Sales and manufacturing performance varies widely across tech sectors and regions, benefitting a handful of companies and forcing manufacturers to expand their hiring, production, and marketing investments in certain geographical locations at the expense of others.
That was my take on a recent research report from IDC that confirmed technology spending grew in 2011, despite Europe's tumultuous economic performance. The report indicated total "IT spending increased by 5 percent at constant currency in 2011," but the growth was largely due to surging infrastructure spending in emerging economies and the increased penetration achieved by smartphones, tablet PCs, and other consumer electronics manufacturers.
That trend will persist in 2012, although the economic landscape may shift, making it difficult for forecasters to pin down how the IT market will perform. Still, certain factors that have governed the industry for 10 or more years will continue to determine future trends, according to IDC. These include economic contractions and turbulence in Western Europe and single-digit performance in North America, but surging growth in many emerging markets, including China, India, Brazil and Russia. IDC further predicts:
In other regions, however, the momentum of 2011 is still evident in recent polls, which show continuing enthusiasm for tech investment amongst businesses and consumers. In the U.S., where IT spending increased by 7% last year, 2012 is likely to bring another year of solid growth (5%) driven by mobile devices, software and network equipment. Japan will see a return to positive growth, after the declines triggered by last year’s tsunami and earthquake disaster. IT spending in Brazil, Russia, India and China will be up by 9%, 11%, 16% and 15%, respectively.
Recent economic and technological developments will drive the market for the foreseeable future. Starting early in the last decade, the market began fracturing along broad lines -- between consumer electronics and enterprise applications on one hand and, on the other, between developed and developing economies. While the United States remains a major market for high-tech companies, its dominance is being challenged by China and India, both of which are spending billions on infrastructure upgrades.
If the US is challenged, Europe is clearly waning. The region's debt-induced malaise crippled high-tech growth in 2011. IDC's forecast is for a 1 percent increase in European high-tech spending for 2012 and 3 percent in 2013. Even this barely optimistic outlook hinges on the continent getting its fiscal house in order. With governments curbing spending and businesses wary about the continent's economic outlook, any unexpected negative developments could throw the continent into a deeper funk.
"Europe is going to be a long, drawn-out recovery," said Anna Toncheva, program manager and economist in IDC's Global Technology and Industry Research Organization, in the press release. "The debt crisis will take a long time to resolve, and there are numerous downside risks which could yet see the unraveling of the European single currency and, in the near term, an escalation of the crisis due to sovereign debt defaults in peripheral Eurozone countries."
It's not all negative. Amidst all the challenges high-tech faces, consumer electronics remains a bright spot even in Europe. Sales of electronics devices for personal and household use are on the rise, paced by smartphones and personal computers, especially tablets. IDC said smartphones grew 46 percent in 2011 while software and disk storage systems expanded 6 percent each during the same period. "These positive trends are expected to continue in 2012, when enterprise spending on network equipment will also accelerate as many organizations invest in network upgrades to cope with the continuing increase in digital information," the firm said.
I don't expect demand for smartphones, tablets, and other consumer electronics products to sink this year. The only uncertainty is in enterprise demand for high-tech devices, and this is contingent upon economic stability in Europe and continued growth in Asia plus the hope that the geo-political landscape remains favorable. Consumers, too, have to keep doing their bit.
@ Barbara, I agree IT investments in infrastructure is encouraging. Benefits of these investments is positive for Europe's IT market and will strengthen growth at this crucial time. US too is predicted to boast a solid growth by 5%. All things being equal, good news indeed.
@Jacobs, You're correct, without investment there'll be no growth. This is why I welcome this news though with caution in certain areas. However, in spite of the economic uncertainty in the western countries, high tech industry's growth is on track. Although largely due to surge in infrastructure spending in the emerging economies and further penetration achieved by smartphones, tablets pcs and other consumer electronics manufacturers.
These growth trends is encouraging investments even in the US and further predicted to bring a solid 5% growth in 2012. Europe too is benefiting though not huge, but encouraging..
@ Dave, I agree with your analysis - the Uncertainty particularly in the Enterprise demand for high tech devices will require caution, forecasting and accurate planning to avoid over production. Like you said perfecting the balancing act of their supply chains is crucial.
Yes, it is, definitely. I guess that news represents also a kind of "lesson to learn", quite often the only attitude from other countries which are running throught a crisis period, is cutting cutting cutting, no more. It is needed the right trade off between cutting and investments.
@mfbertozzi, thank you for your comment. You're correct financial crisis started in the US. Amazing, US can observe? hilarious!. On the whole , yes US amongst others are experiencing an increase investment in high tech because of Europe's ongoing economic crisis. However, It is an encouraging glimmer of certainty in the IT market performance in certain regions. Great news.
Anna, it seems that even though the economic conditions are not well, IT spending is more. That means IT companies are investing more in different technologies by foreseeing a better economic balance in 2012. That's the right way, without investment there may not be any returns.
There are definitely opportunities out there, but people and companies have to start thinking more globally to capitalize on the growth potential.Although there are opportunities, there is also a lot of uncertainty, which will force electronics companies, manufacturers, and suppliers to once again try to perfect the balancing act of their supply chains.
IT investments in infrastructure, while initially, expensive, almost always pay off in increased efficiency. It was good to see that for the most part, IT spending in Europe remains positive. In the past, this has been a key indicator in the US: a pullback in IT spending contributed to the downturn of 2009, and possibly extended it for suppliers to IT.
Good article Anna, happy to hear positive prediction for 2012, it was confirmed there are regions which are promoting trends for investors. It is also the time for avoiding to forget financial crisis started in US a couple of years ago and right now we are assisting to a curious behaviour: apparently and in my modest opinion, US is observing what is happening in Europe, trying sometimes to justify their status is due to current picture in Europe...it seems a "chicken and egg situation".
The new government rules and regulations may prove to be a double-edged sword: achieving some positive goals but costing organizations a great amount of money and work and, perhaps, lost sales as well.
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.
Archived Dialogues
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.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
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.
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