The back-to-school and third quarter (3Q14) momentum is gaining and we all know that the first half of September is poised to bring a number of announcements and unveilings from major OEMs including Apple and Samsung. The question is what will hit, what will miss and where new market opportunities will prevail for whom (see Smith's latest reports in the most recent Smith MarketWatch Quarterly, made publically available today).
New devices reshuffle the deck
One surprising rise over the past few months has been Chinese smart device OEM, Xiaomi. This week, with Samsung's numbers down from the recent quarter and Xiaomi's push in their home market, China, Xiaomi surpassed Samsung to be the leading smartphone device retailer. Of course this is only in their home (and major) market, but with global sales positives focused on emerging markets, and with Xiaomi able to gain momentum and world press through their successes in China, their next phase expansion into other emerging markets is likely to get a boost from the current rise. They are certainly a new competitive force to be reckoned with in the smart device world.
The fall season comes at a great time for these new competitors like Xiaomi to push new, feature-rich smart devices at competitive (and lower) prices in both developed (and saturated) markets and in the lower-priced tiers globally. It is the price point market that holds promise for global smart device sales opportunities. With high-end manufacturers facing challenges of limited new sales growth, and needing to rely on refresh for high-priced devices, the rest of the smart device field is focused on new users by providing price-sensitive devices that give these customers access to the internet with 3G and/or 4G LTE capabilities for data transfer. This access is a critical demand and at the center of device sales forecasts globally. The challenge is price point and branding to new consumers in previously-overlooked markets globally.
Beyond the smart device wars
One new factor that is affecting tablet cycles and resulting in a slowing of tablet forecasts, is the refresh cycle estimates for these 7" devices. As NPD DisplaySearch reported (in considering 2014 data to date) the 1Q14 uptake of tablets was slower than anticipated, and that has continued throughout the year so far. Globally, consumers are seeing little compelling reason to refresh their tablets, and, as a result, the tablet PC supply chain is slowing down production to avoid inventory problems. As NPD DisplaySearch offers:
NPD DisplaySearch expects that competition between 5.5" and larger smartphones and 7-7.9" tablet PCs will reduce demand for tablet PCs through 2018. Unit share for 7- 7.9" tablet PC displays peaked at 58% in 2013, but it will gradually decline in 2014 and beyond. Major brands are likely to move to larger sizes, and shipments of 8-10.9" tablet PCs will overtake 7-7.9" tablet PCs by 2018. In addition, NPD DisplaySearch expects 11" and larger tablets will exceed 10% of the market by 2018. "The increase in screen sizes will help increase tablet PC revenues."[sic] [Hisakazu Torii, vice president, smart application research at NPD DisplaySearch] said.
Meanwhile, with ultraslim PCs also proving to be competitive against mid- to larger-sized tablet PCs, we have seen the PC refresh cycle for enterprise going better than in recent years. As Global Purchasing reported this week, military contract awards are decreasing leading to more price competition among component distributors. Panels, particularly, are being impacted by the slowing sales of tablet PCs and the reshuffling in the smart phone market – although the September sales are expected to reveal more positive data for August and 3Q14, as the supply chain has been gearing up for the upcoming device unveilings.
There is little doubt that, while forecasts suggest that a new or next phase of growth for the semiconductor and electronics industry is upon us, the current market remains challenging as the ability to fully capture and capitalize on the opportunities in new regional, economic, and demographic markets is tougher to achieve than anticipated, and consumers and enterprise purchasers are critical and willing to wait for the best device and price bundling. Read more about the challenges and opportunities facing our global semiconductor and electronics supply chain in Smith's MarketWatch Quarterly reports, free through Smith's homepage or delivered early to your inbox with a free subscription.