Smith Market Blog

Debating CE Forecasts Questioning Revenue Momentum


It would seem as though the adoption of consumer electronics (CE) only gains in momentum recently, with still excited consumers awaiting the latest smartphones, tablet PCs, Ultrabooks and other smart wireless devices (SWDs), especially. Furthermore, a walk through many homes will find an array of electronic end-products as more private lives enter the world of Smart Homes and interconnectivity is an increasingly essential part of daily personal and business life for so many worldwide. The penetration rate of semiconductors and electronic end-devices is escalating, in part, due to the widening of the Internet of Things (IoT) (see Smith's most recent in-depth MarketWatch Commentary, released yesterday to subscribers (free)). The increase in IoT and the corresponding component and end-device increase is inversely correlated to the continued decrease in price for electronics and the components that comprise them.

In sheer volume, the semiconductor and electronics end-product manufacturers are only going to increase the number of widgets produced as we move forward in time, be it tomorrow, next year, or in the next decade, simply because demand will not abate for each next generation of devices. While volume continues to increase, what impact does the continuous decline in pricing for the components and end-products have on the industry? iSuppli released an interesting report last week presenting their forecast view of the revenue impact on the industry as a result of declining CE prices:

The eventual flattening of CE revenue by 2015 is because of the enormous price pressure constantly brought to bear on consumer electronics gear and equipment. Although CE unit volumes are increasing at the moment so as to outweigh the deleterious effect of price declines, the continuous reduction of CE prices in the marketplace will ultimately take its toll in a few years.

These are true statements, but one might question whether or not the forecasts included the likelihood of the next killer device, such as the iPhone or iPad, and the price introduction point that could off-set this slowdown in CE revenue in general. Given the continuous, market quest by OEMs to deliver this next CE sensation, precluding such an occurrence is curious.

There is an increased connectivity demanded of consumers for an ever-expanding set of smarter devices, not just phones, tablets, and TVs but also smart thermostats, white boxes, and electric vehicle charging stations at home with smart energy functionality. In hand with this demand is the rising tide of new means for engaging with not only the devices we already know well, like our washing machines (such as this recent teardown by iSuppli of the GE GFWN1100LWW washing machine), but also the new devices that will organically arise out of new CE demands as the Internet of Things (IoT) increases.

Interestingly, iSuppli concludes their market brief with the important note of confidence for the CE semiconductor market:

Among CE semiconductor manufacturers, the potential for disruptions in the supply chain because of shortages in raw material appears to have finally abated. Meanwhile, the quest by consumers for ever- expanding functionality in their CE gear is likely to translate into continued growth in demand for CE semiconductors.

Semiconductor revenue for the CE space is anticipated this year at $30.3 billion, up 1.6 percent from $29.8 billion in 2011.

Yet, from a distributor's perspective, there is never a true abatement of a supply chain shortage, given the constant potential for natural disasters, which are always unforeseen. We're interested in your views on the CE market forecasts, whether the ones discussed here or elsewhere!

Lisa Ann Cairns, Ph.D.
Written on Tuesday, 10 July 2012 16:50 by Lisa Ann Cairns, Ph.D.

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