Exiting the first quarter, we are seeing that the main demand drivers from the user side of the supply chain continue to be smartphones and tablets. While the question of device saturation in the developed markets has been thrown around, as we saw quite overtly at Mobile World Congress just the other week, leading OEMs in the mobile market are including a dedicated, strategic focus to the emerging market sectors to extend growth opportunities (e.g., Nokia, Huawei, HTC, among others).
However, expanded, low-end mobile device increases is not exactly the type of exciting growth news for the wider semi supply chain. The Bill of Materials (BoM) do not generally tend to offer a wide component sector growth opportunity, simply because these devices are about low cost and high volume to see revenue gain for the OEMs pushing them to market.
So, where is the growth that will support the semiconductor and electronics industry more broadly? It's embedded in the same mobile growth trend, but at the leading edge of what users expect of their devices and how they use them. The answer is the transition from mobility to increasing, full connectivity.
Connecting for growth
What are the trends for the semi supply chain heading into 2Q13?
- 1.There are the emerging economy markets, for which the driver will be low cost and high volume end-products for new device owners and users.
- 2.There are the developed economy markets, for which the drivers are centered around leveraging and extended existing, wide-spread mobility devices to move towards connected life states, also known as the Internet of Things (IoT).
Taking these drivers to a component level points to two parallel tracks, one is the opportunity to leverage existing components with lowered ASP to a lower-priced market; the other is what it means to design engineers to expand the functionality and feature options for experienced mobile users to increase machine-to-machine (M2M) connectivity within the form confines of mobile devices.
This latter point is where the exciting, wider, supply chain opportunities come into play. The connected vision is rooted in M2M and expands from remote computing via mobile devices (e.g., smartphones and tablets, primarily) to the enabling of IoT which extends to previously separated market sectors such as automotive, health and fitness, consumer home electronics, municipalities and cities, and demand management for the energy and electricity sector.
To understand how and why these diverse and seemingly separated market sectors are combining as a driver for component through end-product design change (and growth!), simply stop and think about the day you've experienced and engaged in thus far today. From waking in your home by an alarm to making coffee and breakfast and on through to the public sphere of roads and/or public transportation and the reliance on traffic signals for regulating flow of people and vehicles, on to your engagement with work and the various machines that you rely on M2M connectivity to perform those functions. Not to mention the need for electricity to power all that's happened. These events are the connected life blocks that are becoming more interwoven to improve efficiency of all types, and to support greater productivity.
The network infrastructure to provide even these initial IoT M2M capabilities is driving growth in numerous market sectors:
- communications and networking to support increased data transfer,
- server hardware for cloud computing,
- device hardware diversification for various needs (e.g., health & fitness monitors, smart meters and thermostats, etc.),
- increased penetration of electronics in sectors to enable more M2M (e.g., automotive for electric vehicle, safety and infotainment; retail hardware for NFC and M2M with customers; electronic health records and remote patient care; etc.).
While we are seeing a slowing in the mature economy markets for smartphone demand, what we are also seeing is a next phase of experienced users expecting to be always-on, always-connected, and always able to access and manipulate the data and applications that they need to move seamlessly through their interconnected, daily life.