At the Semico Summit this week I focused on our forecast for the year ahead. My conclusion, as I told participants, was: "2011 will see revenue growth of 8 percent, however the Semico IPI indicates the second half of 2011 as the beginning of the next market slowdown." What evidence supports this hypothesis? Here are a couple of reasons:
Tablet winners and losers.
Approximately 100 tablet computer models are being introduced this year, each with a market share goal of more than 1 percent. There will naturally be winners and losers, but the result of this impossible target from manufacturers will be excess capacity and inventory in the channel as these models shakeout. This will have significant effects on the components market. In terms of semiconductor average selling prices (ASPs), for instance, the supply chain only has to be a few percentage points out of equilibrium to cause prices to crash. We've seen it in the memory market many times.
Even more impossible goals.
The smartphone is considered the promised land. A market that continues to grow at double-digit rates with increasing semiconductor content is an irresistible market. However, the threat in the smartphone market is similar to that in the tablet market. Overproduction of smartphones will result in a production pullback in 2012, contributing to excess capacity and inventory, leading to falling ASP.
While we would expect a semiconductor downturn to produce negative semiconductor revenue, Semico Research Corp. has identified several factors that will dampen the severity of the downturn.
A reduction in production output from Japan is one of these primary factors. The earthquake and tsunami wreaked devastation in the north of the country. A number of production facilities were severely damaged -- Renesas Technology Corp. was one of the hardest hit. In addition to plant closures, the Japanese automotive manufacturers have substantially reduced production rates.
Some consumer products, particularly games and TVs, are in a similar situation. Although this is bad news for the affected companies facing potential revenue declines for 2011, Semico believes there will be pent-up demand that will roll into 2012 helping to mitigate the severity of the downturn.
Other positive factors affecting 2012 include:
A continuing growth in Internet activity and cloud computing is spawning a wave of upgrades in the communications backbone and server farms.
The build-out of 4G wireless networks will require substantial investment that will spur demand from 2012 through 2015.
I do not accept that there will be any slow down in the smart phone and the tablet segment in the next couple of years. They just opened their wings and there is lot of places in this world where they will reach.
Smartphone’s biggest hurdle in the U.S. is going to be the cell carriers restrictions. Right now with the increase in sales of smartphones across the board, company’s cell networks aren't able to keep up with the demand for data usage. Companies are starting to set up more fees for using more data. While this won't affect all users, it will deter some users from converting to smartphones.
I agree that smartphones will continue to be in demand especially because of the newere models coming up. Besides, the excess supply of Tablets will drive prices down. As a consumer, this appears to be a favorable sign.
It seems more like a puzzle at this point, i agree that there will be an increase in sales of smartphones in the future but yet again we dont know what companies like samsung, motorolla are going to come up with in the tablet series already we are experiencing the competetion rolling between samsung and Apple.
Anand you are right. Now a day’s Smart phones are becoming popular in markets and the demand is also high. Majority of techies prefer laptop/net books rather than tablets. I don’t know the exact reason, but I guess mainly because of the cost factor. The cost for tablets is more than the cost of a dual core 10’’ laptop or net book. In India, even though we would like to buy tablets, availability and selection are major hurdles. Hope within a couple of months or years the trend changes and tablets becomes more popular.
I am not quite sure if threat in the smartphone market is similar to that in the tablet market. In countries like India smartphones are slowly becoming popular and market is far away from getting saturated. I am sure people dont mind spending 300$ on smartphone rather than spending 600$ on tablet. So i guess demand for smartphone is here to stay.
Interesting article, Jim, and I think I agree with your conclusion.
However, I don't think the smartphone market is really that similar to the tablet market... I think there is plenty of demand for smartphones, more new smartphones will be purchased in order for consumers to utilize those 4G networks you mention, and I think it's very clear that smartphones are across-the-board a popular, desirable product.
Tablets, on the other hand, are not only in danger of overproduction, but obviously there are way too many manufacturers jumping on the bandwagon even despite the overall uncertainty in the form factor as a whole. So far, no one other than Apple has really produced a very successful tablet that enjoys significant market share... so if there is no viable competitor to the iPad, perhaps there is no tablet market after all: there's merely an iPad market. If that is the case, there could be some very dramatic drops in demand in this space.
Anyhow, this is a bit of a nitpick and you obviously discuss the tablet situation in your first bullet-point. I'm just trying to say that I'm fairly confident that smartphone demand will continue to stay strong.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.