Predicting what 2005 will bring to the electronics industry is much like Harry Potter and his classmates looking into the bottom of the cup and trying to read the tea leaves—depending on how you look at it, you get a different answer.
At first glance, the future is cloudy. Gartner is predicting negative growth for semiconductor capital equipment in 2005. According to a McKinsey study, PC sales are slowing. More manufacturing companies are moving their manufacturing overseas and 8 million Americans are out of work. Many engineers and managers from the electronics industry who lost their jobs in 2001 are still looking for work. CEO's of even healthy companies are seeing stiffer competition, price erosion, and lower profits. The weak dollar, volatile oil prices, and geopolitical uncertainty don't give us much confidence. The prospects look dim for 2005.
On second glance, the tea leaves portray a different picture. According to iSuppli, semiconductor chips are estimated to grow at 4.7% in 2005. IDC is expecting PC growth of 10.1%. They are predicting China will add 178M new PC's; India will increase by 80M and Indonesia by 40M. The wireless industry is making a comeback with 3G and 3.5G systems gaining momentum worldwide. GSM is booming in China and other newly developed countries where wired phones don't exist. Wireless LAN is being installed in coffee houses, college campuses and office buildings. Automobiles are continuing to add more electronic content including wireless services such as GPS, hands-free cell phone, and Internet. All of this points to positive growth in electronics in 2005.
So how do you read the tea leaves? A lot depends on your point of view. Those expecting the boom times of the late 90's will be very disappointed in the prospects of 2005. It will not be a time of high growth and low unemployment. The world economy cannot support rapid expansion given the instability in the Middle East, the slow recovery of Japan, and the modernization required in Eastern Europe. Even the economy of China is slowing, unable to keep its blistering pace of the past few years.
And yet the world of electronics is not slowing down. Higher speed processors, higher frequency RF devices, miniaturized camera and video components, and new breakthroughs in nanotechnology provide a rich set of technologies that can be applied across multiple industries. The military's need for better satellite-based intelligence, secure communications and weapons with pin-point accuracy is fueling a resurgence in leading edge technologies. The commercial need for "wireless everywhere" is resulting in growth in cell phones, laptops, and communication hubs. Improvements in video capture and display is creating a boom in digital cameras, digital video recorders, and home theater systems. Even sensor technology is going wireless as automotive, medical, and industrial companies make use of sensors equipped with RF transmitters and receivers.
As I read the tea leaves I see the electronics industry tied very closely with consumer confidence. I watched in awe over the holiday season as lines formed with people purchasing high definition TVs, digital video recorders, digital cameras, cell phones, and high-speed PCs. I'm seeing new companies enter the scene, capitalizing on the wealth of unemployed engineering talent and eager to put new technologies to innovative uses. I'm hearing from established companies they are beginning to invest in new test equipment, upgrade their computers and install wireless links. I see this as a sign of increased confidence.
I predict 2005 will be a year much like 2004. Barring any major world crisis the electronics industry will grow, not by leaps and bounds, but with a slow and steady pace. The tea leaves have spoken.
About the Author
Grant Drenkow is a solution planner for test system components—helping Agilent plan for future LAN-based instruments, modular LXI products, and test system software. He holds a BS in Electrical Engineering and an MBA in Marketing. He spent 6 years in the U.S. Air Force as an Electronic Warfare Officer, joining Hewlett-Packard in 1983. He has performed various marketing roles as a Product Support Engineer, Application Engineer, Regional Sales Engineer, and Product Marketing Engineer. He spent 4 years in Europe as the Product Line Manager for VXI and software products. Prior to his present job he managed the worldwide promotions of VXI and test
system components.
