Earnings reports are really not just the stuff of economists or investors, they give us important data points to gauge what is happening in companies and how their market strategies are faring, and particularly how much demand different classes of devices are seeing. These results, in turn, give us real information to determine the opportunities and challenges along the global supply chain, and in particular, individual industries such as the semiconductor and electronics industry. For our industry, the first quarter of 2015 (1Q15) has been a continuation of the 2014 market, strength in demand and revenue for smart devices, and new opportunities still gaining momentum by region and by device category.
Smart devices still a consumer favorite
When it comes to smartphones, the warning signs that concerned the industry during parts of 2014 do not seem to have been realized (at least not yet). With major smart phone OEMs reporting, we see that not only are these devices still a favorite among consumers, but that middle class consumers are willing to make the stretch to purchase high-priced phones, such as the case with the emerging markets for the iPhone 6 and 6 Plus. According to a recent Mobile World Live article:
[Tim] Cook [Apple CEO] said that the iPhone has been “extremely strong in emerging markets”, where sales are up 63 per cent year-on-year. Sales more than doubled in South Korea, Singapore, Taiwan and Vietnam, and were up 80 per cent or more in several other markets including Canada, Mexico, Germany and Turkey.
But iPad revenue fell by 29 per cent to $5.43 billion, on unit shipments which decreased by 23 per cent to 12.62 million. Luca Maestri, CFO, noted that while sales in Japan and China had been strong, the performance in other markets was “more muted”.
Notably, after North America, China was the country that Apple experienced the highest number of sales across devices, seeing a "71 percent year-on-year" revenue gain, according to the same Mobile World Live report.
Microsoft recently reported that the Surface tablet continued its revenue growth, now spanning three quarters, up 44% year-over-year, but down quarter-over-quarter, as ComputerWorld reported. However, as ComputerWorld discussed, the question begs whether the profit turn-around for the Surface Pro 3 over the Surface 2 is a result of better cost management or if it is due to an actual increase in demand. Overall, like Apple's iPad, most tablets are seeing more muted sales currently in the wake of the latest generation of smart phones as well as the opening of smart watches.
What about PCs and hybrids?
Meanwhile, in the PC market, particularly Chromebooks, hybrids, and laptops, we are seeing a continued, sustainable profitability. Acer for one, recently announced that its new line of Chromebooks, hybrids and laptops are due to hit the market this summer. This means that the competition in this tough market sector will rev up again. Acer is spanning the price and feature range with its new set of devices, as ComputerWorld reviewed recently. Importantly though, the Chromebook series will fall within the US $149-199 range, a very tempting range for the back-to-school, end-of-summer consumer period.
On the higher priced side, Apple's recent market launch of the new Macintosh laptops is meeting with steady demand, showing a 10% revenue increase, year-over-year for the company. This increase in in spite of the average selling price of Mac laptops in the US $899 to $1249 range, for the low to average priced models. That's in stark contrast to the Chromebook series, and yet sales are steady.
With tablets in a bit of a trough and smartphones and laptops holding steady and continuing to gain globally, the industry is going into the second quarter of 2015 in a positive position. Given the consolidations and market strategies emerging, we look forward to seeing how revenue and volume sales over the summer will pan out. Right now, the industry is in a solid, sustainable pattern in this core consumer electronics (CE) market and further supported by the growth in other markets such as automotive, industrial automation, and medical, health and fitness.