It's official: the recovery is underway for the electronic equipment industry – although a lot of uncertainty continues to rest on the macroeconomic recovery and the effectiveness of US government stimulus packages, especially when that stimulus runs out.
As a result, 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,” says Klaus Rinnen, managing vice-president at Gartner’s semiconductor manufacturing group. “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.”
Jim Tully, vice president and distinguished analyst at Gartner, adds: “Electronics vendors and their suppliers must give careful attention to the expected recovery pattern of each sector, and a separate response must be planned for each. In particular, new product introductions should be synchronised with the expected sequence of the recovery.”
Gartner has recently revisited its expectations for recovery in the electronic equipment industry, providing details by sector.
* PCs – Gartner has found that there is little change in the PC sector recovery. Having bottomed in the first quarter of 2009, a sustainable recovery is pegged for the third quarter of 2010. The outlook for a PC recovery is influenced by depressed corporate demand and the fact that IT spending is not expected to return until 2010. In contrast, home PC demand has held up better than expected, reflecting the way that consumers now value and use PCs, even in difficult times. The overall PC forecast has been revised up, especially for the US and China, in light of this continued strength of the home PC market and the improving outlook for the global economy.
* Mobile phones – Originally anticipated to reach bottom in the third quarter of 2009, mobile phone production reached its low point in the first quarter of 2009. This market is now predicted to be the first sector to show sustainable recovery, starting in the first quarter of 2010. Improving fundamentals in the mobile phone market was a key driver in the upward revision, and Gartner now expects mobile phone unit production to decline only 8% in 2009 which is 4 percentage points less than the May 2009 forecast. 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.
* Wired communications – The wired communications market outlook has benefited from China’s infrastructure spending and an earlier than expected onset of recovery in the developed nations, causing Gartner to move forward the timing of the bottom and first growth by two quarters. However, growth will be relatively weak until 2011, meaning that the period between first-growth and sustainable growth markers could be better described as a period of stability rather than a rapid return to historical growth levels.
* Consumer electronics – Despite reasonable growth in LCD TVs and Blu-ray DVD players in 2009, many other categories have shown either flat sales with little or no growth, or declining revenue and unit shipments between the first and the third quarters. The consumer electronics market appears to be in a state of "limbo" and Gartner has pushed out first growth indicators to the second quarter of 2010. From the second quarter of 2010 onward, Gartner predicts greater stability but anticipates few signs of a return to pre-recession growth rates occurring until the first quarter of 2011.
* Automotive electronics – The auto industry is still performing in line with Gartner’s expectations since the beginning of the year. Gartner predicts that semiconductor vendors will likely see improved demand for semiconductors from Tier 1 and Tier 2 suppliers, which will be reacting to increasing demand and new car purchase orders early in the first quarter of 2010. However, more evidence of recovery in the economy in general is needed before any strong growth trends can emerge for the automotive sector.
“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,” says 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.”