Weiner International Associates
           Weiner International Associates

January-February 2019

 

The APEX EXPO event in San Diego was a great success. 

 

There were numerable major announcements and product introductions.

 

To me, of greatest significance was not just the announcement of CFX but the actuaL demonstration of its magic on the show floor as well as the growing support it was gaining in our industry.

 

Below is a link to my interview on the Executive Forum on Advancing Automotive Electronics.

 

http://iconnect007.com/index.php/article/115848/gene-weiner-on-the-ipc-apex-expo-2019-automotive-executive-forum/115851/?skin=milaero#115848

 

The rapidly changing scene in China's PCB fabrication industry initiated by the government will rock the "home" industry and create new opportunities elsewhere. Many of the "smaller" participants will vanish.

 

Progress is reported in the China-U.S. trade negotiations as manufacturing continue to slow and the government takes counter mesdures. China seems to be counting on promises of big purchases of semiconductors and other U.S. goods to ease trade tensions and persuade President Trump to extend the tariff truce and later resolve the market-rattling dispute directly with Chinese leader Xi Jinping. source: Digitimes

 

The PRC is still predicting 6+ percent growth in 2019.

 

In Taiwan Chunghwa Precision Test Tech (CHPT) will kick off production in small volume for satellite communication PCBs at the end of 2019. Specializing in high-end IC testing solutions such as probe cards for wafer probing and load boards for final testing, CHPT has expanded its offerings to include high-frequency and high-speed PCBs for niche-market applications.

CHPT is already a major probe card supplier for smartphone application processors, with TSMC and Samsung being among its main clients.

 

 

April 2019

 

Visitors to and exhibitors of the world's largest PCB & Electronic Assembly Show, will note a major change in the event's producers. The International Electronics Circuit Exhibition held in Shenzhen, China, previously produced jointly by the Hong Kong Printed Circuit Association (HKPCA) and the IPC will Instead find that the HKPCA is now partnering with its former rival the China Printed Circuit Association (CPCA)  at  the December 4-6, 2019 event as well as with the latter's annual Springtime event in Shanghai.

 

This raises several questions. What caused the divide between the IPC and the HKPCA? How did the HKPCA resolve its differences with the CPCA? How much government influence was exerted to bring about this partnership? What will the IPC's course in China be in the near term as well as the long term? Is the current link with productronica temporary or just one of several planned future exhibits in China? What effect will this have, if any, on the future of CTEX, the East China PCB/SMT Exhibition held in Suzhou co-organized by the Taiwan Printed Circuit Association (TPCA) held every May in Suzhou?

 

Yet, it gets even more complicated

 

C.M. Lee, chairman of the TPCA was just quoted in a Digitimes report as saying that Taiwan PCB makers have to strengthen their investment in R&D of high-end processes to extend their technological lead over Chinese rivals who are fast catching up.

According to Lee, Taiwan now still maintains the highest share, at 31.3%, of the global PCB supply market, but China has seen its market share reach 23% and is steadily trending upward. He added that Taiwan makers now boast absolute superiority to their China counterparts in high-density interconnect (HDI) boards, IC substrates, substrate-like PCBs involving high-end process technologies, with their China peers including Shennan Circuits and Kinwong Electronic still lagging behind by two to three years.

 

Meanwhile, the IPC has joined  the European Alliance for Apprenticeships!

 

Trade war fallout

 

A  new survey of 600 multinational companies around Asia-Pacific, including 150 companies in China conducted by the law firm Baker McKenzie found that the U.S. China trade war forcing 93% of Chinese companies to transform their  supply chains

to mitigate the effects of trade tariffs. Of these, 18% were considering a complete supply chain and production transformation, with 58% making major changes.

 

In some cases, this might mean the closure of a factory in China, with production transplanted to another country, often in Southeast Asia, with Cambodia, Indonesia, Malaysia and Vietnam proving popular destinations for new production facilities. In other cases, it can involve a reallocation of production, where the manufacture of goods bound for the U.S. moves to a country not affected by tariffs. The Chinese plant can then be redesignated to produce goods bound for countries that do not place tariffs on Chinese-made goods.

 

With the trade war now in its 11th month, experts say that many companies have gone beyond the point of considering whether to shift production, and are now in the process of executing their plans.

 

Of the 600 multinational companies polled in Australia, China, Hong Kong, India, Japan, Malaysia, and Singapore, 150 of the firms were based in China. Region-wide, 82% of respondents are changing their supply chains to counter the trade war. The biggest portion of respondents making changes, by nationality, were Japanese, with 94% making changes to their operations.

 

Some analysts warn that while companies are certainly keen to avoid the impact of the U.S.-China trade, their expectations should be managed as there is no country that can compete with China on manufacturing, when cost, infrastructure, quality and service are all considered.

 

The South China Post stated that President Xi will likely visit Washington, D.C. in June to sign a new trade agreement with President Trump.

 

Chinese smartphone maker Xiaomi said its fourth-quarter net profit more than tripled to $275.59 million, on stronger revenue. The results show Xiaomi is weathering fairly well a slowing Chinese smartphone market, the world’s biggest, by increasing its focus on markets such as India and Europe.

 

To compensate for its slowing home market, the company has aggressively expanded in Europe. After broadly rolling out in the continent in early 2018, the company now ranks as the region’s fourth-largest phone vendor. Sales from outside of China made up 40% of the company’s revenue in the fourth quarter of 2018 as the company continues to focus on global expansion as a priority for 2019. Sales from smartphones made up 65% of Xiaomi’s overall revenue in the fourth quarter.

 

Xiaomi also announced that it’s renewing its commitment to the “Make in India” initiative by inaugurating the seventh manufacturing plant in India. The new plant will be set up in Tamil Nadu in partnership with Flex. The new manufacturing plant has over a 1 million square foot footprint.

 

Xiaomi who is already making chargers, cables and batteries in India plans to do PCBA (Printed Circuit Board Assembly) as well in the country. This will lead to sourcing components worth 65% of the price of the device locally. The company also stresses the fact that across its seven smartphone manufacturing plants in India, it employs over 20,000 people, of which 95% are women.

 

...and from Taiwan

 

Export orders dropped 9% year-on-year to $39 billion last month, the fifth consecutive month of declines, the Ministry of Economic Affairs said. Orders in the first three months declined 8.4% to $108 billion, the biggest quarterly decline since the first quarter of 2009!

 

The ministry attributed the declines to continuing trade friction between the U.S. and China as well as falling global demand. Department of Statistics Director-General Lin Lee-jen said that the ministry is conservative about export orders for next month, with estimations of $35.5 billion to $36.5 billion. “The smartphone market is saturating, with stagnating sales since the fourth quarter of last year, while servers and [cryptocurrency] mining graphics cards also came in weaker compared with a year earlier due to a higher comparison base,” Lin said.

 

Export orders for electronic products fell 11.1% to $10.06 billion due mainly to destocking by semiconductor clients, a decline in demand for cryptocurrency mining cards and a fall in DRAM prices. Orders received by optoelectronics makers fell 7.7% to $1.94 billion on falling flat-panel prices, which have been hurt by increases in capacity by Chinese competitors.

 

In March, production in the electronics component segment fell 14.9% from a year earlier, with integrated circuit firms seeing a 21.3% decline while flat panel makers experiencing a 7.0% drop, the Ministry of Economic Affairs said.

 

Vietnam rising

 

Foreign direct investment into Vietnam rose by 7.5% year-on-year to $5.7 billion in the first four months of 2019. In addition, FDI pledges for new projects, increased capital and stake acquisitions - which indicate the size of future FDI disbursements – surged 81% from a year earlier in the January-April period to $14.6 billion.

 

LG Electronics will stop producing smartphones in South Korea and move manufacturing to Vietnam, joining global rivals in reorganizing production as they battle a slump in global demand. LG was once one of the world’s top three mobile phone makers.  It now has less than 3% of the global market.

 

Automotive electronics

 

Volkswagen AG’s joint venture with China’s Anhui Jianghuai Automobile (JAC) plans to invest $750.8 million in a new electric car factory in eastern Hefei city. Volkswagen has said it plans to produce more than 22 million electric cars in the next 10 years, with over half of them built in China. It plans to launch 14 new energy vehicle (NEV)  models in China this year.

China’s car market, the world’s largest, contracted for the first time last year since the 1990s. However, the new energy vehicle segment is still growing rapidly and NEV sales jumped 61.7% to 1.3 million units in 2018.

 

Printed electronics

 

The global printed electronic market will reach $10.3 billion by 2021 according to Zion Market Research in a new study of the market.

 

Back from the edge

 

Sony’s operating profit rose 22% to $8 billion  for the 12 months ended in March. This makes it the second straight year of record profits for the Japanese diverse electronics company  thanks to the brisk performance of its gaming segment. Sony's  continued shift to digital platforms in the entertainment field, including game downloads and music streaming services, also contributed to the record profits.

 

Solder ball markets are resurging

 

The global solder balls market is forecasted to reach $323.7 million by 2025 according to Transparency Market Research. Demand for solder balls has been increasing in China and India. The market in Asia Pacific is estimated to expand at a high growth rate due to emerging business in the automotive and electronics in China, India, South Korea, and Malaysia. A rise in demand for solder balls in automotive and electrical & electronics applications is driving the solder balls market across the globe. Introduction of new innovative technologies or products is also projected to open up new markets for solder balls.

 

May 2019

 

Foreign investors have accelerated the selling of their China equities

 

Figures show $7.78 billion worth of Chinese equities were sold during May via the stock connect, almost three times the outflow in April!

 

Since the latest round of U.S. tariffs, which caught Beijing by surprise, Chinese state media has gone on the offensive. The People’s Daily, the ruling Communist Party’s flagship newspaper, warned that China was ready to use its dominance of rare earths, crucial minerals used in electronics, to strike back in the trade war.

 

One unintended consequence of the trade war is the increased demand for the newly created position of supply chain data analyst.

 

June 2019

 

Back on track?

 

This past winter we predicted that the U.S.-China trade war would be on track to attaining a resolution by the end of June. It appears that the necessary steps to do that were taken at the G-20 in Japan at month's end by the presidents of the two countries to make it happen - hopefully by year-end.

 

Meanwhile Taiwan's PCB industry appears to contnue to benefit growing in by more than 7% in May compared to last year according to the TPCA, and Japan's continues to decline - more than 10% last quarter. However, equipment purchases have declined with delays in installation  now the norm in both Taiwan and China. The latter has experienced aggressive expansion on recent years.

Now, the  PCB industry is unlikely to invest heavily in new equipment in the short term unless the end market has a significant recovery.

 

Taiwan Printed Circuit Association (TPCA) chairman Maurice Lee stated that many PCB makers have adjusted their 2019 goals and will try top keep sales at 2018's level.

 

 

The Indian PCB (printed circuit board) market in India was worth $2.37 Billion in 2018  and is projected to reach $6.33 billion by 2024 (surpassing the U.S.) with a CAGR of 17.9% in the five year period of 2019-2024.

 

Watch out, Tesla!

 

Xpeng rolled out its 10,000 SUV this month. The G3 is an all-electric sports-utility vehicle with a range of 225+ miles on a singkle charge. Its sticker price starts at 199,800 yuan (less than $29,000).

Xpeng plans to launch its PT all-electric coupe on December. This car is designed to go up to 370+ miles on a single charge.

 

United Technologies agreed to buy Raytheon in an all stock deal, forming an aerospace and defense giant with $74 billion in sales through one of the industry’s biggest deals ever. The new entity will be called Raytheon Technologies Corp., the companies said in a statement Sunday. The combination, which they are billing as a merger of equals, will take place in the first half of 2020 after United Technologies’ planned spinoff of its Otis elevator and Carrier air-conditioner businesses.United Technologies Chief Executive Officer Greg Hayes hold that same role in the combined organization, while Raytheon CEO Thomas Kennedy will become chairman, the companies said.Along with last year’s $23 billion acquisition of aircraft-parts supplier Rockwell Collins, the Raytheon deal remakes United Technologies as an aerospace behemoth with products including jet engines, missiles, cockpit electronics and radars. Source: Bloomberg News

 

The World Semiconductor Trade Statistics (WSTS) has released its new semiconductor market forecast generated in May 2019.
WSTS expects the world semiconductor market to be down in 2019 to US$ 412 billion. This reflects expected decrease in almost all major categories, with an extraordinary decrease from Memory at 30.6 percent followed by Analog with 5.0 percent and Logic with 4.0 percent. In 2019, all geographical regions are expected to decrease.For 2020, all regions are forecasted to grow with the overall market up 5.4 percent, with Memory contributing the highest growth followed by Optoelectronics and Logic.

 

Boeing has been negotiating one of the largest orders ever of wide-body jetliners—with China airlines according to Bloomberg News. The $30 billion deal might just cool the trade war while providing Boeing some good news, given its grounded 737 Max and the two crashes that killed 346 people.

On June 18 IAG, British Airways' parent, announced that it would buy 200 737 MAX jets. This is the first order for the troubled aitline since the crash of two of the 737 Max aircraft.

 

Vietnam was recently ranked No 1 among seven emerging Asian countries as manufacturing destinations by Natixis SA, which looked at demographics, wages and electricity costs, rankings in doing business and logistics, and manufacturing as a share of total foreign direct investment.

 

August 2019

 

Will Chinese companies follow foreign operations and move some EMS and box build operations to Mexico and elsewhere? It will happen with some as Western World customers demand greater supply chain security and lower costs to offset trade war taxes. Some OEMs are reconsidering reinstating "local manufacturing" for supply chain segments.

 

Although some manufacturing has returned to the U.S., others are planning to move parts of their supply chains to other countries. Yet, according to a recent study of 200 American companies by Yahoo Finance more than 85% have stated that they plan to remain in China.

 

Business declines have been real. Flex, a Huawei supplier, has released 10,000 workers from one of its two Juhai plants. Realignments are inevitable. Multek (former U.S. multinational company now owned by China) is reported to be replacing Americans that hold senior management positions with indigenous personnel.

 

September 2019

 

Source: IPC International, Inc.

 

 

That raises the question of sovereignty. Is it corporate or national? Are corporate actions responsible to its stockholders, their home country, their host country, or a complex combination thereof? Is a business or industry ever truly global? 

 

September will see trade meetings intended to be the beginning of rapprochement between the U.S. and China in the trade dispute, but will it succeed? The damage already caused in the electronics industry's supply change is irreversible. What new business models will provide a hedge for future manufacturing?

 

In a recent article on relocating supply chains , a senior research analyst and economist at Banyan Hill Publishing called PCBs a "commodity". Really??? When did printed circuits become mass-produced unspecialized products?

 

Taiwan

 

PCB manufacturer Unitech Printed Circuit Board reported that net profit rose 147% sequentially and 423% from a year earlier to $16.1 million. in the second quarter of 2019. Net profit for the first half of 2019 totaled NT$709 million, rising 387% on year.

Strong rigid-flex PCB orders for Apple's AirPods boosted Unitech's profitability in the first half. The company has also broadened its offering to include HDI boards for consumer electronics and automotive applications. Unitech's sales for the first half of 2019 were $330 million up 16.4%.

 

Taiwan’s server exports to the U.S. surged 400% from a year ago in the second quarter of 2019 thanks to Taiwan-based makers relocating production back to Taiwan from China in response to the US-China trade tensions, according to a report by Taiwan’s Ministry of Economic Affairs (MOEA).

 

The report noted China’s GDP growth in the second quarter of 2019 hit a new quarterly low in 27 years. In the first half of 2019, South Korea saw its overall exports drop 8.5% on year, Japan down 6%, Singapore down 4.7% and Taiwan down 3.4%.

China’s PC electronics and optical industries have both been hit hard by the U.S.-China trade disputes, prompting Taiwan companies in these industries to shift parts of their production back home, according to the report.

 

Taiwan’s production value started to rise in the second half of 2018 and grew 16.5% on year in the first half of 2019 in U.S. dollar. Of the amount, network communication equipment orders from the U.S. increased 45.8% on year, while server orders rose by up to 400% on year.

 

Since network communication equipment and servers are both subject to the U.S.' new tariffs on China-imported products, Taiwan’s related exports to the U.S. went up significantly - by 90.1% on year in the first half, an equivalent to a growth by $2.67 billion.

 

The report also showed that the ratio of the U.S. exports to China slipped from 7.8% during January-May 2018 to 6.3% during the same period in 2019, while the ratio of its imports from China also fell from 20.1% to 17.5%.

 

Of the 6,842 China-imported items subject to the U.S. tariffs, 25.7% were PC electronics and optical-related products, 13.2% power equipment and 10% machine equipment.

 

Of the investments returning to Taiwan, 36.3% were from the electronics component industry and 22% the PC electronics and optical industries, followed by power equipment and machine equipment, the report showed. Source: Digitimes

 

Consolidating

 

Printed circuit board (PCB) maker HannStar Board will acquire a 24% stake in local peer Career Technology to aid in its efforts to develop 5G-related products. HannStar Board produces mostly rigid PCBs for PCs, internet communications, set-top boxes, TVs, servers and gaming devices, but the company has less access in the market for handheld devices, such as mobile phones and tablets. The investment will help it broaden its market and expand PCB production from rigid boards to flexible boards, as well as helping the company in the development of 5G-related products amid a rapidly growing 5G market.

 

The agreement will also help Career Technology, a major supplier of flexible PCBs for Apple, obtain the stable funding needed to develop its 5G business long-term.

 

Japan

 

The output value of Japan's PCB industry dropped 6.9% from a year earlier to $2.06 billion in the first half of 2019, with that of the flexible PCB sector experiencing the largest 28.7% on-year fall, according to data compiled by the Japan Electronics Packaging Circuits Association (JPCA).

 

Japan's PCB industry also posted a 12% on-year decline in unit production in the first half of 2019, with the FPCB segment plunging 30.6% in unit production during the same period.

 

ICs

 

North America-based manufacturers of semiconductor equipment posted $2.03 billion in billings worldwide in July 2019 (three-month average basis), according to the July Equipment Market Data Subscription (EMDS) Billings Report published by SEMI . The billings figure is 14.5% lower than the July 2018 billings level of $2.38 billion.

 

The semiconductor industry is facing a “profound” threat from geopolitics, according to Lung Chu, President of SEMI China

 

The semiconductor sector is seeing a slowdown in the midst of challenges such as inventory issues, slowing demand for smart devices and falling memory chip prices. Now, the tensions between the U.S. and China threaten to worsen the situation.

 

“The geopolitical risk is a major uncertainty,” says Lung Chu.

 

He said in a CNBC interview that the technology control as well as export restrictions on Chinese tech giant Huawei could have such a profound impact to the industry that it would fundamentally change even the global supply chain.

 

In May, Washington placed Huawei on a blacklist that prohibits American firms from doing selling parts to the Chinese telecommunications giant without permission. The U.S. offered Huawei two 90-day reprieves and allowed U.S. businesses to continue selling limited products. The U.S. Commerce Department has received more than 130 applications from companies requesting to sell U.S. goods to Huawei — no licenses have been granted yet, according to a recent report.

 

In the event that it is denied access to U.S. firms, such as Qualcomm and Intel, Chu said: “The slowdown will get worse.”

 

Huawei is the third largest chip buyer in the world, Chu said, adding that damage could extend to the U.S. itself, as American firms dominate the semiconductor industry. “Even if you include memory (chips), the U.S. (companies) control about 50% of the global semiconductor markets,” Chu said.

 

In the long run, this could wind up benefiting non-U.S. companies if they don’t comply with Washington’s restrictions, Chu said, “I still believe in a global collaboration as a way to move the industry forward.” “Politics divide, but technology unite(s), and I think this is a lesson that we can all learn.”

 

. . . but, just how important is national security?

 

 

 

 

 

 

 

 

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