TrendForce 2016 IT Industry Forecast – Optoelectronics and Semiconductor Sectors Braces for a Challenging 2016 as Consumer Electronics Product Shipments Weaken
Global market research firm TrendForce held its 2016 IT Industry Forecast Conference at Room 101 of the NTUH International Center in Taipei, Taiwan, on October 15, 2015 (GMT+08:00). A team of senior analysts assembled from TrendForce's major research divisions – TrendForce, DRAMeXchange, WitsView, LEDinside and EnergyTrend – will share their detailed forecasts on trends in major tech industries for 2016.
Below is a summary of their presentations.
Smartphone shipment growth to slow in 2016 with China and India becoming the main growth centers
Major Chinese smartphone vendors – Huawei, Lenovo and Xiaomi – have risen to become three of the top five international smartphone brands this year. Supported by a large domestic market, these vendors have expanded into the emerging markets, Europe and the U.S. with high cost-performance products. However, challenges loom ahead as the feature phone market falters and the growth of the smartphone market enters a plateau period. Smartphone shipments in 2016 are expected to fall steadily, and their annual growth rate will just reach 7.7%.
The driver of the global smartphone market next year will come from the replacement demand for 4G smartphones in China, according to Kelly Hsieh, TrendForce senior manager for mobile communication and end device research. Vendors will also be very active in the emerging markets, with India being the focus of their attention. Though the smartphone penetration rate in India is currently only around 20%, local telecom operators are working hard to expand mobile network coverage for suburbs of first and second-tier cities. Usage of smartphones will effectively increase as telecom operators start offering devices with bundle plans.
Three major vendors will dominate the VR device market next year and sales will soar to 14 million units
The introduction of the Apple Watch did not generate high growth in the smartwatch market as initially expected. Therefore, wearable device developers are now shifting their interests to other attractive products, and virtual reality (VR) devices presently show a lot of potentials. Jason Tsai, TrendForce wearable device analyst, said the sales of VR devices is estimated to soar to 14 million units next year, when vendors will be making mass shipments of their products.
With content offerings being the decisive factor the upcoming VR device war, products from HTC, Oculus and Sony will be the most competitive in the market. HTC Vive, for instance, will be supported by Steam, a digital content distribution platform. Oculus Rift, on the other hand, is championed a large group of independent developers. Sony's VR headset, PlayStation VR, will have access to its parent company's massive collection of multimedia resources. The spotlight of the competition in the VR scene next year will be on these three vendors as they make advances in the market and become the dominant players.
As IoT branches into different applications, developing better services will become the new competitive advantage
Breakthroughs in key technologies, the proliferation of mobile devices and the explosive growth of the Internet have accelerated both the market and application growth of the Internet of Things (IoT). Smart homes, smart cities, and the much-discussed Industry 4.0 are some of the fields that are seeing the implementation of IoT-related technologies. And within the IoT sector there are various applications, including healthcare, retail, logistics, transportation and other specific vertical industries. Together these applications are projected to account for 70% of the sector's total revenue.
According to TrendForce IoT analyst Jimmy Liu, participants in the IoT sector will continue to focus on developing service-based applications. Cultivating vertical industry expertise and cross-industry collaboration will be essential to creating new kinds of services. The participation of the "Maker" communities can also complement the efforts of private enterprises and stimulate the market environment. In addition to improving efficiency and reducing costs, advances in the IoT sector will also help create a value-added, sharing economy that is more human oriented.
Worldwide sales of industrial robots will reach 290,000 units in 2016 with Asia being the primary growth driver
Harrison Po, TrendForce industry consultant, noted that the global market demand for industrial robots has been rising in recent years due to factors such as increase in the elderly population, rising wages, and labor shortage in the manufacturing sector. On an annual basis, the sales of industrial robots worldwide are projected to grow 15% in 2015 and 10% in 2016, totaling 264,000 and 290,000 units respectively. In 2014, the top three markets for industrial robots were China, Japan and the U.S. However, Asia as a whole is set to become a significant market, and the region may even outpace Europe and the U.S. in demand growth by 2016.
Currently, industrial robots are most widely used in the auto manufacturing industry. Growth in this application will come from the emerging markets, where investments in car assembly plants are taking place. Another source of demand for industrial robots will be the expansion of the plug-in vehicle battery production.
In addition, opportunities are abound in the service robot market as more people around the globe are becoming elderly and/or living alone. Currently, service robots are primarily designed to do domestic chores such as vacuuming.
China becomes the world's largest plug-in vehicle market and automotive electronics market will shine in the next three to five years
Growth in the auto market has fallen short of expectations this year due to the slowdown of the global economy. China in particular has registered flat growth contrary to the impressive performances of the past years. However, China's plug-in vehicle market is significantly ahead of those in other countries in development, and it has overtaken the U.S. in the first half of 2015 to become the world's largest. Based on TrendForce's estimation, plug-in vehicle sales will surpass 450,000 units this year, and the market is expected to see steady growth in 2016.
According to Eric Chang, TrendForce automotive electronics analyst, there are three major trends currently developing the auto industry. First, there is the rapid development of automated driving systems. Second, Connected Cars have become the forerunners to smart cars. Third, breakthrough opportunities are emerging for plug-in vehicles in the ride-sharing market. Chang stated that the automotive electronic market will experience a boom in the next three to five years as these trends converge.
IoT to play a key role in the transformations and adjustments of IC industry in 2016
The integrated circuit (IC) industry has undergone quantitative and qualitative changes in 2015. The annual growth rate has dropped from 7.2% in 2014 to 2~3% this year. TrendForce research manager Jian-Hong Lin notes that developments in the Internet of Things (IoT) sector will increasingly exert influences on semiconductor products in terms of design features and production cycles. Going into 2016, IC companies will need to differentiate their products to become more competitive as well as transforming their business models in order to prepare for the next wave of innovations. IoT in particular will significantly change the production cycles of products and affect the distribution of profits among supply chain partners in some applications. At the same time, however, IoT also gives rise to new, underdeveloped market segments that can create values for companies. To fill these market gaps, companies will have to develop new positioning strategies and design processes. In sum, transformations and adjustments will be the primary challenges for the industry next year.
Weak demand continues to drag down DRAM prices
Even though the DRAM industry has become an oligopoly of three companies – Samsung, SK Hynix and Micron, competition remains fierce this year. Among different types of DRAM products, PC DRAM and server DRAM have been hit hard by weak demand through much of 2015. PC DRAM prices have fallen close to 40% year on year while the price decline in the server DRAM market is expected to be steeper during this year's second half. The mobile DRAM market on the other hand has been the exception to the severe downtrend as its growth is sustained by smartphone sales. As Apple continues to upgrade iPhone's memory specs and equipped the latest iPhone 6s with 2GB RAM, the drop in the mobile DRAM prices has moderated in general.
Looking ahead to 2016, Samsung will maintain its technological lead and put considerable pressure on its competitors by migrating to the 18nm process. However, SK Hynix and Micron will also have plans to make sure that they are not too far behind. Ken Kuo, DRAMeXchange assistant vice president, expects the DRAM chip market to suffer sharper price decline next year if there is not enough demand to effectively consume the DRAM chips.
Demand bit growth of NAND Flash at 44% next year, posing challenges for suppliers
The year 2016 will be filled with challenges and opportunities for the NAND Flash industry. On the supply front, the migration to advanced manufacturing process will continue and the development of 3D-NAND Flash technology will accelerate. DRAMeXchange's latest projection shows that annual supply bit growth for next year will reach 50%. On the other hand, the demand forecast for next year is on the conservative side. Sean Yang, DRAMeXchange assistant vice president, points out that the slowing global economy will be negatively affecting OEM end demand as well as retail markets for memory cards and USBs. Demand bit growth for 2016 is currently estimated at 44%, meaning that the NAND Flash market will be having a notable oversupply problem next year.
Market for high-brightness LED products to grow just 2% this year as the industry prepares for consolidation next year
This year has been very difficult for companies in the LED industry. While LED lighting products are seeing rising demands and have replaced numerous traditional products in different applications, their average selling prices have gone down by 30~40% due to oversupply. According to LEDinside, the value of the market for high-brightness LED products is projected to grow 2% year on year to US$14.52 billion in 2015. Duff Lu, LEDinside research manager, notes that the industry will undergo consolidation next year with companies merging or being driven out of business. With uncompetitive players leaving, the industry will gradually reorganize itself.
PV market to see falling prices in 2016; devising new business strategies will become imperative
The photovoltaic (PV) sector have consistently achieved high growth each year, and EnergyTrend forecasts the total market demand to grow by almost 10% annually in 2016, reaching 58GW. With China and the U.S. being the main growth driver, the global PV market will be unaffected by seasonality and stay hot during the first half of next year. China's share in the global demand will gradually increase. The U.S. on the other hand will significantly scale back its investment tax credit (ITC) benefits; but before this cut in subsidy rate, PV companies will keep expanding their shipments. Consequently, installed capacity growth in the U.S. is expected to peak next year.
According to EnergyTrend analyst Corrine Lin, the current oversupply situation in the market is unlikely to ease due to the ongoing capacity expansion efforts by major PV companies. Prices across the PV supply chain therefore will still be under heavy downward pressure in 2016. The strategic concern of industry participants will be to develop businesses outside the low-margin market segments.
Prices to remain weak in the panel market during the first half of 2016 as production capacity outstrips market demand
The downturn of the global economy has seriously weakened the demand for consumer electronics products this year. Respective shipments of monitors, notebooks and tablets are projected to drop 10% year on year on average, while shipments of LCD TVs are seeing near-zero growth. For next year, vendors will be offering products with special features and technologies, such as HRD TVs, wide-viewing angle monitors and HD notebooks. They are banking that these products, along with the promotion of large-size tablets, will become strong incentives to consumers. However, the overall demand will stay stagnant because various applications markets are becoming saturated.
Eric Chiou, WitsView senior research director, noted that panel makers are constantly expanding their production capacity for large- and small-size panels. Furthermore, their stances on capacity adjustments have been generally conservative since they want to retain their market shares. The oversupply situation will therefore gradually worsen. On a quarterly basis, the overall panel supply-demand ratio is estimated to be upwards of 9% between this year's fourth quarter to the middle of 2016. Panel prices will also remain weak.
About TrendForce (www.trendforce.com)
TrendForce is a global provider of the latest development, insight, and analysis of the technology industry. Having served businesses for over a decade, the company has built up a strong base membership base of 410,000 subscribers. TrendForce has established a reputation as an organization that offers insightful and accurate analysis of the technology industry through five major research divisions: DRAMeXchange, WitsView, LEDinside, EnergyTrend and Topology Research Institute. Founded in Taipei, Taiwan in 2000, TrendForce has extended its presence in China since 2004 with offices in Shenzhen, Beijing and Shanghai.
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