MarketWatch Commentary
MarketWatch Commentary is an open forum dedicated to the interactive discussion of news and events affecting the global electronics industry. The views and opinions presented in the MW Blog are solely those of the participants and do not necessarily reflect a position held by Smith & Associates.
Tag >> BRIC
There are many bright chip forecasts out there right now, and with good reason; the data from multiple sources indicate that these positive forecasts are warranted. Yet, there are financial analysts and some economists still leery of a double dip recession (cf. here (IMF), here (Roubini), and here (SeekingAlpha) for some recent views), which, yes, would logically negatively affect the semiconductor industry. The lynchpin necessary to avoid such a double dip is not the US, but China. It is the Chinese monetary and fiscal policies that are critical to the continued forward momentum for the global economy, as seen expressed by The World Economic Forum, which held it's annual meeting last week in Davos, Switzerland. The Davos Forum was a critical event not just for the global economy but also for semi: China reaffirmed that it is committed to "continue with accommodating fiscal and monetary policy, and make sure we have smooth macro-management, [...]. We are shooting for roughly 8% or 9% GDP growth rates," according to Zhu Min, Deputy Governor of the People's Bank of China as quoted in this transcript from the Davos Forum. It is China's continued stimulus policies that support the broader trends in the global economy presently. Particularly important is the driving role of emerging markets such as China and India with their significant consumer demand for handsets, computers, networks, and the infrastructure that promotes increased overall semiconductor demand, according to yesterday's SIA release. As George Scalise, President of SIA, stated, "with improving consumer confidence and signs of economic recovery around the world, the semiconductor industry is well positioned for growth in 2010." (Ibid) For more information and Smith's perspectives on these topics, including our recently released MarketWatch Quarterly, consider our discussion of the semiconductor industry and the latest news about the global economic rebound here in this MarketWatch Commentary section. In the last issue of MarketWatch Quarterly, we provided a more detailed review of China's geo-economic policies and role in the semiconductor industry here, and in this earlier piece, a review of the US stimulus policies. Finally, we considered the role of new consumers and new electronics products for consumers in the latest MarketWatch Quarterly released last week to subscribers and next week to the public here.
China is one of four featured geo-economies in Smith's most recent MarketWatch Quarterly. There are so many obvious reasons to continue to monitor China, but for the semiconductor and electronics industries, China is particularly important because its increasing importance as a major consumer market. Yes, traditionally in the West, one thinks about China as an export heavy nation. Based on that perspective, some analysts marvel at China's economic recovery. It is important to note that while China was hit with negative numbers across the economic board, as almost every other nation, the underlying reason that China was able to rebound quickly and strongly is not due to strong exports. How was China able to recover so quickly and sustainably, i.e., show resiliency in the face of global economic meltdowns? As discussed in the Quarterly article, there are many reasons. One important reason is the significant government stimulus packages aimed at the Chinese consumer and targeting China's most critical industries, semiconductors and electronics, in particular. Herein lies the oft forgotten critical variable: the Chinese consumer. The Chinese consumer has been and will increasingly be extremely important to China's GDP and to most major global industries (cf. also here for a broader Asian perspective). China is not as heavy an export nation as many assume, and the Chinese consumer is responsible for roughly 33% of China's GDP today and set to expand to 50% over the next 5 years, according to The China Market Research Group. With a current GDP for 3Q09 growing by 8.9%, and set to continue to rise, understanding the importance of the Chinese consumer is vital to business success. As a result of the Chinese consumers' positive response to the government stimulus packages, the Chinese semiconductor market, while down 6.7% from 2008, is still almost 10% better than the global semiconductor market, as estimated by iSuppli. Furthermore, the ability to curtail the economic fall through the stimulus packages, a "recovery in semiconductor demand [...] limited the decline in 2009 and set the stage for a return to double-digit percentage growth in 2010," according to Kevin Wang, Director, China research for iSuppli. Of importance for the entire semiconductor and electronics industry is that China's resiliency is based on an increasingly active domestic consumer hungry for products across all markets, from automotive, personal electronics, white boxes, and mobile devices. While there is variability in the 2009 rates of rebound among these sectors, the 2010 forecasts are all double digit.
I keep coming back to the series on BRIC and macro economics that I wrote last year for MarketWatch Quarterly because the news is inescapable (cf. Volume 2, Year 2008). From end product market positioning to the entire supply chain network, there are lessons to be learned from emerging markets, as wonderfully summarized here by MIT Sloan's Management Review, just out today. Of importance is that not only are economic times different today than we've seen due to the global reach of the present problems (aka recession), the fallout of these economic pressures have significantly impacted the entire electronics industry and therewith the entire supply chain (cf. the upcoming articles in the next MarketWatch Quarterly coming out this week!). What are you seeing? You can read about our perspective, we're interested in your experiences and feedback too.
|
|
Lisa Ann Cairns joined the Smith network of businesses in 2001 as a Technology Strategist and became the Chief Strategy Officer for a Smith subsidiary the following year. More recently, Lisa has been involved with various strategic marketing projects for the Smith network and is the Senior Contributor for MarketWatch. Prior to joining Smith, Lisa was an Assistant Professor at Texas A&M University. Lisa received her Ph.D. (1998) and A.M. (1992) from The University of Chicago, during which time she was awarded a National Science Foundation Doctoral Dissertation Research Improvement Grant. She holds a B.A. from Hofstra University, 1988, where she was the first woman undergraduate to receive a Fulbright Scholarship.