Electronics Production | August 01, 2007

Electronic Equipment<br>Growth Slows

Following three years of strong growth, the global electronic equipment market's expansion will decelerate slightly in 2007, iSuppli Corp. predicts.
The past three years have seen an exceptionally strong electronic equipment market, with worldwide revenue growing by 11 percent, 8.0 percent and 7.7 percent in 2004, 2005 and 2006, respectively. The strongest growth has come from PCs, mobile handsets and hot consumer-electronics products such as MP3 players and digital televisions.

“All major markets generated positive growth in 2005 and 2006 and all these areas will continue to expand in 2007, although the total electronics equipment growth in 2007 will drop to 6 percent as the wireless, consumer and industrial markets cool—even as the PC market revives," said Gary Grandbois, principal analyst with iSuppli.

A minor slowdown in the PC market appeared in 2006 as the market for desktops flattened, even while mobile PC unit growth remained high. This strong growth for mobile PCs has continued in 2007 with robust first-half demand that may put mobile PCs on track to repeat their 28 percent unit growth of 2006. The second quarter of 2007 was something of a surprise for the PC market, with much stronger growth than typically seen at that time of the year.

Mobile handset growth remains vibrant in 2007 and is expected to end the year with a 10 percent unit increase. However, revenue growth will be only 5 percent as Average Selling Prices (ASPs) continue to decline.

Semiconductor revenue for wireless communications grew by 14.2 percent in 2006, driven by the 20.7 percent unit growth of handsets. The 2007 semiconductor revenue growth for wireless communications will be 7.7 percent as the handset unit increase slows to 10 percent, one of the many factors behind the present slowing in the semiconductor market.

The attached figure forecasts global annual revenue growth for both electronic equipment and semiconductors during the period of 2006 to 2011.

Feeding frenzy
The frenzied demand for new consumer-electronics products over the past four years has slowed also; revenue growth for the consumer-electronics market dropped by about one-third in 2006, to 9 percent. And it is expected that growth will decline by more than one third in 2007, to a smaller, but respectable 5.2 percent revenue growth as the market slows and ASPs continue to plummet.

The wired communications segment is expected to post 3.1 percent growth in 2007 and automotive electronics are expected to post a 3.9 percent increase in 2007, a weaker trend than seen in recent years.

The industrial market rebounded to 8 percent revenue growth in 2006 as the military/aerospace, medical and semiconductor manufacturing equipment markets grew strongly. But industrial market growth has flattened in 2007, especially in the semiconductor manufacturing equipment sector, and the total industrial market is expected to post 5.8 percent revenue in 2007.

'Tis the seasonality
Although first-half electronics equipment growth was down by nearly 6 percent compared to the last half of 2006, this is a fairly typical seasonal pattern; PCs, mobile handsets, and consumer electronics typically show much stronger growth in the second half.

The normal exception is the industrial market, which typically grows more strongly in the first half of the year, and 2007 will show the same pattern as the industrial market slows from 4 percent growth in the first half to 2 percent in the second half. Despite this industrial counter-trend, the total electronics market will post a double-digit, 12 percent, growth in the second half of 2007 to bring the annual electronics equipment growth to 6 percent.

iSuppli Figure: Annual Growth Forecasts for the Global Electronic Equipment and Semiconductor Markets, 2006-2011 (Percentage Revenue Growth)
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