|'Global diode supply shortfall' on 21st thingies demand........................................................|
"Demand used to be coming mainly from PCs 20-30 years ago and from mobile phones 5-10 years ago"
Said it before. Many, many times over many, many years.
Worth saying again.
The 21st looks nothing like the 20th.
Global diode supply shortfall to last into 2Q18, says Diodes CEO
Julian Ho, Taipei; Willis Ke, DIGITIMES
Thursday 1 March 2018
The supply shortfall seen in the global diode industry since the beginning of 2017 will last into the second quarter of 2018, with the shortfall mainly being driven by ever-growing demand from automotive electronics and IoT (Internet of Things) sectors, according to Keh-shew Lu, president and CEO of Diodes, a US-based supplier of discrete power semiconductor devices.
Demand used to be coming mainly from PCs 20-30 years ago and from mobile phones 5-10 years ago, Lu told Digitimes in a recent interview.
He said the rapid growth of automotive electronics and the trend of new energy vehicles replacing gas-fueled ones will linger for at least 10 years. He said that nobody can give a clear-cut definition for IoT or predict what IoT devices - which may include sports cameras, air conditioning systems, smart speakers and many more - will be available. It is similar to smart speakers, which few people knew about them two to three years ago, Lu said, adding that the proliferation of IoT applications will be endless.
Lu attributed the diode supply shortfall mainly to demand outgrowing production capacity expansion. Autos, IoT devices, smartphones and other terminal products are adopting more parts and components, which therefore have become more and more expensive. To bring down costs, more parts and components with low power consumption, low interference and increasingly smaller sizes are badly needed, including ESD (electrostatic discharge) protection component that cannot be packaged with old packaging practices. The relatively mature diode industry will not see any capacity expansion in the short term, Lu predicted, and its tight supply will at least last through the second quarter.
Three US$1 billion goals
Five years after retiring from Texas Instruments (TI) as a senior vice president, Lu said, he joined Diodes in 2005 and immediately set three US$1 billion goals: boosting the firm's market capitalization to US$1 billion in the short term; expanding its annual revenues to US$1 billion in the medium term, up from US$240 million in 2004; and achieving annual profits of US$1 billion in the long term. As Diodes already accomplished the short-term goal in 2010 and the medium-term goal in 2017, its next step is to focus on pursuing profit growth, Lu indicated.
Lu said that with gross profits of US$358 million in 2017, Diodes hopes to attain the long-term goal of US$1 billion profit by 2025. The company will manage to boost its gross margin to 40% from 35% in 2017 while also expanding its annual revenues to US$2.5 billion from US$1 billion, he stressed.
Scoring revenues of US$268-269 million in the fourth quarter of 2017, Diodes expects to continue such a revenue level in the first quarter of 2018, with gross margin to edge up to 36%, according to Lu.
According to his observations, Lu said, the diode industry will thrive on several major markets. First is the auto market. Though the total number of autos will not necessarily grow, it will be an irresistible trend for cars to evolve from gasoline- and diesel-fueled models to hybrids and then pure electric ones. And Diodes will sustain significant growths in the supply of products needed to support ever-growing automotive electronics applications, after experiencing a 25% CAGR within five years. The firm's ratio of revenues from the automotive electronics sector has surged from 5% in 2016 to 8% for the moment, and riding on the growth pace, its revenues from the sector are estimated to reach US$100 million in 2018 with gross margin of around 50%.
Thriving on niche markets
Second is the high-performance computer and server sector. In 2015, Diodes acquired Pericom Semiconductor dedicated to supplying discrete components for servers and high-end PCs, with gross margin also nearing 50%. This has helped drive the firm's growth in revenues and profits from discrete computing devices.
Third is the smartphone market. Despite slowing growth in global smartphone shipments, the volumes of parts and components used in smartphones are growing exponentially, as brand vendors such as Apple, Samsung, Huawei, Oppo, Vivo and Xiaomi are still striving hard to capture higher market shares.
The fourth is the industrial and motor control area. Diodes initially focused on the 3C field, but after Lu joined the company, it started to venture into the industrial control sector before tapping into automotive electronics in 2013. Lu said that Diodes has set an ultimate goal of reducing the 3C diode revenue ratio from over 80% to 50-60% and raising the combined ratios for industrial and automotive diodes to 40-50%. At the moment, the ratio for industrial-use diodes alone stands at 21-22%.
Five major product lines
Lu stressed that Diodes has zeroed in on five major areas for a balanced development, seeking to have each area command a revenue ratio of 20%. The ratio of revenues from the automotive electronics sector is estimated to hit 9% in 2018 and challenge 20% by 2025, with the ratio goal for the industrial control sector already attained. Lu indicated that if the five major business areas can all meet the revenue goals, his firm's overall gross margin can hit over 40%. He believes that Diodes will have a chance of reaching the US$1 billion profit goal with the firm's enhanced efforts on developing such segments as IoT, high-performance PCs, servers, smartphones, and base stations that offer higher gross margins.
Company statistics showed that Diodes saw its revenues surge over 10% on year to US$1.055 billion in 2017, and its revenue CAGR for 2007-2017 reached 10.2%, much higher than the industry average of 3.2% for the period. Sales in Europe, Asia and North America markets all increased steadily in the period, and among the five major product lines, automotive electronics posted the highest average annual revenue growth of 20%.