Since the global economic recession and the early years of the last decade, analysts in the semiconductor and electronics market (myself included) have argued that industry cycles directly relate to economic cycles. The semiconductor and electronics industries are generally seen as dependent on consumer confidence and general financial stability. But then there's now and global semi sales are showing significant strength – great news for us, but how do we understand the disconnects with the global economic outlooks?
Semi on its own cycle, again?
The global economic scene is rough for analysts, what it reminds us all is that economic forecasts are generally worth the cup of coffee you drank reading them. That's a bit tongue in cheek, of course, but there are so many moving parts, so many variables, each of which can throw in enough concern to derail or delay momentum. During the economic recession, and leading up to it, the argument for coupling mature semi and electronics markets with economic momentum was fairly obvious.
On the other hand, we saw and documented through this site and the Smith MarketWatch Quarterly that emerging markets (see this Special Series recap of the emerging market situation which continues to warrant consideration), which had traditionally been tied to global economic patterns, were marching to their own beat. That has since slowed as the BRIC+ nations have been on a similar wobbly ride along with the overall global economic pattern.
The semiconductor and electronics industry, however, has been steadily gaining momentum since emerging from the post-economic recession. It has been following the path that was foreseen and forecasted for the global economy with regions trailing or leading, respectively. Why has semi been successful and what does this mean going forward?
Semi to continue solo flight
Looking at the numbers this year, it is pretty obvious that when taken as a whole, the global semiconductor and electronics industry and the supporting supply chain businesses have had a good year. At Smith, we've seen this first hand with our customers and internally. That's not to say, nor make light of, the troubles in some markets and regions where challenges still loom greater than opportunities. But as a whole, this has been a very strong year for our industry on multiple levels. From foundries to manufacturers, OEMs to distributors, and along many component sectors, there is strength in the numbers starting to eek out for 2014 year-end reports. Not only that, but, as TSMC's co-CEO, Mark Liu, was cited by DigiTimes, "TSMC is confident that it will continue to outperform the global IC foundry market in 2015." The article continues citing recent announcements from TSMC's annual Supply Chain Management Forum: "TSMC's revenue growth for 2014 is set to increase 27%, Liu disclosed. For the first three quarters of 2014, the foundry reported NT$540.285 billion (US$17.35 billion) in consolidated sales, up 19.7% a year earlier."
This is but one example, albeit an important one, of what is going on in the semiconductor industry. Across the board, from LCDs to semi equipment (and most spots in between that broad grouping) we see the data supporting 2014 numbers as positive and indicative of 2015 continued strengthening. SIA recently released that global semiconductor sales "[…] reached $29.7 billion for the month of October 2014, an increase of 9.6 percent from the October 2013 total of $27.1 billion and an uptick of 1.5 percent compared to last month’s total of $29.2 billion." Also citing SIA, "Additionally, a new WSTS industry forecast projects substantial growth for 2014 and moderate growth for 2015 and 2016."
What makes the fears and vacillations of the global economic outlook melt for our industry? Well, there's not much being said about this disconnect among analysts of any flavor just yet. Internally, I've been wondering and watching throughout the year as I hear very different views and concerns come in from a wide set of sources. The dominant point that I see to date is that the impact of IoT as not just a device addition moment but truly as a (hate to say this) "new era" representing a very different relationship with devices – one of deeper integration, greater ubiquity being reached.
There is much to be considered in venturing a bold statement such as this, that there may be some decoupling of the semiconductor and electronics industry from global economic forecasts. There are valid reasons to support this position though, and the dominance and embedded (you could say "mature" but that is an overused term for our industry) level that smart devices particularly and electronics and computing more generally have in daily life is at the core of this argument. That is a good point, a strong and sustainable point, for understanding and forecasting for our industry. It gives us a baseline of sustainable growth and continuity that is not seen across most industries, except fundamental needs such as health, education, housing and food/water/electricity. That electronics could be at the level of these fundamental human needs is the bold statement moment. On the other hand, what is ubiquitous computing really, IoT as it is called now, if not a description of a fundamental human experience with technology?