What's ahead in 2012 for the technology industry?
Current predictions for the global economy is for “slower growth” in 2012 due to Europe's fiscal weakness, slow expansion in North America, and potentials for declining exports for China. {complink 6856|Goldman Sachs & Co.}, for instance, predicts global economic growth of about 3 percent in 2012, “with quite a bit of differentiation between the strongest performers and the weakest performers,” according to Jan Hatzius, its chief economist, global investment research.
This forecast is applicable to the electronics industry. The sector may grow in the mid-single-digit range but with various segments performing either slightly below or strongly above this level. Results at individual companies will vary widely; major OEMs such as Apple Inc. and {complink 4751|Samsung Electronics Co. Ltd.}, and top component suppliers like {complink 2657|Intel Corp.}, will outperform the industry, while laggards are likely to get hammered. Where your company fits in will be determined by its offerings, customer relationship, end-market, and ability to provide extended support.
Of course, prognostications like these have been wrong before. Technology veterans have seen optimistic sales forecasts fall flat even as companies crank up production to meet these elusive targets. But while trusting analysts' sales projections can be hazardous to a company's fiscal health, I believe it's also sheer madness to not do scenario planning based on some sort of forecast figures.
Absolute sales forecasts are not the only numbers industry watchers consider, however. Executives are also interested in projections about events and developments that may influence corporate performance. HIS provided such a list in its “Ten Events that will Transform the Technology Industry in 2012.” They don't necessarily constitute a roadmap but can help us understand how things shape out in the year ahead.
The IHS list is excerpted below with comments from the company in italics. My observation follows each item. Please post your comments on the message board.
- Enter the ultrabook:
- The 2012 forecast is mostly cloudy:
- The tablet generation gap:
- Intel battles ARM insurgency:
- Smart displays start to become a big deal:
- Hard drives shrink in order to grow:
- Ultrabooks make a dash for cache:
- LTE for everybody:
- Contract manufacturers head for the cloud and ultrabooks:
- Wireless goes ubiquitous:
With the media tablet decimating the netbook market and also putting the brakes on notebook sales growth, the PC supply chain is embracing the ultrabook as its potential savior. Ultrabooks are designed to compete with media tablets with features including thin and light form factors, instant-on activation, always-connected wireless links, solid state drives, and long battery lives.
Ultrabooks won't save the PC market. Rather, they will further hurt notebooks. The ultrabook is not a compelling purchase because it has not created a new demand spectrum but is simply replacing an older one.
This year will see innovations and refinements in how mobile devices interact with the cloud. Companies that effectively promote and market these new cloud services will achieve an advantage in the marketplace.
More questions will be raised about the utility of the cloud this year. Is it just a passing fad or will it become a mainstay for technology companies and their customers?
The schism between younger and older generations in terms of computer usage will become apparent in 2012 with the rise of tablet PCs. This year will reveal to a large degree whether the PC can remain relevant to younger users, who will determine the shape of the computer market in the future.
Desktop computers may fade away but notebooks are here to stay. Tablets will cannibalize the notebook market but they won't end its utility for home and office use.
In parallel with the rise of the media-tablet-inspired ultrabooks will be the increasing use of ARM processors by PC OEMs. ARM processors are perfectly suited for use in small-form-factor products, including smartphones and tablets. This represents a major challenge for Intel, whose X86 microprocessors have dominated the PC market for 20 years.
ARM is certainly a viable alternative to the Intel near-monopoly, but the world's biggest chip maker has been in this situation before. Writing off or underrating Intel is a mistake.
Illustrating this trend, the portion of display driver chips used in large screens will decrease, and then will grow in small and medium screens in 2012. An estimated 44 percent of all display drivers will be used in small/medium displays in 2012, up from only 39 percent in 2010.
This is a natural development and is good news for chip makers — but perhaps not so for display makers because of the increased competition in their market.
To cash in on the fast-growing sales of the ultrathin ultrabooks, hard disk drive makers will have to shrink the form factors of their products.
Shrinking the form factor alone won't save the hard disk drive market. The shift away from HDD will continue to accelerate for other reasons apart from size.
In parallel with the demand for thin HDDs, ultrabooks will generate booming sales of cache solid-state drives (SSDs).
Another reason why hard disk drives are an endangered species.
Demand for faster mobile data rates and latencies — driven by rising sales of smartphones, tablets, and now ultrabooks — will generate massive growth in subscribers for the next-generation 4G wireless standard, known as Long Term Evolution (LTE).
Hopefully, telecom service providers won't throttle the market by raising prices or imposing stringent usage quotas.
Suffering from low margins and weak growth in their existing notebook PC business, original design manufacturers (ODMs) in 2012 are entering the market for servers used in cloud applications, which could generate higher profits for these contract manufacturers. ODMs are turning their attention to ultrabooks to revitalize sales.
Whether they head for the cloud or ultrabooks, margins will remain under pressure at contract manufacturers. To improve margins, they must increase their value proposition — but none, so far, have been able to do this.
The year 2012 may be the time when we start to see ubiquitous wireless technologies spur exciting new business models in technology.
This is probably the safest forecast from the IHS list.
Terrific post, Anna. I gather that your view on technology's progress tends to the optimistic side, despite the not entirely bright forecast for economic growth.
Great article and many of the points make sense. One comment from me; kids will need PCs as long as they need to do their homework and write stuff down as the user interface on a tablet is not the best for this activity.
I like your observations about the predictions and your willingness to question them. I'm still uncertain about the ultrabook, for example, and which market it will impact. Personally, I'm of the “save the PC!” persuasion but your argument is compelling. Thanks for your perspective!
Barbara, The PC isn't going away. I agree. It will have its wings clipped by smartphones and tablet PCs but crushed? Hardly. Writing can be done more easily on a regular notebook. The tablet PC isn't a writing tool and I don't see High School students drafting essays on tablets. They are useful but I doubt as many of them will ever be sold as laptops. You write on a PC and peck on a tablet. That's the difference. Thanks to Apple we have both of them.
Peck… that's a good term for it. I can't help but think of birds now for some reason…
Lots of great predictions and analysis. The slow growth and broadening of the earnings gap between successful and unsuccessful companies suggest that more mergers and acquisitions will be seen in 2012.
“Ultrabooks won't save the PC market. Rather, they will further hurt notebooks”
Anna, I think ultrabooks are more suitable for enterprise and SMB community, where they need more computing power than normal laptops and net books. For normal users it's not going to be having any effect because in price wise also it's slightly more than the normal laptop or netbooks.
@Ariella, thanks for your comment. Yes my point is that analyst don't often get things right. Hence, sales projections (though essential) alone can constitute a fiscal health hazards to a company. Executives do monitor other projection, events and developments that may influence performance.
@Bolaji, I agree with you completely. Having a college freshman, a high school senior and freshman, the tablets are but a mere toy for wasting time and getting on Facebook. There are times it is hard enough to time out a long email on a smartphone without a keyboard or a tablet, let alone a multiple page school project. The tablet market will continue to grow and the survivors will get weeded out, but they are not going to replace a laptop for any serious user.
@FlyingScot, Well I agree, however, we will know the outcome by the end of this year whether desk top PC will remain relevant. Remember schools and colleges are beginning to use tablets. It's portable, workable and saves space. Younger ones tend to gravitate towards latest technology.
@Stochastic excursion, absolutely. 2012 will unfold gaps and differences in corporation performances, particularly in the high tech industry.
Great article! I hope to see more exciting wireless technology to grow besides the mature Wi-Fi.
One thing I am looking forward to seeing the outcome of, is how much cloud computing will catch on. Hard to say at this point, but perhaps we will know next year at this time.
The best way to add value and grow at the same time is acquiring new technologies and IP. That is the wave that we're on nowadays.
@Jay_Bond,
As for me, the tablet experience in its current form can never replace laptop experience. I know there are people that can bend a tablet to their will, to make entries on tablet is an exercise in hunting and pecky futility. Tablet still can't do what laptops do.