It may be that the awaited 2Q12 pick up is coming in a bit early, albeit in fits and starts, which is certainly welcomed news after the difficult 2011 market for many. This week the Dow Jones hit the 13,000 mark for the first time in almost four years (see here from WSJ), and while that may seem like a random thought, the fact is such a numerical break-through has an important message for industries, semiconductor and electronics included: Positive sentiment by individuals and enterprises that the US has seen the worst of the economic downturn and better days are likely ahead. However, the upswing was not long lived (see here from WSJ), but that it occurred at all is what is important to markets.
What the positive stock market news means for the electronic component and product market is that demand uptick for goods should be on the rise because breaking through numerical barriers, even briefly, is a sign that people are thinking differently, positively, about the future. Further evidence of this positive view of the market and our industry is the increase in IC orders that are occurring at Taiwan IC designers, for example, as reported in a 2/22/12 article from DigiTimes. Continued strong inventory management will be essential to maintaining growth though, as market volatility must still be assumed and consumers and enterprises could change course quickly.
The expected, upcoming release of Apple's iPad3 as a possible mini tablet (see, for example, this from Financial Times) along side of this week's release of Barnes & Noble's beefed up Nook and Sony's PS Vita, see here from Smith's MarketWatch Commentary, is additionally positive news to keep consumers and enterprises interested in purchasing electronics during what is generally a slower period.
But due to the slower cycle stage of the electronics year, prices on commodities, such as NAND did see some slippage during February, as DRAMeXchange reported, but should these new devices take hold and experience stronger than expected demand, new ASP support for the device components, particularly NAND, is likely to occur. Presently it is a waiting game until momentum can be determined, likely during 2Q12.
Meanwhile, the PC sector OEMs are still feeling the negative revenue effects of the significant supply chain disruption from the Thailand flooding that halted the flow of disk drives. Dell reported an 18% decline in earnings as a result of the disruptions, as detailed here by WSJ, but stated that 2012 is expected to see an increase, particularly as the positive mid- to larger-enterprise clients continue hardware refresh, and as Dell increases its efforts in servers and network equipment. HP also reported their 1Q12 numbers which were not positive either, profit was down 44% and revenue down 7% as reported here in the WSJ. While this is tough news, the optimism and perseverance to rebuild HP has legs and will take a bit of time, of course. The HDD shortage from the Thailand flooding has likewise negatively impacted HP's PC and server sectors, and the company offered that it will take through 1H12 to completely work through the effects of the disruption.
Overall, server and network equipment sectors are seen as strong growth centers for the semiconductor and electronics industry going forward with the continued rise of cloud computing and the overwhelming increase in data storage needs at all levels of users (from individuals to enterprise and government, etc.), as we discussed in an earlier edition of Smith's MarketWatch Quarterly here.
Additionally, with the new mini-tablet, tablet PC, eReaders, and upcoming smartphone releases, the mobile semi component sectors are seeing increases in orders as well. One noteworthy example of the order pick up in this market sector is the recent news about the "Chinese networking giant," Huawei, as reported here by ZDNet: "Huawei plans to give contracts totalling [sic] $6bn (£3.8bn) to US mobile technology companies Qualcomm, Broadcom and Avago."
Considering the news earlier this week from mobile OEMs considering continued penetration in the European mobile space, it is clear that there is continued confidence in solid growth opportunities for handheld mobile devices. That positive view will add a strong base from which the new orders we see coming in can grow, all of which is good news for the semiconductor and electronics industry already.