THE WORLDWIDE SEMICONDUCTOR INDUSTRY: TRENDS AND OPPORTUNITIES

By Marie-Claude Veillettewww.brokerforum.com

Market Study 2016

ContentsMARKET OVERVIEW

GLOBAL MARKET SHARE

TOP 20 SEMICONDUCTOR SALES LEADERS – 2016

TRENDS AND OPPORTUNITIES

+ Percent of Semiconductor Demand by End Use + Growth by Component + Growth by Region

THE “INTERNET OF THINGS” WILL DRIVE THE GLOBAL SEMICONDUCTOR MARKET

TOP SEMICONDUCTOR EXPORT MARKETS

DEVELOPING YOUR BUSINESS ON AN INTERNATIONAL SCALE

APPENDIX

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Market OverviewCurrent growth in electronics production is the main driver of the global semiconductor industry. The rapid pace of innovation and ever-expending use of technologically advanced devices including smartphones, tablets, flat-screen monitors, smart connected cars and medical devices is multiplying the number of semiconductor components being used around

us every day and stimulating global demand for semiconductors. Digitization, connectivity and the Internet of Things (IoT) now promise solid growth in the long-term for the global semiconductor market.

After increasing 9.9 percent in 2014 to a record $335.8 billion, global semiconductor sales fell slightly in 2015 to $335.2 billion.i

The growth leaders in 2016For 2016, growth in Optoelectronics (1.8%), Sensors (7.6%), and Analog ICs (1.0%) is expected to be offset by declines in Memory (-10.2%) and Logic (-2.5%). ii

In its spring 2016 Semiconductor Industry Forecast, the World Semiconductor Trade Statistics (WSTS) expects the global semiconductor market to continue declining by 2.4% in 2016 to US$327 billion with growth returning in 2017 and 2018. Growth is expected to return for all major product categories and regions to reach US$341 billion in 2018, which would yield a year over year growth of around 2% for 2017 and 2018.

The Americas and Asia-Pacific regions are expected to show the highest growth rate while continuing to account for approximately 80% of the global semiconductor market.

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Worldwide Semiconductor Market Product Sales in 2015

SEMICONDUCTORS$335,2B

GenericPurpose$18,6B

IntegratedCircuits

$274,5B

MOS$229,3B

Discrets,Sensors & Opto

$60,7B

Discrets$18,6B

Opto$33,3B

Sensors$8,8B

Micro$61,3B

Logic$90,88B

MPU$43,3B

MCU$15,5B

SpecialPurpose

Logic$70,2B

StandardLogic

$20,6B

DSP$2,5B

Memory$77,2B

DRAM$45,0B

Flash$30,4B

SRAM$0,4B

Rom’s,EPROM,EEPROM

$1,4B

Source: WSTS, 2016

Global Market ShareU.S. semiconductor manufacturers are still the leading suppliers of semiconductors to the global market and enjoy a majority of market share. American companies also account for 47 percent of the market share of the global semiconductor manufacturing equipment (SME) sector. Along with Japan and the Netherlands, these top three countries control over 90 percent of the $37 billion global market. iii

U.S. firms have retained their competitive edge in microprocessors and other leading edge devices, fending off immense competitive pressure from Japan and Europe in the face of a severe industry recession in 1985 and 1986. Gains in market share for memory has allowed American firms to increase their market domination, garnering them more than half of the total global market share. However, these firms now face strong competition from South Korean and Taiwanese companies.

U.S.-based companies hold firm ground in most major markets, accounting for around half of total market share, but pressure has been mounting from Asian and European suppliers.

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49,9% 50,1%

Chinese Market$98,6B

56,2%

43,8%

Europe Market$34,3B

56,6%

43,4%

Americas Market$68,7B

41,9%

58,1%

Japan Market$31,1B

35,9%

64,1%

Americas Firms Other Firms Source: SIA 2016 Factbook, March 2016

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Top 20 Semiconductor Sales Leaders – 2016 The number of global semiconductor suppliers is still the highest in the United States, which is home to eight firms, followed by Japan, Taiwan and Europe with three each, South Korea with two and Singapore with one.

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USA01. Intel Corpora�on +9%05. Qualcomm -25%07. Micron -28%08. TI -5%15. Apple 10%16. GlobalFoundries -5%17. Nvidia 15%20. AMD -19%

SOUTH KOREA02. Samsung 0%06. SK Hynix -30%EUROPE

10. NXP -16%11. Infineon 7%13. ST -6 %

JAPAN09. Toshiba -7%14. Renesas -4%18. Sony -12%

TAIWAN03. TSMC -12%12. MediaTek 12%19. UMC -9%

SINGAPORE04. Broadcom Ltd. -4%

The top 20 semiconductor companies include three pure-play foundries and six fabless companies. Excluding pure-play foundries from the top-20 ranking would allow U.S. basedIDM ON Semiconductor ($817 million), China-based fabless supplier HiSillicon ($810 million) and Japan-based IDM Sharp ($800) million to enter the top 20.

Declines in sales have reduced revenues for the top-20 semiconductor companies by 6% year-over-year in the first quarter of 2016, while the global semiconductor market as a whole saw a decline of 7%.

Source: Anysilicon.com, May 23, 2016

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Trends and OpportunitiesThe Internet of Things and the digitization of consumer products will stimulate a huge demand for sensors produced by the semiconductor industry. Automotive and communication markets are expected to be two other major drivers for the growth of the global semiconductor market in the coming years.

Right now, communications products represent the largest end-market for the semiconductor industry. Growth in this area is currently being driven by demand for smartphones, tablets, digital televisions, wireless network infrastructure and will, in the not too distant future, be complimented by the Internet of Things (IoT) - connected devices in the home or workplace.

The market for connected or smart devices is expected to grow rapidly and

reach into the billions of dollars by 2020. This will have a positive impact on the growth of the semiconductor industry and drive semiconductor companies towards innovation.

The vast majority of electronics production is concentrated in the Asia-Pacific region. As a result, exports to this part of the world continue to grow faster than exports to the European Union and Latin America.

Consumer demand is also driving growth in emerging markets in Eastern Europe and Africa.

The industrial market for semiconductors and electro-medical devices will also stimulate global demand for semiconductors.

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China will continue to lead growth in Asia, while Japan is expected to grow by only 1.5% annually. Europe and the Americas should experience moderate growth, with expected annual growth rates of 3.9% and 4.5% respectively in 2019.

Growth in the rest of the world will be expected to manifest mainly in Taiwan, South Korea and Singapore.

Source: SIA 2016 Factbook, March 2016 (World Semiconductor Trade Statistics)

Source: Gartner, PwC

Source: Gartner, PwC

COMPOUND ANNUAL GROWTH RATE (CAGR) 2014-2019

Memories

MPUs & MCUs

Logic

Analog ICs

DiscreteSemiconductors

Sensors &actuators

Source: PricewaterhouseCoopers, May 2015

GLOBAL SEMICONDUCTOR BILLINGS (BN $US) FORECAST

Industrial / Gov’t 13%

Consumer 12,8%

PC Computer 29,7%

2015Total Semiconductor

Market = $335 Billion

Percent of Semiconductor Demand by End Use

Growth by Component

Global Semiconductor Consumption Forecast

Memories

MPUs & MCUs

Logic

Analog ICs

DiscreteSemiconductors

Sensors &actuators

CHINA

60,5%

REST OF THE WORLD

13,7%

AMERICAS

11,4%

EUROPE

9,0%

JAPAN

5,4%

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The “Internet of Things” will drive the Global Semiconductor MarketWith the expected growth of the Internet of Things (IoT), a huge opportunity exists for semiconductor companies to position themselves for the next phase of growth in the semiconductor industry.

Most of the chips that will power the IoT, including crucial components such as transmitters, sensors, and memory storage components, already exist and are used today in a variety of electronic devices. But in orderto meet the expectations that accompany an evolution in technology, many of them will have to be redesigned to consume less energy, incorporate modern security features, and be smaller in size and available to manufacturers at a lower cost.

They will also have to be easier to integrate into a wider variety of tiny devices, not just PCs and smartphones: tomorrow’s home appliances, security systems, smart thermostats, smart watches, fitness bands and trackers, smart glasses and wearable medical devices will all use semiconductor technology.

The IoT is now poised to be integrated with technologies beyond consumer electronics into other markets and applications as well. Recent technological advances such as self-driving cars and drones represent just the beginning of the endless possibilities that a network of smart connected devices can provide in improving our productivity, safety and overall quality of life.

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Connected devices by 2020 (million)According to industry analysts at IDC, these 50B connected devices will drive the total IoT market to US$8.9 trillion by 2020, with three segments – consumer electronics, automotive and healthcare – accounting for more than 50% of the total market in revenue terms.

A recent PwC analysis suggests that around US$33 billion will come from “IoT related opportunities” by 2019. This accounts for almost 34% of the total increase in semiconductor revenues forecasted across all applications – US$336 billion in 2014 to US$432 billion by 2019.

Source: Industry Forecasts Compilation, 2020 forecast from IDC, PwC analysis.

2014

5,400

5,500

5,000

4,100

3,200

2020

30,000

6,000

3,300

Internet of Things TV Tablets Smartphones PCs

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Top Semiconductor Export MarketsChina represents half of the world market for semiconductors. Domestic semiconductor production in China only supplies nine percent of the country’s consumption needs, with imported products supplying the balance.

China represents the largest and fastest growing export market for semiconductors, on the strength of the country’s extremely large and diverse electronics manufacturing industry.

South Korea has a vibrant consumer electronics manufacturing sector, as well as large automobile manufacturing industry.

Singapore is a logistical center for the Southeast Asia region.

Germany’s robust industrial and automotive sectors are driving demand for semiconductors.

Mexico is a top market for semiconductors because of its huge electronics and auto assembly operations that serve North American markets.

Taiwan has a large flat-panel display industry and is a hub for semiconductor testing and packaging.

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Top Semiconductor Export Markets for 2016

1. China2. Japan 3. South Korea4. Singapore5. Taiwan6. Malaysia7. Germany8. Mexico9. Thailand10. Vietnam11. India12. Brazil13. France14. Indonesia

15. Netherlands16. Philippines17. Canada18. Czech Republic19. Australia20. Hungary21. United Kingdom22. Poland23. Italy24. Switzerland25. Ukraine26. Israel27. Sweden28. Slovakia

29. Russia30. Turkey31. Austria32. Belgium33. Ireland34. South Africa35. Spain36. Romania37. Finland38. Portugal39. Estonia40. Denmark

Europe

Asia

Africa

Oceania

Americas

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AppendixSources

+ World Semiconductor Statistics (WSTS) Press Releases, May 24 2016 + The Semiconductor Market: 2015 Performance, 2016 Forecast, and the Data to Make Sense of It + SIA 2016 Factbook”, Semiconductor Industry Association, March 2016. Top 20 Semiconductor Companies 2016, May 23 2016 + The Internet of Things: The next growth engine for the semiconductor industry, pwc, May 2015

Citations

i Global Semiconductor Sales Top $335 Billion in 2015” Feb 1, 2016, SIA Press Release.ii WSTS World Semiconductor Trade Statistics, Spring 2016 Semiconductor Market Forecastiii 2016 ITA Semiconductors and Semiconductor Manufacturing Equipment Top Markets Report trade.gov/topmarkets/pdf/semiconductors_top_markets_report.pdf

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