It is disheartening to have to point to a poor economy, not just in one geographic region but across the globe, as a significant drag on the health of the electronics industry for four years running. The electronics industry is not big enough to pull the economy back from the brink except in countries that are getting their first widespread tastes of electronics. China certainly is gaining from shifts in equipment production there, and South Korea should be benefitting from Samsung's unique success in consumer products and wireless phones. However, the rest of the world's electronics industry needs a solid foundation in economic factors not largely influenced by our industry.
One could say that 2013 will be the big growth year, but there are still many stumbling blocks in our path. At the time of writing, there are many telling issues that may take another 30 days to expose their indicators. If you are reading this, then the Mayans and the aliens from space who advised them were really bad in math, and mankind and the Earth are still in harmony.
Reports of year-end holiday and Christmas shopping are good enough but price breaks are a big driver. It is still hard to see whether Best Buy, JCPenney, Groupon, Facebook, Netflix, Radio Shack, and Mr. John McAfee will still be around in early 2013. The bidding on MIPS Technology is spirited but if the price gets too high the final winner may have remorse.
PC or WC
The jury is still out on whether Windows 8 and UltraBooks is spurring enough excitement in the PC space to loosen consumer spending. The enterprise will take longer to respond simply because it will continue evaluating and there will be a new budget to spend in 2013 so there may not be a big rush pent up. However, if the buzz about tablets and smartphones fires up sales as Christmas gifts – a very likely scenario/outcome – this could severely impair sales of something that looks like a productivity tool, even if it is a little more fun, e.g. an UltraBook with a touchscreen on Windows 8.
Did Windows 8 come out with features that the public were immediately excited about? Did the delay of Windows 8 dull the impact of the waiting Ultrabook hardware? How were important end-of-year and holiday sales impacted? Is the PC becoming the WC – the Work Computer? Years ago video game consoles took a huge bite out of a former PC function. How much will tablets and smartphones pull Internet access for information, socializing, and most of the "lean back" functions from the PC? These are some big questions poised to be answered in the next year or two.
Smartphone 2nd Place
Samsung certainly lit up 2012 with ever-increasing sales of smartphones, quickly adding tablets to the growing masses and showing ringleader Apple that a mid-sized tablet has some real attractive conveniences. While the US may have hesitated, other geographies welcomed the galactic player. The underground took to a lot of name-calling, registering the term "fan-boy" as derogatory.
Meantime the serious professional fighting took patents and fair play to the court room with the world heavyweights. The results were sure to displease half of the onlookers. There are lessons to be learned from any battle, and the integrity of the game was tested here. Certainly, designers and programmers everywhere left the drama reconsidering their own position on what are unique and valuable ideas and how to protect and respect intellectual property. Electronic systems are extremely sophisticated, building on thousands of concepts developed over decades, so this will not be the last major legal action to draw the attention of the industry. The engineering investments are too high, as are the profit potentials. And now there are two leaders in the wireless handset (and tablet) market, curiously holding left hands while throwing punches at each other with the right.
It is interesting that smart phones are pretty pricey items and come with a hefty monthly service charge, yet they still go through a renewal "churn" and seem to be an indispensible "3rd screen". Although to be honest, for many people the smart phone may be the first or only screen they use. Tablets don't really fill the same role due to their size. People still insist on actually talking by phone occasionally.
Many silicon vendors have backed away from the cutthroat smart phone industry. Even with ARM at the core it takes numerous resources, deep support, and a complete ecosystem to serve that industry. The few hard-fought wins to second-tier handset makers may not provide the payback, so Freescale, Texas Instruments, and others have scaled back and redirected their applications processor operations to pursue less vicious markets in which they can specialize.
More Powerful ARMs at your Service
The ARM processor architecture has dominated wireless handsets for 15 years while partners have found that ARM cores are attractive in nearly every other application as well, spreading like insects even into the microcontroller world. The last year saw bigger talk given to ever-more-powerful ARM processors, not just by multiplying the number of cores, but now moving to the 64-bit processor arena.
With an eye still on the power efficiency which accompanies the ARM mystique, announcements – not products yet – of higher performance 64-bit architectural designs with greater address ranges put some credibility into the idea that ARM could end up at the core of servers. More companies have joined in the chorus as OEMs, like Applied Micro, Calxeda, and now AMD who has broken ranks to continue beating on their eternal foe with a newly-fashioned sword.
It will take a few years for ARM-based servers to make any impact in the market even if the incumbents ignored them.
Embattled Kings and Queens (letting the reader pick which is which)
Intel is in some unfamiliar territory with the image of the PC being changed by forces from markets and vendors outside the immediate sphere of Intel influence. Intel, however, has deep resources and has seen this coming at least to some extent. The whole Atom effort has been on a low-power trajectory for years now, bringing along the x86's formidable software base. How applicable that software base is in the new extremely-mobile world has yet to be confirmed.
Microsoft is also looking for relevance in the finicky, throwaway, what-have-you-done-for-me-lately soft world. As noted, the success of Windows 8 is critical. Facebook, Google, and Android make Linux look like a child's-play competitor. Notice that none of those household names advertise on television.
On one hand these companies are fighting to hold on to their home turf while with the other hand reaching out to the new vast frontier that resembles a wireless handset (and at least for MSFT, with an ARM). These new markets have been tried before by the hardware giant and the software giant. Will something finally stick in 2013?
From Smart Grid to batteries to just plain chip power consumption, there should be no doubt that the importance of lowering and managing energy is of increasing interest. Whether it's putting energy to good use while driving a large industrial electric motor, creating more light with CFLs, LEDs, and HID lamps1, or turning off sections of a digital integrated circuit for the moments that it isn't needed, or minimizing transistor leakage, energy efficiency is improving.
Balancing electricity generation on the grid with loads from industry and the home, accommodating periodic DC solar farm sources or electric car recharging, reducing the heat produced by server farms, or carefully nursing the electrons from a cell phone battery – a tremendous amount of human energy is being invested in the power management of electronic systems, from both hardware and software angles. One particularly nice thing about effort put into reducing energy needs, is that it is all good. Except for perhaps the whining "but we could run 3x faster if we didn't have to worry about it glowing like a (incandescent) light bulb", every watt saved at the semiconductor has benefits and reduces many difficulties all the way back to the original conversion of energy from the Sun.
Memories of 2012
The commodity markets of DRAM and Flash can be some of the most brutal in semiconductors. The weakness of 2012 accelerated the DRAM market's inevitable continued consolidation, with Micron acquiring Japan's Elpida and certain Taiwan facilities at extremely attractive prices. Other companies that entered the downturn in a weakened state are much worse off as a result and any 2013 growth will come too late for more than just survival at best. This is a cleansing process that this market undergoes with some regularity.
Looking to 2013
The electronics industry is not going to lead the world out of its economic recession any more than housing, oil, healthcare, transportation, or war will. Politicians have shown little ability to fix anything. But electronics will be a part of the eventual return of a healthy economy – that can be said with 99% certainty.
The topics highlighted above indicate some of the influences on large portions of the electronics industry that will carry into 2013 and later. One can swing to the opposite end of the spectrum to find insight for what 2013 has in store for semiconductors overall. For that it is handy to analyze expenditures in capital equipment (capex) by the semiconductor industry to provide at least a baseline of what the industry is capable of producing and effects of supply and demand on price.
A decline of almost 5% to $285 billion in revenues for 2012 may cause many industry participants to lose hope, but there are fundamental signs that are actually looking up. An over-investment in capacity drove prices down starting in mid-2011, and kept them low throughout 2012. However, Objective Analysis expects demand to catch up to this capacity level in the middle of 2013. This will stabilize prices, leading to growth in the second half. With a depressed first half and a strong second half, the business will grow at a modest annual rate of 9%, closing out 2013 with sales of about $310 billion.
This growth is called "modest" because over the history of semiconductors the average market growth has been 18%. The common joke in the industry is that although the average growth is 18%, actual growth in any one year always falls far to one side or the other of that number. The market's strong cyclicality sees to that. Expect 2014 growth to be significantly higher than 18%. By mid-2015 the "Boom/Bust" cycle will kick in again to bring growth far below the 18% figure.