Inflection point. It's a double-edged term that signals either the end of good times or the beginning of recovery. As such, it's something that's either shunned or treated with great anticipation--and the latter is surely the case with the latest recovery that the electronics industry is cobbling together.
Inflection points, however, like the end of economic recession, are difficult to see until the market has fully turned the corner. It's a bit like crossing the equator by ship. You don't necessarily appreciate the event until you begin to notice a subtle change in the climate.
So what is the high-tech sector's present latitude? Unfortunately, no navigational aid has yet been invented that can determine that, so for now it looks like good old-fashioned dead reckoning will have to suffice.
As the end of the year approaches, holiday demand will provide one important indicator. Already, it seems, cell phone makers are gearing up for what many hope will be a banner year. While manufacturers and service providers are still refusing to confirm projections of significant demand upside issued by one research firm, they are acknowledging a resurgence in customer interest driven by new services, like cell phone number portability, and new features, like color screens and handsets equipped with built-in cameras.
Consumers can also be seen rallying around the long-awaited arrival of affordable LCDs that will ostensibly replace CRT-based TVs and desktop PC monitors. Demand for such products, combined with less than desirable yields at so-called fifth-generation LCD fabs, has contributed to a shortage that many industry pundits expect will last into next year.
While rising prices may occur as a result, anyone strolling the aisles of Circuit City or Best Buy can see that--insofar as LCDs are concerned--the world is indeed flat.
However sophisticated the modeling may have become, though, demand prediction is still a largely observational science. Pulling into an inflection point provides the market with a natural lift. But without knowing the true trajectory of demand, it's impossible to know if the stimulus is sufficient to trigger a sustained recovery.
Still, as the saying goes: Any port in a storm. The November EBN Electronics Buyers' Index touched a three-year high of 45 and is now flirting with the 50 mark that signals broad industry expansion. Buyers are suddenly more concerned (or at least as concerned) about availability as they are about price. And early projections are that post-Thanksgiving retail sales--and in particular e-tail sales--are off to a solid start.
Let's hope for smoother sailing in the days ahead.
E-mail comments to Andrew MacLellan at email@example.com.