Summary
Electronics tend to do well in a slow economy. At the consumer level, people tend to cocoon in their homes when times are tough. Instead of going away on vacation, or going out for entertainment, they tend to buy electronics. At the business level, sure there will be a pullback in spending on high-end servers, but even in recessions, businesses tend to buy computers and peripherals, and networking hardware to improve efficiency and boost productivity.
Analysis
VLSI expects both consumer and business spending to stagnate in 2009, resulting in a very slight 3.5% growth in electronics. At this rate, worldwide electronics shipments should amount to $1.7B.
In 2008, semiconductor growth has been ~2%, and in 2009 the market might experience anything between a decline of 2% and growth of 1%. In addition, one can expect a capital spending decline of ~17% in 2009, and capital equipment to drop roughly 18%. In excess condition for all of 2008, inventories will rise in 4Q, overshadowing demand and reducing production needs for 1H 2009, which will lead to a reduction in factory utilization.
Continued weakness in memory sectors combined with reduced production due to increased inventory levels are causing many manufacturers to drop spending projections. Memory financials continue to worsen, causing suppliers with cash flow problems to delay or eliminate capacity expansions. Some vendors are even postponing investments for needed technology improvements because of profitability problems.
