First the bad news. 2009 is stacking up to be a poor year for the electronics industry, including the high-flying communications sector with its past exceptional wireless growth rates. Projections for all communications segments are down.
But the good news is that most businesses aren’t going away. While growth will be less to none this year, it probably will not be as bad as the dot-com disaster in 2000-2002. So think positively and press forward with your plans. More than ever, this is the time to be creative. Innovative solutions can save the day and help you move forward, even in down times.
WIRELESS STILL LEADS
Wireless, specifically the cell-phone sector, has been driving the semiconductor industry for the past few years. That won’t change during the coming downturn. Nokia, the leading cell-phone maker, expects total 2008 handset sales to be 1.24 billion, or up about 8% over last year. The 2009 projection for handset sales is somewhat less than that. Some estimates say only a 1% loss, but others forecast as much as 9% less.
Qualcomm also projects lower IC sales. Intel forecasts low double-digit decreases that mirror what other leading IC vendors are suggesting for early this year. Most other semiconductor firms expect lower sales as well.
Market research firm iSuppli says that final 2008 semiconductor sales will be $266.6 billion, down about 2% from $272 billion in 2007. Wireless chips make up an estimated 19% of the total. Other cellular-related equipment manufacturers will see basestation and other infrastructure sales decline during the year as 3G rollouts slow down and 4G implementations get delayed.
Look for similar declines in other communications sectors, specifically networking, driven by PC sales. HP and Dell are looking at declines in 2009. IC Insights forecasts that PC revenue will decline 3% but rebound in 2010. Laptop sales are expected to exceed desktop sales for the first time. That’s good news for wireless, since all laptops have embedded Wi-Fi and sometimes other wireless technology.
New chips like AMD’s Shanghai and Intel’s iCore7 won’t reverse the decline, but they may help certain sectors like high-end servers. Related communications and networking sales will drop as well. Even the previously healthy consumer electronics market anticipates lower sales and profit. Best Buy is projecting lower sales overall and saying that it could no longer accurately predict the future. Circuit City recently went into bankruptcy, closing over a hundred stores and laying off hundreds.
While we will see downward trends all year, we may expect some moderate growth in a few areas. For example, analog TV transmissions will go dark on February 17. With only digital signals to be had, this could trigger more than expected digital TV sales as the reality of this major change sets in. Converter box sales will be good, too.
Smart phones are still hot despite the downturn. High-end phones like the Apple iPhone, Samsung’s Instinct, HTC’s Google Android G1, and the RIM BlackBerry Storm, Curve, and Bold will persevere as affluent and tech-savvy consumers upgrade from their current feature phones. About 16% of consumers have smart phones, and many want to upgrade to fancy phones with greater data capability.
These phones also carry higher margins, so they will help carry the low-margin phones during the downturn. Companies that don’t offer high-end models could suffer, like Motorola did upon the decline of its Razr sales. This coming year could be a real shakeout in the handset market similar to 2000-2001, when six handset makers folded.
One bright spot is that consumers aren’t going to stop using their cell phones. Wired home-phone connections continue to decline in favor of wireless phones. While consumers will cut data usage such as Internet access, they will still talk and text. Portio Research reported 2008 text-messaging revenue at more than $130 billion and predicts that amount will grow to $224 billion in the U.S. by 2013.
The saturated cell-phone market is now largely a replacement market, as much as 75% worldwide. That figure may decline, but millions of phones die each year and millions more are lost every day.
Look for wired network upgrades as carriers and operators try to deal with the increased data flows thanks to video and 3G cell phones. Already, 10-Gbit networks are well on their way, but some upgrades to 40 Gbits/s are in place with more in the works. The 100-Gbit/s systems are being developed and in the planning stages (see the figure).
The future is clearly fiber as costs fall and the demand rises for ever-increasing traffic. Look for more fiber to the home (FTTH) like Verizon’s FiOS and other passive optical networks (PONs), as well as more optical backhaul in the cellular networks.