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Spring's Green Shoots Show Healthy Promise and Industry Changes

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First quarter (1Q13) results offer a few surprises regarding which device and market sectors have been feeling gains versus pains. The 1Q13 trends are carrying forward from the latter part of 2012, though some gains are in stark contrast to 2012, which is an important positive – particularly as we continue to move through (and hopefully out of) doldrums.

Record growth in 1Q13

As IDC reported earlier this week, the growth of tablets has far outpaced growth forecasts, as expressed on a year-over-year (YoY) basis:

Worldwide tablet shipments continue to surge, growing 142.4% year over year in the first quarter of 2013 (1Q13), according to preliminary data from the International Data Corporation (IDC) Worldwide Quarterly Tablet Tracker. Tablet shipments totaled 49.2 million units in 1Q13, surpassing that of the entire first half of 2012. With growth fueled by increased market demand for smaller screen devices, tablets have shown no sign of slowing down.

According to the same IDC report, industry leading Apple and Samsung outperformed forecasts for the period. This strong growth certainly added to the overall growth for the tablet market globally.

Beyond tablet growth, mobile phone growth expanded in 1Q13 by 4% on a YoY basis. Noteworthy in this growth is that IDC data underscore that the tipping point of smartphone dominance over feature phones has occurred, with the 1Q13 period marking the first time that smartphone sales have outpaced feature phone shipments:

In the worldwide smartphone market, vendors shipped 216.2 million units in 1Q13, which marked the first time more than half (51.6%) the total phone shipments in a quarter were smartphones. The market grew 41.6% compared to the 152.7 million units shipped in 1Q12, but 5.1% lower than the 227.8 million units shipped in 4Q12.

There is presently no forecasted abatement in demand for either category of device, from a global perspective. In fact, as DisplaySearch research recently underscored, there is concern that the component market for smartphones is seeing continued tightening leading to constraints in supply. With continued strong smartphone demand in China for upcoming summer holidays, the shortages for this growth market are seen as serious. According to the DisplaySearch research:

forecast total smartphone sales in China will be more than 285 million units in 2013, for Y/Y growth of 68%. This growth is causing the demand for smartphone components to dramatically increase in Q2.

Industry trend changes go beyond devices

Interestingly, among the industry changes we see currently is the continued movement toward ubiquitous computing through the expansion of Internet of Things (IoT). The pace of IoT adoption – or better, connection – has been quickening, with the signals from the above tablet and smartphone sales underscoring consumer and enterprise users' demand for computing devices as their base mobile device. In support of the rapid adoption of IoT is the keynote address by Allen Proithis with InterDigital Solutions on May 2, 2013 at the Telecom Council Mobile Forum M2M Workshop, in Santa Clara, CA as reprinted here by EETimes.

There is considerable opportunity in IoT, as Mr. Proithis conveyed in his keynote, and the opportunities spread far and wide through the semiconductor and electronics industry, as recently detailed in Smith's MarketWatch Quarterly. The focused demand for mobility is very much at the foundation of IoT growth. Along with this demand focus though, is a change in the industry as different components and markets become more or less prominent. Further changes include strategic shifts in the timing and seasonality of device releases, such as Apple's iPad Mini market strategy as discussed by IDC, to spread out the sales and revenue to reach into the traditionally slower quarters for the industry.

As major OEMs move device releases and market pushes into traditionally lower volume quarters, and as users, both consumers and enterprise, shift demand cycles as well. Among the trends that are affecting industry cycles, is the purchasing trends of Bring Your Own Device (BYOD). With enterprises no longer purchasing en masse, and users now making those purchases along their individual timeframes, we see the initial smoothing of the semiconductor and electronics industry cyclicity. This purchasing and demand change is pushing manufacturing and supply changes as well, although with the macroeconomic situation still in relative doldrums, there is a disconnect in demand and supply trending.


Lisa Ann Cairns, Ph.D.
Written on Friday, 03 May 2013 13:36 by Lisa Ann Cairns, Ph.D.

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