Electronics markets showing signs of recovery

Electronics markets bounced back strongly in 2010 from the 2008-2009 recession. The recovery stalled in 2011 as a series of natural and human-made disasters hit various parts of the world. Japan was hit by an earthquake and tsunami in March 2011. Thailand was affected by floods which disrupted HDD production and thus impacted PC production throughout the world. The European financial crisis led to economic weakness in most of the European Union (EU).

Recent government data on electronic production and orders shows most regions are beginning to recover from the 2011 slowdown. The chart below shows three-month-average change versus a year ago in local currency for electronics orders (U.S. and EU) and production (China and Japan). The data is through May 2012, except for the EU which ist hrough April. China continues to show the most robust growth, with double digit growth since the beginning of 2010. U.S. electronics orders experienced 12 months of year-to-year declines from March 2011 through January 2012, but turned positive in February 2012, reaching 6% growth in May. Japan electronics production change was negative for 16 months, with declines greater than 20% for six of those months. In May 2012, Japan electronics production turned positive at 2.3%. EU electronics orders remain weak, with April 2012 the twelfth consecutive month of year-to-year declines.

Unit shipments of PCs, mobile phones and LCD TVs have not yet reflected the above recovery. International Data Corporation (IDC) estimates PC unit shipments versus a year ago have been flat or in the low single-digit range for seven quarters through 2Q 2012. A bright spot has been media tablets, which have shown explosive growth since Apple released its iPad in 2Q 2010. Numerous competitors to the iPad have emerged from Samsung, Amazon and others. Media tablets in many cases are displacing PC sales. Combining unit shipments of PCs and media tablets results in a more realistic picture of this market segment. The combined data shows sturdy growth in the double digit range through 1Q 2012.

Mobile phone shipments were fairly sound with double-digit growth through the first three quarters of 2011. Shipments have weakened since, with 1Q 2012 down 1.5% from a year ago. Within the mobile phone market smart phones have shown vigorous growth, over 40% for the last three quarters. IDC estimated smart phones accounted for 36% of the total mobile phone market in 1Q 2012, double the percentage from two years earlier. Smart phones are a key driver for the semiconductor market due to the high semiconductor content. Smart phones also benefit mobile service providers through increased data usage and provide growth opportunities for app developers and accessory makers.

LCD TV unit shipments have also been weakening over the last two years, according to DisplaySearch. 1Q 2012 LCD TV units were down 3% from a year ago compared to year-to-year growth averaging over 30% in 2010 and 7% in 2011. 3D LCD TVs are emerging as a meaningful segment of the market, accounting for 14% of LCD TV shipments in 1Q 2012 versus just 4% in 1Q 2011.

Despite the overall weakness in electronics and semiconductor markets, some signs are pointing towards a resumption of healthy growth. Two of the key drivers of the new recovery, media tablets and smart phones, have just emerged as significant markets in the last few years. 3D TVs may drive growth in an overall flat TV market. Economists generally expect the overall world economy will show higher growth in 2013 than in 2012. An improving economy and the new electronics market drivers should lead to relatively strong electronics and semiconductor markets in 2013.