asian manufacturers.
Table 2 – Five Highest Rated EMS Companies, 2010
Company
Total Rating
HTC
11.6
Wistron
10.9
Hana Microelectronics
7.8
Quanta Computer
7.2
Delta Electronics
6.6
The Worldwide Electronics Manufacturing Services Market, 2011 Edition is the product of thousands of hours of research. The report sells for $2995, with extra single-user licenses at $250 (contact us concerning corporate licensing). This report is only available in PDF format and is delivered by email. With the purchase of the report, an Excel spreadsheet of all tables and a PowerPoint presentation highlighting key findings may also be obtained for an additional $500 each. For more information see www.newventureresearch.com/
New Report on IC Packaging, Released May 2011
The semiconductor industry has been cyclical since its inception, but the general trend for the industry is upward. The downturn of 2009 reversed itself by the second half of the year, catapulting the industry into a year of tremendous growth in 2010.
The recently released report, The Worldwide IC Packaging Market, 2011 Edition, offers an in-depth look at the worldwide integrated circuit (IC) packaging market. Forecasts of units, revenue, and ASP for individual IC device markets are provided from 2010 through 2015. The package solutions for each of these markets are then forecast, broken down into I/O ranges. In a separate chapter, the package types are first combined to deliver an overall worldwide forecast of IC packages, then divided into 12 different package families, plus bare die solutions. The major package families include:
• Dual in-line package (DIP)
• Small outline transistor (SOT)
• Small outline (SO)
• Thin small outline package (TSOP)
• Dual flat pack no lead (DFN)
• Chip carrier (CC)
• Quad flat pack (QFP)
• Quad flat pack no lead (QFN)
• Pin grid array (PGA)
• Ball grid array (BGA)
• Fine-pitched ball grid array (FBGA)
• Wafer-level package (WLP)
Additionally, unit forecasts for die mounted using direct chip attach (DCA) methods were developed. DCA methods include chip on board (COB), flip chip on board (FCOB), chip on glass (COG), flip chip on glass (FCOG), and tape automated bonding (TAB)/tape carrier package (TCP).
Packaging revenue is derived by multiplying worldwide units with pricing information supplied by contract IC package assemblers.
The contract IC packaging market forecast is supplied in a separate chapter. Units and revenue are analyzed by package family. Forecasts are computed by compiling information obtained from each individual contract assembly company. Pricing information is provided by I/O count and price per I/O, and when multiplied by units, yields revenue. Profiles of individual contract IC package assemblers are provided.The report contains a chapter on the state of the industry.
The purpose of the report is to aid companies associated with the IC packaging market in forecasting demand for their own products. The IC packaging market is evolving to keep pace with other changing markets. IC packaging demand is affected by changes in the die contained in the packages, and by performance expectations of the final product purchased at the consumer level. Through extensive primary and secondary research, this report presents an objective look at the world of IC packaging.
For more information, see www.newventureresearch.com, or contact Karen Williams, at kwilliams@newventureresearch.com/
