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Chipmakers Warn That The Chip Boom Is Over—And Manufacturers’ Frantic Stockpiling Is Partly To Blame

Chipmakers Warn That The Chip Boom Is Over—And Manufacturers’ Frantic Stockpiling Is Partly To Blame

Global chipmaker shares jumped on Thursday after Taiwan Semiconductor Manufacturing Corporation (TSMC) reported a record 76.4 percent increase in second-quarter profit year on year. The Philadelphia Semiconductor Index, which tracks major global chipmakers like Intel Corporation, QualcommASML Holding, and Nvidia Corporation, as well as TSMC, rose by 1.9 percent.

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Thailand’s Electronics Sector Still A Magnet For Investors Amid Pandemic

Thailand’s Electronics Sector Still A Magnet For Investors Amid Pandemic

The COVID-19 pandemic and the US-China trade friction have failed to slow Thailand’s resilient electronics and electrical (E&E) industry which on the contrary many investors see as a haven, Thailand Board of Investment (BOI) data shows.

In the first nine months of 2020, the number of foreign and domestic companies which applied to invest in Thailand’s E&E sector actually rose to 106 projects, from 94 projects in the same period in 2019, making it by far the most popular sector, totaling over $1.2 billion in investment applications submitted to the BOI.

With a supply chain of some 2,500 companies and 800,000 employees ranging from researchers with doctoral degrees to vocationally trained technicians and experienced assembly line workers, it is the country’s largest manufacturing employer, according to Thailand’s Electrical and Electronics Institute (EEI).

“E&E is fundamental to Thailand 4.0”, said EEI president Narat Rujirat, referring to the innovation-driven growth strategy of Southeast Asia’s second largest economy.

This ambitious vision involves creating a regional hub for futuristic industries including medical devices, electric vehicles, robotics and automation. At its heart is the technological transformation of one of Thailand’s long-established core industries, electrical and electronics, into what is today termed “Smart E&E” and the emergence of the so-called Internet of Things (IOT).

Thailand’s E&E sector has burgeoned into a global powerhouse and is the world’s second largest exporter of computer hard disc drives, air conditioners and washing machines, according to GSB Research, a unit of Thailand’s largest state-owned bank.

In total, Thailand’s E&E industry generates $56.5 billion worth of exports in 2019, or 24 percent of total exports, according Thailand’s Ministry of Commerce and GSB Research.

In addition to a strong supply chain and skilled human resources, Thailand’s attraction for E&E investors also stems from its strategic geographical location at the crossroads of Asia, which has enabled it to become one of the world’s top exporters.

Investors also benefit from privileges offered by the BOI. E&E companies focused on innovation and research and development can receive tax breaks of up to 8 years and other incentives such as renewable smart visas of up to four years for international talent and investors in key sectors such as smart electronics, as well as their families. The BOI also supports companies by helping establish industrial linkage, sourcing of local suppliers and business matching. Many companies have developed strong partnerships with local academic institutions.

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Global Machinery Production Revenue To Reach US$1.6 Trillion In 2022

Global Machinery Production Revenue To Reach US$1.6 Trillion In 2022

  • 2019 will be a tough year for machine builders, with overall global machine production revenue growing at a compound annual growth rate (CAGR) of 2.1 percent from 2017 and reaching US$1.6 trillion in 2022.
  • Year-over-year eurozone machine production revenues are expected to contract slightly by 0.4 percent in 2019. The Asia-Pacific region will grow by low single digits, as growth in China—the largest contributor in the machine tools market—is expected to remain in the single digits, at least until 2020.
  • The machine tools category comprised 5.7 percent of all global machinery production revenue in 2019. After the global economic downturn in 2015, a short 5.5 percent year-over-year growth spurt in 2017 helped revenues climb to their highest level. However, the year-over-year growth rate fell to 3.4 percent in 2018. It is expected to decline by 0.4 percent in 2019.
  • The largest downstream industries in the machine tool sector are automotive, with 25 percent of revenues, and consumer electronics, with 16 percent.

The market performance of the machine tool sector is highly dependent on commodity prices, macroeconomic conditions and sector performance (e.g., automotive, construction, aerospace, and ship building). According to IHS Markit Economy and Country Risk (ECR) information, a global recession is highly unlikely to occur in 2019. However, due to weaker global trade, political uncertainties, and other headwinds, global machine tools production revenue will only begin to improve late in 2020 or early in 2021.

Automotive And Consumer Electronics Lead The Market

The poor sales of automobiles in late 2018, and the downward-trending market for smartphones and PCs, is reflected in the latest sales and production revenue estimates from IHS Markit. Other broad, underlying factors for the downturn include a weaker global trade environment, increased geopolitical tensions, lower investor confidence and declining global vehicle sales. Furthermore, the top producing and consuming countries for this type of machinery—namely, Germany and China—have been hit especially hard by the industry downturn.

Bleak Near-Term Signs For Machine Tools Production In Germany And China 

In the fourth quarter of 2018, Germany’s manufacturing purchasing managers index (PMI) slipped to a 31-month low. The country’s total machinery production revenue is forecast to contract by 0.3 percent in 2019, with machine tools revenue growing at just 0.7 percent, year over year. Germany’s poor performance was caused by the global decline in automotive manufacturing. While it is difficult to isolate the main reason for the declining growth in this industry, changes in the way new vehicles are regulated is an obvious candidate.

The tedious and long approval time for regulatory compliance has proven costly to automakers. Especially in Europe, consumers are also more conscious about making new vehicle purchases, in the face of these ever-changing regulations. Although the automobile manufacturing industry has made strides in implementing new technologies, market conditions will continue to push near-term machinery investment rate to an all-time low.

Machinery production in China is also facing tremendous downward pressure, due to slowing investment, sluggish growth in downstream industries and the Sino-US trade war. China is also dealing with many of the same problems Germany is facing, including contracting automotive sales and weaker global trade.

Although national stimulus policies have been enacted, and industrial upgrades have been implemented gradually, they have not done enough to offset the economic headwinds in China. In fact, IHS Markit forecasts that China’s machinery production revenue will grow only 1.4 percent in 2019, the lowest rate since 2015. Machine tools production revenue will also suffer, contracting by 3.7 percent in 2019.

Timing Is key For AGVs, AI And Other Game-Changing Innovations

Good timing is often the key to a successful product launch. Despite the current declining economic conditions, the application of automated guided vehicles (AGVs) and AI in machine tools is expected to increase in the next few years. Some companies are more keen than others to strengthen their competitive edge during hard times.

Machine tool companies have started to include AGVs in their work flows, to load and unload materials. Normally this process would be handled by a few skilled workers, but this type of work can now be completed by a single AGV with a robotic arm.

Robotic modules with robotic arms are also used to help cutting machines load, unload and move products and manufacturing components. Hybrid solutions are now appearing, that enable machines to form and cut at the same time. This ability is particularly important for production lines that need to save space, by minimising the machine footprint.

With efficiency and precision in mind, proprietary AI systems can be used to constantly tune and optimise cutting machines in real time and without human intervention. These systems are smart enough to regulate cooling and power, which results in cost savings from less waste material, longer service intervals and reduced power usage. On top of all of that, cutting tools can be continuously tuned and adjusted to provide an optimal cut.

By Teik Chuan Goh, analyst, manufacturing technology, IHS Markit

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Contraction Of Singapore’s Manufacturing Sector For Fourth Consecutive Month

Contraction Of Singapore’s Manufacturing Sector For Fourth Consecutive Month

Singapore’s manufacturing sector has contracted again in December 2018, with the key electronics sector declining further. This is aligned to a weakening global outlook for the manufacturing sector and the current fallout between the US and China, as well as the overall decline in manufacturing in South Korea, Taiwan and Malaysia.

In fact, Singapore’s overall Purchasing Managers’ Index (PMI), dipped 0.4 points in December 2018, reaching 51.1. This is barely above a reading of 50 which indicates that growth has occurred. Similarly, the electronics sector, which saw its first contraction after 27 consecutive months of growth in November 2018, dropped 0.1 points to 49.8 in December 2018 according to the Singapore Institute of Purchasing and Materials Management (SIPMM).

Meanwhile, China’s official manufacturing PMI that was released on January 2019 indicated that the country’s manufacturing sector has sank into the contraction territory for the first time since July 2016, while the Caixin manufacturing PMI also contracted to 49.7, which is the lowest figure that the index has dropped to since May 2017. This was a decrement that stands below analyst expectations.

Regarding this, the SIPMM has commented that the lower overall PMI reading can be attributed to slower growth in new orders and new exports, factory output, inventory, as well as employment level. Additionally, it can be taken into account that the indexes of finished goods, imports, input prices and supplier deliveries also expanded at a lower rate, while the order backlog index has continued to contract for three consecutive months. Alvin Liew, a Senior Economist at UOB has further added that the weaker PMI is most probably linked to a slowdown of China’s growth and the corresponding drop in demand for Singapore’s goods and services that are tied to China’s economy. He also projected that a continued slowdown is likely to occur due to many factors such as a decrease in China’s growth, uncertain trade developments between the US and China, as well as a global electronics cycle downturn.

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Global Laser Cutting Market To Hit US$5.7 Billion By 2022

Global Laser Cutting Market To Hit US$5.7 Billion By 2022

The global laser cutting market has a projected CAGR of 9.3 percent from 2016 to 2023 and will grow to reach US$5.7 billion by 2022. This can be attributed to heightened production demands from various industries and the shift towards automation. With regards to the automotive, consumer electronics and defense industries, their growth has resulted in an increased demand for machines that drive manufacturing processes and these has in turn spurred the growth of the laser cutting industry.

Currently, alternatives to laser cutting such as offer similar features and are able to offer some benefits that laser cutting cannot provide. However, the market competition posed by these alternatives are expected to dwindle with time due to the constant technological improvements that laser technologies are experiencing.

Based on technology, the laser cutting market can be segmented into solid state lasers, gas lasers and semiconductor lasers. Solid state laser was the highest revenue contributor and comprised about 40 percent of the total market share in 2015. However, gas laser is expected to witness rapid growth till 2023.

Although the US contributes significantly to the growth of the industry, Asia-Pacific is expected to be the fastest growing region moving forward. This can be attributed to an increase in the number of manufacturing facilities and the growing purchasing power of consumers in developing nations.

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Vietnam And South Korea To Increase Bilateral Trade To US$100 Billion By 2020

Vietnam And South Korea To Increase Bilateral Trade To US$100 Billion By 2020

Vietnam’s Minister of Industry and Trade, Tran Tuan Anh, has signed a memorandum of understanding (MoU) with South Korea’s Minister of Trade, Industry and Energy, Sung Yunmo. Under this MoU, both countries will embark on an action plan to increase bilateral trade to US$100 billion by 2020. Additionally, this document will function as an added legal documentation between both leaders with regards to the broad agreements that were discussed at the Asia-Pacific Economic Cooperation (APEC) meetings in Da Nang in November 2017.

Based on the MoU, from now on till 2020, South Korea would support Vietnamese enterprises by enhancing their competitiveness in areas that include accessories and parts, automobile and electronics.

Bilateral trade between Vietnam and South Korea reached US$61.5 billion in 2017 which is an increment of 41.3 percent year-on-year. Within this figure, Vietnam’s exports to South Korea made up US$14.8 billion, which was an increment of 30 percent while the country’s imports to South Korea was worth US$46.7 billion. This was an increment of 45.3 percent year-on-year.

In the January – November period, South Korea remained Vietnam’s second largest import market with turnover of US$43.5 billion. This was an increment of 1.7 percent year-on-year and South Korea was only behind China by US$ 59.7 billion.

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Monthly Manufacturing Performance In Singapore – October 2018

Monthly Manufacturing Performance In Singapore – October 2018

Total Manufacturing Performance

Singapore’s manufacturing output increased 4.3 percent  in October 2018 on a year-on-year basis. Excluding biomedical manufacturing, output grew 3.0 percent. On a three-month moving average basis, manufacturing output rose 2.5 percent in October 2018, compared to a year ago. On a seasonally adjusted month-on-month basis, manufacturing output increased 2.0 percent. Excluding biomedical manufacturing, output grew 3.9 percent.

Performance By Cluster

Transport engineering: Output increased 30.8 percent year-on-year in October 2018 with all segments recording output growth. The marine & offshore engineering segment expanded 52.2 percent, on the back of a low base in October last year, as well as a higher level of work done in offshore projects. The aerospace segment grew 15.6 percent with more engine repair and maintenance work from commercial airlines. Overall, the transport engineering cluster grew 14.0 percent in the first ten months of 2018 compared to the same period last year.

Biomedical manufacturing: Output increased 11.5 percent in October 2018 compared to a year ago. Pharmaceuticals output expanded 15.8 percent with higher production of pharmaceutical and biological products, while the medical technology segment grew 2.9 percent to meet export demand from the US. On a year-to-date basis, the biomedical manufacturing cluster’s output increased 5.8 percent compared to the same period a year ago.

Precision Engineering: Output grew 1.4 percent in October 2018 compared to a year ago. The precision modules & components segment grew 7.7 percent, supported by higher production in optical instruments. By contrast, the machinery & systems segment fell 2.9 percent due to lower production of industrial process control and semiconductor equipment. On a year-to-date basis, output of the precision engineering cluster grew 7.0 percent compared to the same period last year.

General manufacturing: Output increased 1.3percent on a year-on-year basis in October 2018. The miscellaneous industries segment grew 2.9 percent, on account of higher production in structural metal products and batteries. The food, beverages & tobacco segment rose 2.1 percent with higher output in infant milk and dairy products. However, the cluster’s growth was moderated by the printing segment which declined 6.9 percent. Cumulatively, the cluster’s output rose 0.6 percent from January to October 2018 compared to the same period a year ago.

Chemicals: Output decreased 1.0 percent year-on-year in October 2018. The other chemicals segment grew 15.1 percent with higher output in fragrances. However, production in the petroleum and petrochemicals segments fell 9.6 percent and 14.7 percent respectively due to maintenance shutdowns. In the first ten months of this year, output of the chemicals cluster increased 5.6 percent compared to the same period in 2017.

Electronics: Output fell 2.7 percent in October 2018 on a year-on-year basis. Within the cluster, the other electronic modules & components and infocomms & consumer electronics segments grew 5.1 percent and 1.7 percent respectively, while the rest of the electronics segments contracted. Cumulatively, the electronics cluster’s output increased 8.9 percent from January to October this year, compared to the same period last year.

The next monthly manufacturing performance release will be issued on 26 December 2018 on the Singapore Economic Development Board (EDB) webpage.

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