Change is afoot and growth momentum is rising as industrial, enterprise and consumer confidence levels solidify for the semiconductor and electronics industry. The post-COMPUTEX Taipei glow is still upon us, that is certain, but what is particularly important is that independent forecasts, industry sales, and related data points are all pointing in the same direction – up – for the same reasons – expanding Internet of Things (IoT) and proliferation of wearable technology this year and for at least the next couple of years.
Growth: The numbers have it
Global GDP forecasts from the International Monetary Fund (IMF) as well as industry financial analysts all point to this and the next few years as growth years. The trickle down supply chain effect is important and positive for the semiconductor and electronics industry especially, with the IoT rise and the many diverse market and sector drivers at the center of the momentum.
Importantly, there is demonstrated growth in new consumer electronic (CE) devices such as mobile devices (wearables, smartphones and tablets) for a variety of markets and price levels, as well as newer hybrid (2-in-1 tablet-laptop) PCs. These devices and the components plus platforms to support them have been featured by leading OEMs recently across many global venues. What we see occurring is that market sector expansion for the newer set (of still limited but expanding) wearable devices is gaining interest from consumers and from OEMs who see diversification and first mover opportunities from the new IoT ecosystem.
As we reported last week from COMPUTEX, IDC forecasts "[…] the worldwide market for IoT solutions grow from $1.9 trillion in 2013 to $7.1 trillion in 2020." That is a significant market opportunity for the entire semiconductor and electronics supply chain. To support this growth, we see that forecasts for CAPEX spending is similarly positive, with the potential for a record 2015 in front end fab equipment, according to SEMI's recent report. The importance of this fab spending for the wider semi supply chain is that we are looking at the 2014 and 2015 increases as telling of the positive build for components for IoT ecosystem builds.
IoT ecosystem driving supply chain changes
This IoT ecosystem is growing rapidly as the advantages of increased mobility supported by cloud computing and analytics are being embraced not just by enterprises but also by consumers who are demanding seamless computing experiences. This ubiquitous computing demand is a true positive, one greater than the surge the industry experienced with the quick rise in smartphone and tablet adoptions because it extends across all of the market sectors as people's lives move through each sector, of course.
As ubiquitous computing continues its expansion, we are seeing early movers in the OEM and component manufacturing space begin to move into new markets, notably automotive and medical electronics, introducing new competition and innovation into those supply chains. As this diversification happens and new markets are entered, there is an increased need for support because different component standards, requirements, and supply chain networks must be navigated.
The introduction of new competition in markets once considered niche, such as automotive and medical, is important to price competitive events that affect ASPs which, in turn, promotes the introduction of innovative designs that will spur sales uptake in the markets. However, the new supply chains are not just about an increase in component manufacturers or similar lateral movements, because of the challenges and shrinking real estate for components, the new designs include System in Package (SiP) advances which are increasingly supporting open-source hardware designs (as will be discussed in early July at SEMICON West). Advances in chip integration open new possibilities along the supply chain as well supporting new design collaborations, supply chain relationships, and importantly extend innovations across and within markets to push new end-products faster and at lower costs.
There are a number of moving points presently, together they supporting a growth propulsion that is not only allowing for device and component innovation but also for market diversification and new supply chain dynamics to open for the semiconductor and electronics industry. As we move into the second half of 2014, we will be monitoring and reporting on the impact that these supply chain changes have on the industry all while supporting clients to make these moves seamlessly and with the support they need through the deep expertise and global supply chain services that Smith offers.