By Rob Spiegel, Contributing editor — Electronic Business, 1/5/2010
It goes without saying that 2009 was a tough year for the electronics industry. With the notable exception of laptops “ which grew in unit shipments throughout the year“ and LCD-TVs, most product segments suffered significant declines. That started to change in the third quarter as year-over-year and sequential growth returned to many product groups. Desktop PCs are likely to remain sluggish as buyers turn to laptops that are cheaper and come with robust functionality.
The industry managed its inventory better during this recession. During the 2000/2001 recession, the industry had to eat through a mountain of inventory before factories restarted. This time around, any increase in demand should prompt production. But the current recession has been more broad-based and far deeper than the last recession, so the industry still has some recovering to do before revenue returns to pre-recession highs.
Most industry observers predict that the first half of 2010 will continue to see growth returning, but without a real boom. The second half of 2010 is likely to be more robust. Here is a look back at 2009 and forward at the 2010 forecasts for the consumer electronics, PC/laptops, medical, and military segments.
Consumer electronics: fueled by HD TVs and Internet connected devices
Consumer electronics took a big hit during 2009. It has been a challenging year, said Norm Bogin, VP of research for digital entertainment at In-Stat, a research company in Scottsdale, Ariz, owned by the same parent company as EDN. We just did a survey on holiday spending in the US and the intent to buy is down, he said during a late 2009 interview.
Even so, there are some products that look good. HD TVs are still high on the shoppers list, but in general, 2009 is down from 2008, and 2008 was pretty weak, he said. The demand for HD TVs is partly prompted by this seasons high discounting.
Bogin did see a few other bright spots this year. E-books and e-readers are strong,he said. DVDs are down, but Blue-ray is up.
In 2010, we can expect consumer electronics to struggle at the beginning. The first half of 2010 will still be a challenge, but certain products will grow, said Bogin. Blue-ray, e-readers, mobile Internet devices, and HD TVs will grow,he said, further pointing to Internet TV as a growth market in 2010. Internet TV will grow, and anything that enables Internet.
The second six months of 2010 look brighter, according to In-Stat. The second half of 2010 should be better, since we should be through the recession and in a job creation mode, said Bogin. As soon as unemployment goes down, spending on consumer electronics will go up.
PCs: Laptops outsell desktops
2009 saw a remarkable move in the PC/laptop sector, as laptops passed desktops in unit sales for the first time. Notebooks were definitely strong,said Matthew Wilkins, principal analyst for compute platforms research at iSuppli Corp. They provided low-cost mobile computing when pockets and spending was getting hit hardest. He noted that notebooks were the growth driver for the whole PC industry.
Jim McGregor, chief technology strategist at In-Stat, agreed that laptops saved the PC industry this year. In 2009 we started to see a lot of innovation take hold in the netbook and ultra-thin category,he said. I would say the ultra-thin is going to win out. They’re very sexy and we saw the price drop from $748 down to $599 right away.
He noted that life for the desktop was difficult this year. We are almost at the point where the desktop has to fight for its identity, said McGregor. For the home, its still a good device, but ita unlikely to be your primary communication device.
2010 will see a pickup in the sector as a whole, with laptops still leading the way. Due to the replacement effect, the notebook PC will still be strong, and the desktop will still be weak, said iSuppli Wilkins. We are also looking forward to seeing how CULV [consumer ultra-low voltage] laptops develop and engage the market. He also expects the introduction of microprocessors with integrated graphics to be a major milestone for the PC platform in 2010.
In-Stats McGregor expects the PC market to explode in 2010. Electronics is leading the way in this recovery, he said. Going forward, our industry is growing very rapidly. Business, consumer, everything across the board is looking good for 2010.
He expects the growth to be fueled by innovation. You’re going to see an explosion of design in 2010 not just form factor, but changes in terms of other technologies making their way into PCs, said McGregor. You’ll see I/O capabilities and a lot of differentiation among OEMs and ODMs for crafting distinctive products. He points to Dell coming out with a dual-mode latitude with LYNX and Microsoft. Also, Acer and Toshiba are on a tear, said McGregor. Look for longer battery life and longer performance levels.
Medical: Growth is robust, healthcare bill or not
The medical sector did well though the recession and looks to be big for 2010, as well but not just because of the potential for a healthcare bill. There are two camps regarding a potential healthcare bill, said Harley Feldberg, president of Avnet Electronics Marketing, the component arm of Phoenix-based distributor Avnet Inc. One believes expanded healthcare will mean more health services, therefore more medical equipment. The other camp believes a healthcare bill is more about how to pay for healthcare and not about healthcare growth.
Even so, the sector had a decent 2009 and looks bright for 2010. The sector did well during the recession and the aging population will help it grow in 2010, said Feldberg. He sees a bright future for the sector. In handicapping, we see strong growth in medical. We are adding technical support.
The growth in medical electronics during 2010 will come in two areas: devices consumers use to monitor specific health issues and devices used by medical professionals, experts believe. In consumer medical equipment, one growth market is home monitoring equipment for diabetes. This is a problem now not only in the Western world, but also in countries such as India. So the market for blood glucose monitors and insulin pumps is fast growing,said Seema Deshpande, general manager for medical/high reliability, high performance analog at Texas Instruments Inc. We also see a growing trend for health and wellness related medical equipment like electronic exercise monitoring.
Yet another area where TI sees growth is in patient monitoring equipment using wired and wireless connectivity for remote monitoring of vital signs in hospitals, doctors office and in homes.
Growth is also projected for equipment used by medical professionals. We continue to see a lot of innovation in medical imaging,said Deshpande. Semiconductor innovation has brought about a trend to make equipment more accessible and affordable by enabling lower power and smaller size. Growth areas include ultrasound equipment that is becoming increasingly portable, even handheld, and remote monitoring equipment.
Military: Good, but not a growth market
Given the new surge in Afghanistan and the ongoing military presence in Iraq, it would seem the military sector would boom for the US electronics supply chain, recession or not. Avnet Feldberg believes that some of the demand for military components may be slipping outside North America.
We are a little puzzled by the market conditions in military and defense, said Feldberg. Business isn’t as buoyant as people would think. Even though much of the military purchasing is restricted to North America, Feldberg believes some systems are being procured elsewhere. A defense contractor could sublet a portion to a French company, he noted.
Looking forward, Feldberg believes 2010 will be a good year for the sector, but not particularly robust. I think it will continue to be a good market, he said. I dont see a lot of growth in 2010, but its not particularly a growth market.
While military equipment may be slow growing, the components used in defense are finding their way into other applications. In the HiRel [high reliability] market, which has traditionally been focused on defense and avionics, we see interesting new applications for industrial, medical, and consumer markets that require resistance to higher temperatures, smaller size, and lower power, said TIs Deshpande. In the industrial market, railway lighting applications require product longevity in a high-temp environment.
Deshpande noted this also applies to components used in harsh environments such as downhole drilling and undersea cabling. Military components are also being used in medical applications.
High-reliability devices or enhanced products are increasingly sought after for sterilization equipment or in imaging and radiation applications, said Deshpande.
Another growth area for traditional military components is in space applications. We are seeing continued year-on-year growth in the space market,said Deshpande. The space industry requires that semiconductors are resistant to radiation effects and meet mission lifetime objectives.