Let's face it, for the majority of the semiconductor and electronics industry, 2014 turned out to be a banner year, all in all. According to SEMI, semiconductor equipment sales were up roughly 20% in 2014, year-over-year. Well, not quite for every market sector, but, as an industry, worldwide semiconductor revenue grew to US $339.8 billion, a 7.9% increase for 2014 year-over-year, according to recent Gartner data.
Smith is conducting its Global Supply Chain Survey again this year, please click HERE and with just 5-10minutes, you can add your voice and experience to the data that we'll be reporting on that later in this first quarter. We'd like to include your market views along with your industry peers!
How good was 2014?
For DRAM in particular, 2014 was a boom year, seeing 31.7% revenue growth and stable pricing due to short supply situations, and an overall growth of 7.9%, as Gartner recently recapped. Those are, historically, very strong numbers for DRAM. The memory market overall grew at a strong pace in 2014, hitting 16.9% year-over-year, as different Gartner data reveal.
Related to the DRAM growth last year, PCs actually saw a 1% growth in 2014, which, while not a stellar growth number generally, it represents a significant turn-around from the recent couple of years of decline and negative numbers. For example, in 2013 as Gartner notes, the traditional PC sector saw double digit declines hitting -10.1%. In another Gartner year-end report, they cite that the shift in PC growth is regionally based, with the revitalized growth coming from mature economies, especially North America and EMEA, where consumer confidence has rebounded while emerging economies are still showing preferences for tablet and smartphone purchases over PCs. Underscoring the strength of some of the regional PC growth, Gartner's data reveal that "[i]n the U.S., PC shipments totaled 18.1 million units in the fourth quarter of 2014, a 13.1 percent increase from the fourth quarter of 2013 […]. This is the fastest growth seen in the market in the last four years." For the same period, EMEA and APAC saw growth in the 2% range.
One of the key supply chain trends that tends to go hand-in-hand with this accelerated, overall growth, is an increase in mergers and acquisitions (M&A), and we did see a good number of M&A events and consolidations across the global semiconductor and electronics supply chain. These consolidations are deepening the capabilities of the companies involved, but they are also shrinking the traditional set of companies. There are two notable opportunities from the level of consolidation we are seeing: one is there are opportunities for new companies to compete and engage the market innovatively, pulling along their (often more localized) supply chains and introducing new vendors and strategies (e.g., this is what we are seeing in China and India, especially, as new companies like Xiaomi and Huawei are extending and growing quickly); another opportunity arises from the necessity for increased collaboration among the remaining companies, having to work together and share in R&D, capital expenditures due to increased manufacturing costs, and related ventures not previously shared.
What about 2015?
For 2015, the first half of the year holds better visibility, of course, and while some sectors, such as tablets, are likely to continue to see a slow down over the recent couple of years, overall growth for the industry is expected to slow year-over-year from 2014, but still reach 5.4% as a worldwide level, according to new Gartner data, but also forecasted by a number of industry analysts. That is a respectable growth rate, to be sure, "[…] driven by strong growth in application-specific standard products (ASSPs) in smartphones, along with DRAM and NAND flash in ultramobiles and solid-state drives (SSDs)," as Gartner cites.
An exciting growth sector is industrial electronics which is forecasted to hit in the 9% range in 2015 as IoT for industrial applications extends, particularly with SmartCity and LED municipal lighting taking the lead, according to the same Gartner report. With SmartCity and related infrastructure growth, the support for additional, consumer IoT is expected to increase momentum and be the next growth driver hitting during 2015 and continuing.
Meanwhile, IT spending, which supports enterprise electronics growth, is forecasted to rise by 2.4% in 2015, year-over-year, also according the latest suite of Gartner reports. As Gartner's analysts note, the is a decline from the high 3.9% originally forecasted, but the revision is due to the strengthening dollar and foreign exchange rate impacts which otherwise only drop the forecast by 0.1%.
Critical moves? Supply chain collaboration and agility
All in all, the forecasts for 2015 are holding positive for most regions and market sectors, good news as we exit a strong 2014 and hope to continue the momentum. An important caveat to growth is the note regarding the increased collaboration across the supply chain. As SEMI also notes, moving into IoT and a plethora of innovations from manufacturing to devices, companies will have to work more closely together. New challenges will face the global semiconductor supply chain with new architectures, wafers, packaging and materials all likely to hit. These challenges and the changes they carry from design to production and distribution demand collaboration more than previously because of the complexity and costs involved.
Similarly, with the reduction in major suppliers and manufacturers, sourcing through reliable channels familiar with the challenges and risks in our industry is even more critical. Testing and transparency will increase even more as key capabilities in demand from distributors. Similarly, with the rise of local and regional new supply chain growth and emerging market opportunities, having a distributor that has the depth and knowledge in these local markets and the relationships to ensure top-quality sourcing can be the difference between success or failure as emerging markets open but with local preferences.