Electronics Industry Recovery Underway

Gartner says growth is resuming, but the effects of the recession on the electronics industry will linger for several years.

Antone Gonsalves, Contributor

October 13, 2009

3 Min Read

Sales of PCs, mobile phones, consumer electronics, and other electronic equipment have bottomed out and are poised to resume growth, a market research firm said.

The PC market is the first sector to post year-on-year growth, which was seen in the third quarter, Gartner said. PC sales typically rise in the second half of the year, due to the back-to-school and holiday-shopping seasons.

However, sales in other major sectors will not begin to rise on a year-on-year basis until next year, Gartner said

"Almost all sectors of the electronic equipment market have now hit bottom and await signs of first growth in comparison with the same quarter last year," Gartner analyst Klaus Rinnen said in a statement released Monday.

In looking at the individual sectors, Gartner said PC sales bottomed in the first quarter of this year, but a sustainable recovery isn't expected to begin until the third quarter of next year. The delay is due to businesses holding back on spending. However, companies are expected to begin buying again in 2010.

In contrast, home PC sales have held up better than corporate sales, reflecting the priority consumers give to PCs even in economic downturns.

The mobile phone sector will be the first sector to show sustainable growth, which will begin in the first quarter of next year, Gartner said. The analyst firm has revised its production forecast upward for the sector, predicting an 8% decline this year from 2008. Gartner had forecast in May a 12% drop.

The rebound in production is largely the result of demand for basic phones targeted at emerging markets, particularly China, and for smartphones, which continue to sell well as competition increases and prices fall.

The wired communications market has benefited from China's infrastructure spending and an earlier-than-expected resumption in buying in developed nations. As a result, Gartner moved the timing of the bottom to this year and first growth to next year. Nevertheless, the sector will be relatively weak until 2011, and the period between first growth and sustainable growth is better described as a "period of stability," rather than a return to historical growth levels.

The consumer electronics market overall has been in a state of "limbo," despite reasonable growth in LCD TVs and Blu-ray DVD players this year, Gartner said. Therefore, first growth isn't expected until the second quarter of next year, followed by a period of stability. A return to pre-recession growth rates isn't expected until the first quarter of 2011.

Finally, Gartner predicted that demand for automotive electronics is likely to improve in the first quarter of next year due to an expected increase in sales of new cars, which have been hit particularly hard in the economic recession. "However, more evidence of recovery in the economy in general is needed before any strong growth trends can emerge for the automotive sector."

"Although the first signs of recovery are starting to appear for the electronics industry, the damage from the current industry recession will be felt for a long time," Rinnen said. "This is seen in our current five-year semiconductor revenue forecast, which does not show recovery to 2007 levels until 2012."

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