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Semiconductor Value Chain Conditions Hold Pace

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While there is much uncertainty still in the global markets, the wider business community along with the semiconductor value chain is holding its course, for the most part (see here for an example of US corporate frustration from CRN).

On the demand and purchasing side, we are seeing a similar trend, PC refresh is still moving forward for enterprises, though at a moderated rate, as are those electronics that are either hot selling items or necessary for business functionality. 

On the consumer electronics (CE) side, there is greater restraint, except for the continued strong momentum for smartphone and tablet PC sales, with LCD TVs being among the hardest hit CE segment.  Inventory for flat-panel LCD TVs in the 40"+ range are mounting with   manufacturers reporting a mixed strategy for 2H11.  Higher-end OEMs and manufacturers are looking to pull-back production in order to ease inventory increases, in stark opposition to the usual ramp-up for back-to-school sales.  Meanwhile, lower cost producers and those focused on distributing to emerging markets will continue normal-cyclical production paces.  The hope along the LCD flat-panel supply chain is that the present swelling inventories in the mature economies of the US and EU can be reduced and sold off through the winter holiday and not refreshed until the new year, 2012 (see this report summary from DisplaySearch).

The semiconductor supply chain for tablet PCs and smartphones however, continues to move along, even for the harder hit sector of smaller displays, as reported here by iSuppli recently.  While panel manufacturers are mostly down across the channel due to inventory gains, there are also some reports of slight increases in tablet PC inventories due to the growing number of competitors to Apple's hot iPad.  Apple, Samsung and leading OEM tablet PCs continue to see strong demand though (see here for supply chain news for Apple from EETimes).  In fact, Apple continues to have trouble meeting demand for iPad2 and is looking to expand their supply chain for iPad3 (see this report from EDN, as recently highlighted in MarketWatch Biweekly out today with a free subscription in English or Chinese).

With the emerging economies continuing to gain momentum, we are also seeing shifts among OEMs and component manufacturers tailoring production, distribution and sales strategies towards these important opportunities (see here for MarketWatch Quarterly's recent report on Brazil).  Meanwhile, leading OEMs are preparing for the wider release of Ultrabooks to hit mature economies' CE shelves for back-to-school with increased support from chip manufacturers' new technologies and architectures (see here for Intel's latest 7nm thoughts; here for chip makers concerns on tablet vs traditional PC sales; and DigiTimes 7/26/11 for a briefing on netbook manufacturers switching to Ultrabook production).  One caveat, with prices for Ultrabooks expected to hover around the US $1,000 level, the question of corporate refresh and demand will be important given consumers' resistance to higher priced CE goods because of macro-economic conditions and uncertainties that still hold confidence down.

How 2011 will turn out is certainly still a bit of a mystery overall.  In general though, despite the continued macro economic troubles for mature economies, there are a number of positive trends and exciting 'new era' shifts.  There are important and seemingly immovable demand trends from smart wireless devices (SWDs) and from the rising demand in the emerging economies for both consumer and business growth.  These strengths, coupled with increased movement to cloud-based services and data compression capabilities, are playing a critical role in the shift that is moving the electronics industry in new directions (geographically and product/component-wise) that will change present norms.  Some of the impacts of these new directions and their impacts on components will be explored in the September issue of MarketWatch Quarterly available here as a free subscription.


Lisa Ann Cairns, Ph.D.
Written on Tuesday, 26 July 2011 12:07 by Lisa Ann Cairns, Ph.D.

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