Electronics industry is on the up

THE ELECTRONIC EQUIPMENT industry is starting to show signs of recovery according to analyst firm Gartner.

While things are looking up, the researchers warn that the ride is still going to be bumpy for the next few months, mainly due to the uncertainty of overall macroeconomic conditions and the effect of government stimulus packages.

Gartner does not expect a sustainable recovery pattern until 2010 and associated semiconductor sales are not expected to regain 2007 peak levels until 2012.

"Almost all sectors of the electronic equipment market have now hit bottom and await signs of 'first growth' in comparison with the same quarter last year," said Klaus Rinnen, managing vice president of the semiconductor manufacturing group at Gartner.

"The first signs of growth will be led by seasonal buying patterns in the PC market during the third quarter of 2009, although other major sectors will not begin to show first growth, year-on-year, until 2010."

Mobile phones are expected to lead the charge into recovery. Having bottomed out in the first quarter of 2009, Gartner now expects mobile phone unit production to decline only eight per cent in 2009, four per cent less than it was predicting in May.

The rebound has largely come from the demand for basic phones targeted at emerging markets, particularly China, and for smartphones, which continue to perform well as competition increases and prices come down.

While mobiles are faring better than originally anticipated, little change is expected in the recovery of the PC sector. Also hitting its lowest point in in the first quarter of 2009, a sustainable recovery is only expected in the third quarter of next year, mainly due depressed corporate demand and lower IT budgets. This will be offset somewhat by home PC demand, which has held up better than expected.

Much like PCs, consumer electronics was largely flat or down but saved by reasonable growth in LCD TVs and Blu-ray DVD players. With many people holding off on large luxury purchases, the market appears to be in a state of limbo and Gartner has pushed out first growth indicators to the second quarter of 2010. From this point it is thought that stability will start to appear and growth rates are expected to hit pre-recession levels in early 2011.

"Although the first signs of recovery are starting to appear for the electronics industry, the damage from the current industry recession will be felt for a long time," concluded Rinnen.

"This is seen in our current five-year semiconductor revenue forecast, which does not show recovery to 2007 levels until 2012. Vendors must prepare for significant changes in consumer buying behaviour, technology demand patterns and a changed supplier landscape."

Areas such as wired communications and automotive electronics are going to be subject to significant regional fluctuations, but should follow a similar pattern to the other groups. µ