Shifting Gears for Healthy Growth in Electronics

Last year there was considerable concern about tablets "cannibalizing" the PC market due to their popularity. We certainly have seen device convergence come to the fore with some tablet OEMs morphing devices into new "phablets," further integration of smartphones and tablets, and the present swell of Ultrabooks, all of which support continued growth in the consumer electronic (CE) sector. We are also seeing an important expansion of the CE sector that presents a different type of device convergence filled with more opportunities and healthy diversification for electronics components: the automotive sector.

Recently, there have been interesting growth opportunities for the wider, global semiconductor supply chain in the once-called "niche" markets of automotive, health, aerospace, and defense. The increases in semiconductor penetration rates into the mainstream devices for these markets spurs growing diversification and healthy competition for electronics OEMs and EMS companies.

Automotive semiconductors and electronics components experienced positive growth in 2Q12 thanks to increased penetration rates in vehicles, pushing auto semiconductor market share close to the 20 percent mark in parallel with the PC sector. Auto OEMs are recognizing that consumers' demands for integrated devices now stretches beyond their pockets and briefcases and into the car. With decreased pricing for many automotive chips, the price-sensitive auto industry is capitalizing on these consumer demands coupled with improved safety features and the means to differentiate based on increasingly sophisticated electronics packages (e.g., engine, brake, and tire monitoring; navigation, tracking, and alarm or alert systems; advanced driver assistance systems (ADAS); etc.). At the core of the latest auto feature packages is the rise in MCUs, MEMS, optics, wireless, and embedded SOCs.

The diversification and expansion of markets for the semiconductor and electronics industry comes at an important point in our global supply chain. Following reductions in the number of major companies across verticals (consider the dramatic decrease of suppliers for HDD and DRAM, to name two notable and recent examples), the increase of semiconductor and component penetration in once "niche" markets allows for new centers for healthy and diverse competition.

Ramping up for the 3Q12 CE peak season, the latest Ultrabooks and tablets are hitting the market with positive consumer reception. This is welcomed news in the wake of the reports showing PC growth slowing for the traditional CE devices in this sector, as discussed by EBN's own Barbara Jorgensen last week. (See: Triple Whammy in the PC Arena.)

Meanwhile, the new devices are pushing the component market in different directions, opening the doors for some, but also closing some for others. We can hope that the combination of Intel's Ivy Bridge and Ultrabooks plus Microsoft's Windows 8 and new Surface tablet, alongside the new Apple lineup, will continue to fuel growth in our industry. Regardless, it is a definite positive to see the automotive sector opening with a wide slate of opportunities for many semiconductor and electronics companies to realize growth and new market share as components that were once the domain of CE devices are now part of the largest CE device, the automobile.