"The sense in the industry now is that there is more risk on the upside than the downside. That is, there is greater risk in underestimating demand than in overestimating it," said Greg Sheppard, executive vice president of iSuppli, El Segundo, Calif.

"The phrase that captures the feeling of the industry today is 'cautious optimism,'" Sheppard added.

iSuppli is predicting the global market for electronic equipment will grow by 3% in 2003 after experiencing two years of decline, Sheppard said. Electronic system revenues will expand by 7.3% in 2004. All of the major electronic equipment segments, even the beaten-down telecom area, will return to growth next year, he predicted.

Sheppard showed iSuppli's forecast of semiconductor market growth of 9.9% in 2003 and 14.4% in 2004.

The major assumption behind the expansion is that the world doesn't experience another derailing crisis, he added.

"If there's any sort of terror attack or other shock to the system, all bets are off," Sheppard said.

An industry expert attending Sheppard's presentation agreed that market conditions have changed, requiring an adjustment in attitude among members of the electronics supply chain.

"At the peak of a cycle, people always think that conditions will continue the way they are forever, whereas, when you are in a recovery, you have to climb a wall of skepticism," said Doug Andrey, director of finance and principal analyst for the Semiconductor Industry Association, San Jose. "If companies underestimate the upside, they can carry too little inventory, underestimate demand for end products and miss out."

Andrey said the fact that the electronics industry already has endured several severe shocks in recent times yet still is recovering, is an encouraging sign.

"What's unusual about the current cycle is the number of shocks," Andrey said. "Usually, during a down cycle, you have one big shock, such as the Asian financial crisis. During this down cycle, we've had three: September 11, the Iraq war, and SARS (Severe Acute Respiratory Syndrome) epidemic). Given all these shocks, the fact that the market is in this state is a very positive sign."

In his presentation at the Supply Chain Network Conference, Jay Srivatsa, principal analyst, consumer platforms for iSuppli, said that despite slower-than-normal growth and a lack of a killer product, the consumer electronics market remains healthy and will grow in 2003 and 2004.

"It's been a tough year and next year will be tough as well," Srivatsa said. "But despite that, the consumer electronics market is doing well. The most important factor today is that there is no hot product on the market. There's no excitement. There's nothing to make those of us who have kids to line up at electronics retailers to buy the latest thing."

Srivatsa said the consumer electronics market also is undergoing a structural change, as upstart, low-cost manufacturers from Taiwan and China steal market share from the traditional market leaders, the vertically-integrated Japanese brands like Sony Corp.

The value of branding appears to be diminishing in consumer electronics in general, he added.

The major growth driver for consumer electronics in 2003 will be digital still cameras, Srivatsa said. Surging demand for mobile phones and digital still cameras has spurred a shortage in lenses, displays and CCD sensors, which could affect overall sales of these products. But Srivatsa said he expects these supply issues to be resolved by the fourth quarter.

Srivatsa predicted demand will cross over from film cameras to digital still cameras in 2004.

"Film cameras will be history soon," he said.

The major application driving growth in 2004 will be DVD recorders, he said. DVD recorders are already suffering from shortages in a key component, the Optical Pickup Unit (OPU).

Srivatsa predicted that consumer electronics equipment revenue will rise by 4% in 2003, following 3% growth in 2002. The year 2004 will bring growth of nearly 6%, he said.

Presenting on mobile handsets, Dale Ford, vice president of Market Intelligence Services for iSuppli, said the market is growing after a two-year pause, despite a slowdown in the rate of increase in subscribers.

"We've moved past the significant declines of the prior two years, but we're in a different growth pattern than what has been experienced previously," Ford said.

Subscriber growth will slow to 15% in 2003, far below the 40% to 50% growth rates seen during the boom years prior to 2001, Ford said. More than 63% of mobile handset sales now are driven by upgrades.

Ford said that new cell phone features are spurring upgrade purchases of mobile phones.

"The killer application in mobile handsets are imaging and color displays. These factors play an important role in driving demand and are not to be discounted."

Ford predicted mobile phone factory revenue will grow at a compound annual rate of 3.6% from 2002 to 2007. Mobile handset production will reach 480 million units in 2003, up 9.5% from 438.5 million units in 2002.

On the supply side, Ford said the rapid rise of Chinese players, such as Bird and TCL, are changing the competitive dynamics of the market.

"These bands continue to assert themselves, creating challenges for the major players," Ford said.

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved