Gadgets to overcome the ‘crunch’
07 January 2008
Well I am sure for some 2007 was dull and for others exciting. For some it will have been disastrous and for some it will have been a huge success. Maybe some will look back on it as a year of missed opportunities, while others will admit they got the breaks. But at the beginning of 2007 did we know whether our year would be full of positives or negatives?
And as we look forward to 2008, can we tell what the future will be for the electronics industry, either collectively or as individual companies? No chance.
If I had to try and tap into the mood it would be one of caution. The events in the second half of 2007 instilled a sense of nervousness more reminiscent of the dot.com crash, and that is still a recent enough wound not to have fully healed. The sub-let generated crisis in the US threatened to undermine the US economy, which destabilised Europe and even caused a nervous look or two from the manufacturing powerhouses in the East.
Although the US trimmed back its interest rates to try and stabilise the situation, their own markets remain unconvinced, which, in a country that fuels its economy by self-investment at the individual level, this genuinely does undermine the manufacturing base and consumer confidence. However, my prediction is that this is going to be one of the category five hurricanes that targets the Mexican gulf, but by the time it hits land it has been downgraded to a tropical storm. And it never hits a particularly populated place anyway. So in a few weeks time the potential catastrophe has been forgotten about and the news agenda has moved on.
This won’t be forgotten about in a few weeks, but I do think (and I do hope these are not ‘famous last words’) it will pass relatively harmlessly in the grand scheme of things.
Why is this? I base my optimism on two main theories. Both of which require taking a step back from the closer analysis of the financial pages. Firstly is one of capacity. At the time of the dot.com crash we had geared up to have a capacity to make more mobile phones than there were people alive who could afford them. Personal CD players, DVD players, telecoms equipment and so on were also due to fill the global factory capacity irrespective of the fact that this manufacturing capacity was outstripping demand.
Now compare the growth in the Chinese internal market alone. The double digit growth in the electronics manufacturing industry is lead by demand from an increasingly consumerist society – one with money. China itself is turning into a domestic market that is predicted in five years to be of comparable size to Europe and the US combined. And then there is India, Malaysia, Vietnam and numerous other countries on the up. In other words, the market is there.
The other theory is more intuition than intelligence. Increasingly over the last few years, and in particular in 2007, I have been aware of a new generation of electronics goods. I am ignoring the huge strides that are always made in medical, automotive, industrial and other industries. This is about consumer electronics. In the past there have been some brilliant gadgets that have been a triumph of substance over style – clever things where the design has been secondary. Then there have been those gadgets that have been the reverse. Fashion accessories as much as functional objects.
But now my feeling is that fashion and function are both put on the drawing board at the same time. By definition, everyone in this industry has a ‘techy’ streak running through them, and yet nobody can resist something that is beautifully designed. So many of the latest phones, mp3 players, games consoles, laptops, PDAs are both functionally brilliant and hugely desirable at the same time. The consequence of this is that life cycles of some products, even in mature and saturated markets, will speed up to fuel demand.
I heard that many of the new products due for release at the Consumer Electronics show in Vegas this week have been closely guarded secrets. The main reason for this being that if people knew how good some of these ‘next generation’ products were likely to be then they wouldn’t buy any of the old generation products for their loved ones at Christmas – they would just wait for a month.
So I think that these two reasons, massive growth in new markets and sustained growth in the established ones, means the future remains bright for the electronics manufacturing industry - irrespective of what happens when the difficulties of the American economy ripple out to the rest of the world.
However, there will always be individuals and individual companies who are winners and losers. Those who get the breaks - and those who don’t. And I hope that all of our readers are among those who get the breaks and turn out to be winners in 2008.
Happy New Year to you all.
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