The soothsaying at year end is just part and parcel of the calendric page-turning events, and while predictions and forecasts are always best taken with a grain (or pound) of salt, we just cannot help ourselves (see this great reminder from Seeking Alpha that the best forecast is that other forecasts are likely to be wrong or off). But given that we need forecasts, despite their error margins, it is important to remember that to look ahead means to understand the contexts of what has already come to pass. The retrospective look at 2012 is really one that is quite sobering in the midst of the year-end holiday festivities.
A moment of sobering data
In fact, if we exclude the hot smartphone and tablet markets, well, there really was some stability, minor growth, and positive inventory management to be joyous about. As we discussed in the recent Smith MarketWatch Quarterly, Vol. 6 No. 4 sent to subscribers (free) last week and available mid-January to the public, "the looming question is whether or not we have (finally) completed the 2012 bottoming-out cycle; and at what point realistic rebounding and growth can be forecasted."
In other words, beyond hoping that 2012 was the bottom (outside of the smart wireless device (SWD) markets) was there really growth and what does that foretell for 2013? Turning to the most recent issue of Manufacturing Market Insider (MMI), released today, "it is now quite possible that 2012 could be a growth year overall for 20 of the largest contract manufacturers." Even in spite of the ongoing drag from global and regional macro-economic uncertainty and lingering fiscal concerns in the US, particularly since the presidential elections and still present (though with hopes of an agreement to avert the "Fiscal Cliff" see this WSJ article on the consumer impact).
MMI cites the following data in support of the likelihood that for the top contract manufacturers (CMs), 2012 is likely to have been a (modest) growth year:
Through the first nine months of 2012, combined sales of the 20 CMs grew 4.7% year over year, setting the stage for low or modest annual growth as long as there is no double-digit decline in Q4 that would wipe out the sales gains of the first three quarters. Nine-month sales of the 11 EMS providers and 9 ODMs in the group totaled $246.3 billion, up from $235.2 billion in the same period a year ago.
[…]The eight mid-tier and smaller providers collectively increased their Q3 sales by 10.6%, an indication that the EMS market is not without pockets of growth. Revenue for the quarter totaled $618.1 million, up from $558.7 million in the year-earlier period. This marks the second quarter of healthy year-over-year growth for the group; in Q2 combined sales rose by an adjusted 9.4% year over year (more about adjusted growth later).
While 4Q12 sales were not as robust as hoped after the US Black Friday sales period, it is expected that they were at least stable with some growth, albeit at a modest level for the period compared with other years, as we discussed earlier this month in MarketWatch Commentary. The data collected by MMI as well as the existing trending data for 2012 and for the recent quarter, do lead us to still hold hope for decent (stable to modest) positive numbers when the final 2012 tallies come in for the global semiconductor and electronics industry. Having these latest MMI data on the EMS sector is a strong indication of improving health in the overall market.
Reasons to cheer
While the debating lingers as to how (well) the overall semiconductor and electronics industry will rebound in 2013, what is common throughout forecasts is that by the second half of the year, 2H13, we should begin to see a real growth trend, though perhaps not the steep inclines of times past. The one sector that still defies the more muted growth is, of course, the SWD sector. We expect to see some tapering of the phenomenal double-digit levels, particularly in the mature markets due to saturation of device introduction; but trends will still be at the initial stages of steep growth for emerging markets, as well as for low-priced devices for all markets' consumers.
Tablets and smartphones continued to show brisk sales through the holidays, with one report from Online Media Daily citing over 17 million tablet activations on Christmas Day, representing a 332% increase on daily averages for December. Similarly, smartphone activations were up as well, but this year they were surpassed by tablets.
As a result of this continued growth, the smartphone and tablet PC IC sector, 2013 is set to be the year that these ICs outpace traditional PC ICs, according to an early December report by IC Insights (for more detailed reviews of selected component sectors and forecasts, see the 4Q12 Smith MarketWatch Quarterly issue, Vol. 6 No. 4, available publically mid-January, sent to subscribers last week). Adding to this excitement is the recent announcement reported by WSJ from Acer that they will be offering a US$99 tablet PC in early 2013, however it is primarily targeted to the emerging market at that price range, and there is still uncertainty as to its availability, and then pricing levels, for non-emerging markets.
Competition continues as does the price declines at the consumer point for various SWDs, while penetration is being met at the high-end sales, what has yet to fully be realized are the larger sales potentials as lower-priced consumers can finally join in the SWD growth.
2013 promises to be interesting and likely more positive than 2012. Happy New Year!