We're at the point in companies' cycles when clearer insight into the second-half of the year (2H14) can be presented. This week we heard from a few of the major chip companies that provide wide views to both the global supply chain and to regional markets. One of the key drivers mentioned across companies for both 1H14 positions and forward looking 2H14, is the impact of LTE and smartphone growth as well as Internet of Things (IoT).
Regional growth increases
As FT reminds us this week, "Growing appetite for mobile devices, wearable computers and connected homes, cars and workplaces is fuelling demand for microchips." What we are also seeing is the widening of the regions demanding smart devices and internet connectivity solutions are seeing significant "appetite" surges from the emerging economic regions.
One corporate example of this demand surge taking hold in emerging regions is seen in China's Huawei's recent 1H14 reports as reported by MobileWorld Live:
[…] revenues were up 19 per cent year-on-year, to CNY135.8 billion ($21.9 billion), helped by increased LTE investment worldwide and growing brand awareness for its range of consumer devices.
[…] Huawei's flagship smartphone, the Ascend P7[…], is now being sold in more than 70 countries and regions.
These surges underscore what we've been hearing and saying for a few weeks now, that there is an opening in markets with new demand drivers that will support revenue and unit growth for the duration of 2014 and well through 2015.
LTE expansions important for new markets
One other corporate example from this week is Qualcomm's reporting improved forecasts for 2H14 over a not as strong 1H14. While their reporting surprised with mixed data and questions of some slowing in China presently, the future opportunity still holds promise. The mix of devices that IoT offers and the improvements in network moving to 3G and 4G LTE upgrades gives many companies along the global supply chain, important diversification and renewed growth opportunities.
As we continue to see the 3Q14 reports and as we move forward into a busier industry cycle, just how soon and how strong the new growth waves will mount will give us a better indication of the final 2014 and next 2015 industry outlooks.
More detailed discussions on key supply chain events are offered in Smith's MarketWatch Quarterly reports which are free to subscribers – the recent summary on 2Q14 was released last week and will be available publically the end of the month.