Saturday, December 15, 2007

The weekend blog: worldwide electronics sales show serious signs of cooling off

Posted by John Keller

Market researcher IC Insights Inc. in Scottsdale, Ariz. is releasing a dismal report on worldwide shipments of electronics systems, which says sales in 2007 will represent the smallest growth since electronics manufacturers recovered from the 2001-2002 downturn in the wake of the 9-11 terrorist attacks and the telecom bust.

Also bad news for our industry, IC Insights is altering its integrated circuit forecasts and 2008 is not expected to be a big year, as believed last year. A year ago IC Insights projected the semiconductor market would grow by 7 percent in 2007 and 20 percent in 2008, but has lowered its IC forecast to 2 percent growth in 2007 in its latest report.

Growth in defense electronics spending, meanwhile, also is starting to cool off after years of growth during the Bush Administration. The 2008 Defense Department budget request contained spending cuts for procurement and research in communications, electronics, telecommunications, and intelligence (CET&I) technologies.

Industry experts also are predicting that overall defense spending has peaked for the time being, and should begin a long-term shallow decline, as the wars in Iraq and Afghanistan start winding down next year and a war-weary Democrat Congress starts looking for other ways to spend the taxpayers money.

In all this doom and gloom, however, folks in our industry should not lose sight of the promise of defense spending. Even when military spending is on the downturn, as it apparently will be for a while, it still represents a large and reliable source of income for technology companies.

Think of the huge ups and downs we've seen in commercial industries like telecommunications and Internet technologies. Military spending is steady and reliable by comparison. Sure, spending in our industry may be scaling back, but it's still a large and promising business to be in.

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