A Bumpy Ride In 2009

As 2008 draws to a close, many magazines will look back at this year’s technology innovations that are the lifeblood of the electronics industry. Just for a change, I thought I’d take a look forward to what may be in store for us during 2009, particularly given the monetary turmoil we’re currently experiencing.

The financial maelstrom we find ourselves in has, of course, prompted numerous industry analysts and prophets to ruminate, cogitate, extrapolate, and pontificate on where 2009 will take the electronics business. Naturally, these predictive insights don’t always agree with each other.

However, all pundits seem to agree that the semiconductor business will suffer a serious slow down in 2009. Consumer confidence is shaky at best and despite copious financial bailouts, the banks remain jittery about trusting each other regarding the movement of money between them.

So how bad will 2009 be? Well, the pundits’ prophecies suggest that the first half-year will see a decline in semiconductor business of between 7.5 to 11%. Contributing to this downturn will be a depressed PC market. Sales of desktop systems are expected to drop by 6%, which contradicts earlier predictions of a 22% increase in 2009. Optimistically, the sales of laptops are expected to maintain a positive growth figure.

And just how bad will 2009 be compared to the 2001 recession that saw global stock values plummet and the electronics industry suffer serious decline? The consensus is nowhere near as bad.

The 2001 electronic market depression was caused by three main factors, the failure of the dotcoms businesses, the tragedy of the World Trade Center attacks, and the fact that venture capitalists had been less than diligent in who they loaned money to. This last factor created a situation where many fledgling companies could access large amounts of cash for whatever projects they had, brings those projects to fruition, and then find they didn’t have any customers to buy the products. Thus, the end of those fledgling-ers. As one industry expert said to me back in 2001, “dead cats don’t bounce.”

While 2009 will start badly, many analysts say that the second half of the year will see sales drive back up. Some are bullish enough to predict a very slight overall market growth in 2009, although I find that a little too optimistic.

Most inventories currently stand at reasonable levels. Nonetheless, companies have been prudent about limiting capital expenditure and many have cut operating costs.

So, it looks as though we’re in for a roller coaster ride in 2009. However, given the international efforts to stabilise the world’s financial challenges and given the electronics industry’s inherent resilience and consummate ability to innovate, it may prove less of a white-knuckle ride than a lot of people expect.

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