I just finished listening to a webinar by Shawn DuBravac, economist and certified financial analyst (CFA) with the Consumer Electronics Association (CEA), entitled “Economy in Crisis: How We Got Here, Where Do We Go and What Does It Mean for Consumer Electronics and Your Business.”
The presentation offered a wealth of historical economic information via charts and numbers showing how we arrived at today’s economic crisis. But when it came to the prospects for the consumer electronics industry during the upcoming holiday season, DuBravac was surprisingly optimistic.
DuBravac doesn’t have the numbers for all CE sectors yet, since he usually presents them at the November press preview of the International CES. However, he did have a couple ready. He expects gaming hardware units to be up around 3.5% over last year with revenue rising a bit more than that. Portable gaming systems are driving this growth. In addition, he expects audio/video shipment revenue to increase by just under 5% versus last year.
Also very interesting, DuBravac said that perhaps there’s a shift away from consumers viewing technology as purely discretionary spending. In other words, consumer electronics may no longer be considered a luxury, but more of a necessity, though DuBravac made an exception for gaming.
A TOUGH ECONOMIC YEAR
It’s been a tough year economically. First there was the precipitous rise in gasoline prices along with the promise of energy bills that would go through the roof come winter. Most people finally got the message that we need to break our dependence on foreign oil, wean ourselves off fossil fuels, and so on and start using alternative sources of energy. Many people stopped buying SUVs and pickup trucks in favor of smaller gas misers. I looked out my window the other day and saw a guy in a Smart Car delivering a pizza to my neighbors.
Even though gas prices have taken a dive recently—in New Jersey, prices have fallen from a high of about $4.05 to $3.19— I don’t think people have changed their thinking on energy. I think most people are still excited about hybrids and the prospect of seeing all-electric vehicles, such as the Chevy Volt, finally come to market.
The demise of several financial institutions, the rescue of others by the federal government, and the dramatic decline in the stock market have added to the economic bad news. But through all of this, the electronics industry seems to be holding its own. Not only is the CEA expecting growth this holiday season, other research reports clearly show the industry has been doing well this year despite economic conditions.
For instance, Malcolm Penn of Future Horizons in The Global Semiconductor Monthly Report said that July’s results continued the year’s first-half trend of “exceeding expectations,” though he did say that the mood in the chip market is all doom and gloom. We’ll see how things play out for the remainder of the year. As for the stock market, where electronics companies big and small have seen their share prices tumble, DuBravac expects a nice recovery next year.
Our annual Reader Salary Survey represents mostly good news as well (see “What’s In Your Paycheck?” p. 26). Salaries are over the $100,000 mark again for the second year in a row. This is probably the best news of all, and it coincides with a recent op-ed piece in The New York Times entitled “A Fool’s Paradise” by Bob Herbert.
“With reality now caving in on us—banks and brokerage houses falling like tenpins, a trillion dollars or so in bailout money being added to the nation’s debt burden, families by the hundreds of thousands being driven from their homes by foreclosures— it might make sense to get back to basics,” Herbert says. “And in the United States, the basic economic component of a sustainable family life is a good job.”
Make no mistake about it, engineering, with its six-figure income, represents a good job. We all seem to be working longer hours, and sometimes it feels like we’re on call 24/7/365. But for the most part we’re all doing something we really like and are reaping the benefits of the hard work embodied in a solid engineering education and a productive career.
I don’t want to sound like a pie-in-sky optimist. Obviously, electronics companies have their share of bad economic news. There has been news of layoffs this year. Hewlett-Packard Co., the world’s largest computer maker, said last month it would eliminate 24,600 jobs. Sharp Corp., one of Japan’s consumer electronics giants, recently warned that it expects annual net profit to drop more than 40%, reflecting the rapidly worsening business climate.
Will this be the norm for our industry in the third and fourth quarters? I sure hope not. I hope DuBravac’s predictions of steady growth are on the mark. This would mean the industry will be in surprisingly good shape as we head into 2009, considering the overall economic conditions and the downturns this industry has experienced in the past.
I look forward to 2009 and the continuing strength in the consumer electronics and other industries. If DuBravac is also right about an upturn in the market next year, we’ll not only have excellent salaries but our investments and 401k funds should return to normal levels as well.