Electronica 2010 is set to conclude a successful year for the global electronics industry. Despite the traditional fickleness of their figures, even analysts agree that 2010 has seen tremendous sales growth for semiconductor companies. But while many analysts say we’re in a boom year, they’re a shade jittery about 2011.
Figures supplied by World Semiconductor Trade Statistics show that sales on the European semiconductor market continue their upward surge, recording a significant 43.8% increase in Europe in May 2010, compared to the same month in 2009. Also in Europe, positive growth rates were recorded for some of the main product categories on a three-month rolling average.
In particular, optoelectronics were up 8.9%, and discretes and MOS microcontrollers were up by 6%. Sales for memories grew in May as well. Notably, sales for DRAMs increased by 4.4%, and total MOS SRAM grew by 10.8%. Overall, European semiconductor sales in May 2010 amounted to $3.2 billion (U.S.).
On a year-to-date (YTD) basis, semiconductor sales continued their increase by 43.2% in 2010 versus the same period in 2009. The exchange rate of the Euro compared to the U.S. dollar has reversed its impact on the European sales picture. Semiconductor sales totalled 2.4 billion Euros in May 2010, up 4.4% from the previous month and 44.3% over the same month a year before.
Also on a global YTD basis, semiconductor sales increased by 39.3% in 2010 versus the same period in 2009. On a worldwide basis, May semiconductor sales totalled $24.7 billion (U.S.), up 4.5% from the previous month and 47.6% from the same month in 2009, for a 52.3% YTD increase.
Nation By Nation
The European electronics market has been buoyant this year, but economic factors are worrying industry pundits as well as the stock markets. True, the European Union is an economic heavyweight with 27 countries and nearly 500 million people, accounting for almost a third of the world’s GDP. Yet when its economy sneezes, the rest of the world might not catch a cold, but it will quickly reach for the vitamin C.
Positive trends during the first and second quarter of 2010 showed the European Union’s economy expanded by 1.0% quarter over quarter. Germany’s GDP grew by 2.2% quarter over quarter. France’s GDP was marginally stronger than expected at 0.6% quarter over quarter. The United Kingdom’s economy grew by 1.1% during that period as well.
Yet Greece contracted by 1.5% due to its debt crisis. Spain is facing serious economic concerns following a property price crash and nearly 20% unemployment. There also are fears in the Euro zone that Hungary and Portugal may soon be facing a Greek-style debt crisis.
Global stock markets remain uncertain. Their concerns are focussed on the long-term negative effect on the Euro because of the EU countries already or potentially facing a debt crisis. An additional concern felt by the international stock markets relates to worries over the U.S. economy, despite the U.S. GDP figure of 2.4% looking good. The underlying concern is U.S. unemployment figures.
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On a positive note, Europe’s industrial heavyweight, Germany, is looking like it has moved well away from the financial problems it was facing four years ago. This bodes well for the electronics industry. But while GDP figures and other general economic factors help when you’re taking a broad economic snapshot, they don’t give you a focused, pragmatic view.
Clearing The Mist In Those Crystal Balls
So what will happen in 2011? Four consecutive quarters of growth may mean a boom trading year, but maybe it’s time for a reality check. Order books are full, customers are building stocks, double ordering is rife, production capacity is stretched, lead times are building, and deliveries are taking longer. And remember, the double ordering of components does not mean OEMs are double shipping finished products.
That’s particularly important. Semiconductor companies are extremely cautious when it comes to over-investing in manufacturing, marketing, sales, and distribution on the back of a market boom, only to find they have inflicted debt upon themselves when the market declines. Many semiconductor companies remember the financial pain of the industry collapse at the beginning of this decade and won’t get caught again.
2011 Will Boom, But Not So Loudly
Will 2011 bust after the boom of 2010? I don’t think so. The communications, computing, automotive, industrial, and military markets will continue to be component-hungry customers for electronics technology. But what do the crystal-ball gazers say?
International Data Corporation says there will be 8.8% growth. Future Horizons expects 14.4% growth. And, the Semiconductor Industry Association predicts 5.6% growth. That’s an average of 9.6% for 2011. As always, opportunities will exist for companies that aren’t afraid of creating new technologies and trying new ideas.
But take note: the start of this decade saw an electronics market go into financial free-fall driven by the vast amount of venture capital that was available to burgeoning and adventurous electronics companies. Many design projects were initiated but with insufficient proof that there were substantial end markets where sufficient sales could be achieved to pay off the venture capitalists.
Caution could prove one of the watchwords for 2011. To paraphrase Star Trek’s Spock, there will be growth, Jim, but not as we know it.