Electronics sales are surging, further lifting profit margins and boosting cash piles. Still, unease continues. We identify 15 unanswered questions for vendors.
Electronics manufacturers are enjoying resurgence in their business fortunes as rising sales and tight demand conditions boost profits, helping many companies strengthen their already beefy cash positions.
Yet, industry executives continue to worry about the future. Most companies are keeping as much cash as they can on their balance sheet rather than add new employees or fund expensive capital improvement projects. Although some leading semiconductor companies like Intel Corp. and Samsung Inc. have jacked up their capex in recent months, others have been slow to write checks for big-item acquisitions and manufacturing expansions.
There are numerous reasons for this situation. The global economy is still in flux, led by the United States, where economists and federal regulators believe growth remains tepid. In Europe, fears about the debt positions of countries like Greece, Portugal and Spain have kept consumer spending on a tight leash.
Furthermore, the electronics supply chain itself is in turmoil. Demand is generally acknowledged to be strong and vibrant but some executives still wonder if the double-digit sales growth they are seeing is because demand is so strong or if the fear of insufficient supplies—the traditional bane of the industry—is responsible for a chunk of the increase.
Here is my list of the top 15 questions industry executives would like to have answered with a high degree of accuracy. If you have answers to them, please list them below in the comment box. Also, if there are other questions you believe executives should be asking, please put these also in your comments and I will update the listing over the next few days with those that make the grade.
Here are the questions. Further explanations on them follow in the next pages:
1. How long will this upturn last?
2. How much visibility do OEMs, suppliers and third party suppliers have?
3. Will businesses increase or continue to raise capital expenditure, purchase computers and other IT equipment?
4. Will consumer sentiments remain strong and, if yes, for how long; if not, when and how much will it decline?
5. When will the financing crunch really end and are there still lenders out there interested in supporting my business?
1. Who exactly are we competing/will be competing against?
2. Which of today’s market segments will disappear and which new ones should we focus on?
3. Is the government getting ready to or likely to take away my competitive weapons by introducing “fair use” or other legislation that purport to and aim to break down barriers to entry in my market segment?
4. Whose garage should I be peeking into for the next Apple, Dell or Microsoft?
5. Are my employees sufficiently motivated and do I have the right mix of design, manufacturing, marketing, production and management resources?
1. How much capacity should I be adding?
2. Who is stockpiling components, double-ordering and screwing up the supply chain?
3. Is my supplier able to support my future component requirements?
4. Is my supply chain flexible enough to support continued strong growth or moderate to sharp dip in demand?
5. What do I do with my cash hoard?