ICs are some of the core components that we handle daily across our global network and hubs, and as such we have seen firsthand the shifts affecting this commodity. There is no doubt that the significant demand for smart wireless devices has changed the focus of the electronics sector not just for users, both consumer and enterprise, but especially for manufacturers and OEMs.
Weights on demand
While it may sound like the redundant thumping of an old drum, it's still the economy front and center that weighs heavily on spending across the board – from purchasing at individual and corporate levels but also on the focus of how and where companies along the semiconductor and electronics supply chain were investing. In the end, the conservative position on shipments and a focus on margins and profits over market share meant that PC manufacturers and OEMs have kept supply tighter than historical trends, which, given the economic doldrums that we are still in, has helped hold inventory levels in healthy check, but has also resulted in tighter supply chain situations for devices and components for these devices.
Without question, the netbook sector is being called down and out for the count, as Digital Trends boldly argued based on Windows 8 release. Couple the netbook dearth – or death – with the soft global PC demand, as reviewed by iSuppli, the review and outlook for this important, and once central, sector for our industry is rather bleak:
With final figures in, total shipments to the PC market in the second quarter amounted to 85.1 million units—up a marginal 1.2 percent from 84.0 million in the first quarter. Both the mobile PC and entry-level server segments made sequential gains, equivalent to 3.9 and 4.5 percent, respectively. However, a 3.4 percent decline in desktops dragged down the total PC space.
What about ICs?
What does all this have to do with ICs? It comes back to the question of demand drivers: what's hot and what's not is, quite simply, what is and will shape the forecast trajectories. According to recent research from IC Insights, while those in the traditional computer-based IC market are only likely to see a 3.1% CAGR during the 2011-2016 period, the broader application segment of communications ICs, which support the mobile sector writ large, are set to double the average IC market growth, seeing a CAGR of 14.1% over the same five-year period.
According to the IC Insights report, "The communications IC market is forecast to reach almost [US]$160 billion in 2016, an increase of 94% from 2011. The Asia-Pacific region is forecast to represent 61% of the total communications IC market in 2012, increasing from 59% in 2011." This market opportunity certainly is providing forward momentum for Comms ICs but at the same time, opportunities can be challenges and vice versa, see Smith's MarketWatch Quarterly for more supply chain discussion. iSuppli's research on the IC supplier base underscores the situation faced by IC suppliers and manufacturers given the rapid shift from traditional PCs to smart wireless devices:
As smartphones as well as LTE have gained in popularity, the corresponding influences they have exerted on design philosophy have created paradigm shifts that are transforming the competition. In this type of rapidly shifting competitive landscape companies that identify the changes early and are able to reposition their core strengths appropriately reap the rewards while those slower to react often see their market share shrink. Perhaps, one of the clearest examples of this is in the application specific mobile handset core integrated circuit (IC) supplier market where revenues totaled over [US]$6.5 billion in the second quarter of 2012.
What is certain is that enterprise adoption is critical to the overall changes and growth or decline for the wider PC sector that spans desktops, Ultrabooks, notebooks, and tablets. As recently reported by ComputerWorld, citing Gartner's research, the rise in portable devices has only really begun:
But Peter Sondergaard, Gartner's research director, says they are predicting that in two years, 20% of sales organizations will use tablets as the primary mobile platform for their field sales forces. By 2018, 70% of mobile workers will use a tablet or hybrid device that has tablet-like functions.
Sondergaard is describing a world that is less desktop dependent and, by extension, less Windows dependent.
At the Gartner Symposium/ITexpo conference here, […] there was enormous focus, overall, on the competition in the mobile space, as well as the impact of the cloud, social collaboration and data on information delivery.
The portability question is certainly at the heart of the shifts and with that portability is the requirement for mobility in terms of anywhere access, positive market opportunities for Comms ICs and for those agile suppliers and manufacturers who are able to respond and engage the changing marketplace.