First quarter results from around the industry are hitting on a daily basis now and the news is more or less as expected. Similarly, forecasts for what may be ahead in 2Q11 are not that surprising (continued muted with rebound), but going into the second half of 2011, the clouds form and many are wondering if we're waiting for the other shoe to drop due to longer-term shortages and supply chain disruptions from the devastating natural disasters that occurred in Japan not even two months ago.
According to Manufacturing Market Insider's April 2011 release, "[n]ontraditional segments – industrial/commercial, medical, automotive, defense/security/aerospace and other – accounted for 30.3% of the [US] $78.4 billion in 2010 sales generated by the 42 Top 50 [EMS] providers." (MMI Vol.21:4, p.3) Furthermore, MMI data reveal that the next two largest market mix segments are communications infrastructure (25.5%) and consumer electronics [(CE)]and mobile phones (25.3%), with the traditional sector of computing and storage showing the smallest percentage of sales, 18.9%.
Why the interest in these numbers? Well, as we watch the 1Q11 reports from companies throughout the semiconductor and electronics supply chains come in, and consider the CAPEX investments and forecasts for growth for the remainder of 2011, it is important to note that mobile computing and smart wireless devices (SWDs) are the market drivers for CE and much of corporate spending. IHS iSuppli recently reported here that mobile memory is set to grow upwards of 26% in 2011, expanding into new market sectors. Here we also find the ongoing question of how to categorize mobile computing (especially tablets). MMI still categorizes tablets in mobile computing and CE rather than as a PC, under computing. As we here at MarketWatch and others, including the major OEM CEOs, have argued, tablets are best understood as part of the next generation PC (read more about this categorization here).
The skinny: both mobile CE and computing (PC) sectors are expected to strengthen as we continue farther into 2011 (as end products and the components comprising the bill of materials (BOM), especially mobile memory). Particular demand and sales strength is still expected to come from the emerging market demand in Asia and South America.
With major manufacturers (see for example this on TSMC) and OEMs reporting this week, such as in this FT.com article, they are echoing the call that while there was significant price volatility during the past weeks post-Japan crisis, the expectation is for these drops to be regained for most companies. However, the situation for some companies, such as Japan-based Panasonic, is not as positive, with releases today of restructuring and market losses due to the disasters and increasing market competition in the SWD space (see this article from WSJ.com).
The bigger picture: while there is some cloudiness around what the second half of 2011 will hold, because of oil prices and consumer confidence affecting spending at both consumer and corporate levels (see this from FT.com), the expectations are for a rebound in demand for mobile products, whether phone, tablet, or other SWDs in addition to new features provided by new automobiles (increased fuel efficiency through MEMS additions, hybrid- or electric vehicles (HEV or EV), and the increased infotainment features based on new auto semi chipsets (see this example about BMW).