Consultants Forum    |   FacilityLocations    |   FastFacility    |   Advertise    |   Subscribe    |   Newsletter    |   RSSRSS
Inward Investment Guides
Electronics: Recharge Required for a Changing Industry
Once driven by unceasing consumer demand, the electronics industry has been powered down by the recession and the changing habits of buyers and users.
Dan Calabrese (Oct/Nov 09)
(page 2 of 2)
The Fallout
While certain product categories continue to show growth, the market's makeup is decidedly changed by the fate of companies that probably would have survived during ordinary economic times or even during a typical cyclical downturn.

"In a cyclical downturn, two things would happen," says Ford. "One is that a company facing cash-flow problems would seek credit to get through. But this time, there was no credit. There was no facility to get cash. So the other option that might have been available was to say, `OK, things are not going well, but we've got some great intellectual property. We'll get bought out by somebody else.' But again, those options were closed off. Others didn't have the facility to get financing to make that acquisition."


The direction of the electronics industry in general was largely mirrored by events in the semiconductor segment, where, according to Jim Feldhan, president of Phoenix-based Semico Research, a fear of inventories brought about a late-year nosedive. "Last year, we actually were on target, almost through the third quarter, to having positive growth," he says. "Of course, with the financial collapse, no one wanted to own any inventory at all, so purchasing basically stopped in October."

What followed, Feldhan says, was four months of declining revenue never before seen in the semiconductor industry. "We've had two or three months, but we've never had four consecutive months, especially in the December-

January time frame," he says. "And the industry really overreacted in terms of cutting inventory."
Feldhan says data from the Semiconductor Industry Association (SIA) suggests 2009 will likely show an overall decline of 12.5 percent in the industry, which is far less severe than some were predicting when the downturn began late in 2008. The SIA's most recent monthly report indicated that worldwide sales of semiconductors in July were $18.2 billion, an increase of 5.3 percent from June 2009 when sales were $17.2 billion.

While sales are still down significantly compared with 2008, the SIA notes that the year-on-year rate of decline has moderated, with the first six months of 2009 seeing an average monthly year-on-year decline of approximately 25 percent, while July 2009 sales were 18.2 percent lower than July 2008. "The fifth consecutive month of sequential increases in semiconductor sales reflects improving demand in the consumer sector," says SIA President George Scalise. "Sales of consumer products such as netbook PCs and cell phones are supporting the modest recovery in demand that is now under way."

Feldhan believes a resurgence in capital expenditures (capex), which had declined between 40 percent and 50 percent each of the past two years, is also helping to fuel a turnaround. "If you keep track of some of the major companies that do invest in capex, like TSMC, Intel and UMC, they've all raised their capex spending for the second half of the year, so they can supply the industry," he says.

According to TechAmerica's annual Cyberstates report, which focuses on employment in the tech sector, total tech employment in 2008 was up 1.3 percent to 5.9 million. But the semiconductor industry fared the worst of all industry segments, losing 10,900 jobs. The best performing segment in the industry - and one that TechAmerica analyst Josh James believes will remain strong for the next several years - is software services, which added 86,000 jobs in 2008. It was the fifth consecutive year in which software services employment grew.

While software services fueled an overall rise in high-tech employment, all three of the other major sectors lost jobs, with high-tech manufacturing losing 23,100; communications services shedding 12,700; and engineering and tech services falling by 26,600.


<< Back  Page1 2   
 
Have questions, comments or concerns about this article? Submit to Ask Area Development here and the author or an expert from our network of site selection and facility planning professionals will answer:
News Items
 
Around The Web
 
Studies/Research
News Items
 
Around The Web
 
Studies/Research

Share