As Europe's recession drifts into its record sixth consecutive quarter, the electronics industry must continue to negotiate a bumpy economic road.
The euro zone economy contracted during the first quarter of the year, making the slump the region's longest in the postwar era and longer than the 2008 downturn that dragged down much of the world, according to reports from The Wall Street Journal (subscription required) and Spiegel Online.
The gross domestic product dropped 0.2 percent in the euro area and 0.1 percent in the 27 European Union countries, according to data from Eurostat. In March, seasonally adjusted industrial production grew 1 percent in the euro area and 0.9 percent in the EU27. Industrial production fell 1.7 percent in the euro area and 1.1 percent in the EU27 from a year earlier.
With no recovery in sight and increasing concern that austerity measures have backfired, high-tech companies will have to take a hard look at how they map a route forward. Many of those doing business or based in Europe, including Philips, Siemens, and ST Microelectronics, have been talking about the downturn's impact on their balance sheets for several quarters. (See: Earnings: Dark Clouds Hang Over Europe’s Bellwethers.) There have been the usual counteractive responses: layoffs, reorganizations, shuttering facilities, management changes, etc.
Now that those measures have been exhausted, there's a growing recognition that companies have to dig their way out of this — pretty much on their own. Proposals coming from economic ministries or the EU collective don't seem to convey enough confidence in being able to stimulate an economic turnaround anytime soon. And companies can't really walk away from Europe, even if the promise of growth in markets like Africa or South America offers glimmers of hope for bottom line security. Europe still generates 17 percent of the world's GDP, the WSJ said.
Even though most companies know this, there are few real-life examples of companies moving beyond this slowdown. There's always talk that a downturn is the best time to invest in research and development. Innovating your way out of the recession was once a mantra, wasn't it? But there's little solid evidence that this is happening on the wide-scale basis that's needed right now.
McKinsey & Co. suggested in a press release for a 2009 report that “businesses can align themselves with the evolving behavior of their customers during the recession and position themselves for economic recovery.”
The tactics suggested in the report (dated perhaps, but still relevant) include a deep-dive analysis of consumer spending habits to see where and how much buyers are cutting back and understanding how consumers replace products. It's not a stretch to say that some of the suggested tactics could be applied to supplier-customer relationships in European high-tech sector or to any supply chain relationship.
What I'm really waiting to see is for a company to take a bold step forward and do something that doesn't involve the same reactionary, recession-sidestepping strategies. Most safe standbys have already been done, and they haven't really worked. Come on. Surprise me with your best climb-out-of-this-mess solution.