Electronic equipment markets should begin a recovery in the fourth quarter of 2009, enabling the electronics industry to enter into a sustained recovery in the second half of 2010 with a reacceleration in sales in 2011.
"Almost all sectors of the electronic equipment market are still declining, and we will need to see markets hit bottom before we see the waves of recovery and a rebound to positive growth," says Klaus Rinnen, managing vice-president at Gartner's semiconductor manufacturing group. "The wider process of rebounding will occur over a period of approximately two years."
Although the PC market is already reaching the bottom of its growth pattern, Rinnen says the majority of electronics segments will not reach bottom until the second half of 2009, and until then, uncertainty will remain high and visibility low. He also suggested that there is a possibility of a W-shaped recovery pattern that, while less likely, could push sustainable growth into 2011.
"Although there are signs that the market will improve over the next few years, we do not expect semiconductor sales to regain the 2007 peak sales levels during the current five-year forecast period, ending in 2013," says Jim Tully, vice-president and distinguished analyst at Gartner.
It is anticipated that PCs and mobile phones, as the "bread and butter" of the electronics industry, will be among the lead segments to bottom out and start the charge for the recovery.
However, Gartner warns that, although improvement in electronics inventories, in combination with government stimulus, will likely put a halt to the current slide in the market, the question is one of timing between these two events.
If economic growth and government stimulus are slow to materialise, the industry could see a demand and production lift followed by a languishing demand period and even a risk of overproduction in mid-2009. Such events could not only delay the bottoming of segments but also force a second and lower bottom for the PC market.
Even if government stimulus plans lead to a rapid economic recovery and a return to growth, Gartner does not expect the onset of a sustainable recovery – as measured by a rolling 12-month comparison with the prior year – to set in before the second quarter of 2010. Mobile phones are projected to be the first market to achieve a sustainable recovery, edging PCs by about one quarter. For the industry as a whole, sustainable recovery will take longer as higher-priced and highly consumer-dependent segments are delayed.
"The semiconductor industry must prepare itself for significant changes in consumer buying behaviour, technology demand patterns and the supplier landscape," says Tully. "The current recession is pushing many suppliers to the brink of ruin, and several will not survive. The emerging supply chain will be leaner and stronger, but while it reshapes to the new market realities, industry participants are exposed to considerable vendor vulnerabilities."
Gartner analysts say that awareness of risk, both up and down the supply chain, is a must for industry players to maximise their opportunities. In the near term, careful attention must be given to the expected recovery pattern of each sector, and a response must be planned, as those vendors with the most credible response to these patterns will be the ones that emerge from the downturn as winners.