June 30, 2014 --Electronics production growth has turned positive in 2014 for all key geographic regions. The graph below shows three-month-average change versus a year ago for electronics production in local currency through April 2014. Total industrial production is used for Europe (EU countries) and South Korea since electronic production data is not available. The data is from government sources.
China continues to show strong growth in electronics of 10% or higher. Taiwan electronics was in a significant decline throughout 2012 and 2013 but returned to growth of 5% in April 2014. Japan electronics experienced a major decline following the March 2011 earthquake and tsunami. Japan’s electronics growth has been positive since November 2013, ranging from 4% to 8%. U.S. electronics went from positive growth in 2012 to declines of 1% to 7% in each month of 2013. The U.S. turned positive in January 2014, showing growth in the range of 2% to 4% through April. Europe’s industrial production followed the same general trend as U.S. electronics, turning positive in October 2013 and growing about 3% in each month of 2013. South Korea’s industrial production oscillated between positive and negative in 2013, but has been positive since December 2013.
Two key drivers of electronics and semiconductor growth over the last few years have been smartphones and tablets. The growth rate of these products has been slowing over the last several quarters. Tablets have slowed from over 100% year-to-year growth in 2012 to only 4% in 1Q 2014, according to IDC. Smartphone growth has decelerated from close to 50% in 2012 and the first half of 2013 to 24% in 4Q 2013 and 29% in 1Q 2012.
Despite the slower growth in the last few quarter, both tablets and smartphones are expected to show healthy growth for the year 2014. Gartner expects tablet growth of 39% and NPD DisplaySearch projects 26%. IDC lowered its forecast in May to 12% from its March forecast of 19%. IDC expects large display smartphones to take away some of the potential market from tablets. Smartphones are forecast to grow between 24% and 34% in 2014 according to Gartner. IDC is projecting 19%.
What is the next big driver of growth for electronics and semiconductors? One potential answer is the further evolution of computers and mobile phones into a single device to handle most of people’s computing and communication needs. It will probably several years of technological and design innovation before this type of device becomes mainstream.
In the near term several applications will help stimulate electronics and semiconductor growth:
- Automotive production has grown steadily over the last four years. Safety, entertainment, navigation and communication applications are driving increasing electronics and semiconductor content in automobiles.
- Television sales will see higher growth as more consumers purchase Ultra High Definition (UHD or 4K) TVs. However the high prices of UHD TVs will limit the market to early adopters for a few years.
- Wearable devices for tracking fitness and health are becoming popular. The market for these devices is currently small but fast growing.
- The “internet of things” (IoT) is getting a great deal of publicity. Basically it refers to connecting a wide range of devices to the internet to be remotely monitored and controlled by a PC, tablet or smart phone. Home security and energy management are two key IoT applications which are seeing acceptance in the market. However some of the proposed IoT applications seem to be a technology in search of a need.
The current outlook for electronics and semiconductors is good based on production statistics. Traditional and emerging devices should be able to sustain growth for at least the next few years. Our May forecast at Semiconductor Intelligence was for semiconductor market growth of 10% in 2014 and 9% in 2015. This forecast certainly looks achievable based on recent trends.
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