Pent up demand for electronic systems within the corporate sector will help boost the global electronics market to $1.1 trillion in revenue in 2004, according to iSuppli Corp. (El Segundo, Calif.).
Presenting at the Supply Networks Conference in San Jose Monday (Sept. 27), iSuppli said long-overdue capital equipment upgrades by companies will combine with continued robust consumer spending on electronic products to give the market a kick to 10 percent growth for 2004, up from approximately 6 percent growth in 2003.
However, overall economic factors " such as slower-than-hoped-for rises in jobs growth and spending on consumer durable goods, and an unexpected build-up of component inventories " will moderate 2005 growth to 6.4 percent, setting up 2006 for a "soft landing," according to iSuppli executive vice president Gregory Sheppard.
"The market is not going to hell in a handbasket, it's just growing at a more modest rate," Sheppard said.
The return to spending on network equipment by both telecommunications carriers and enterprises is a bright spot in the outlook, and growth will be a steady 10 percent compounded annually between 2003 and 2008. Companies are spending more on value-added services to generate more revenue, said Steven Rago, principal analyst.
Overall carrier spending for 2004 is up 46 percent, while enterprise network equipment spending is up 10 percent, Rago said.
Growth will come from applications such as broadband -- which will allow carriers to provide services like video-to-the-home, and interactive Internet gaming -- and voice over IP, a method of sending voice calls over the Internet at a far lower cost than traditional telephone services. During the second quarter of 2004, one in four telecom equipment purchases was in the area of voice over IP, said Steven Rago, principal analyst.
Today, 38 percent of households worldwide, or 150 million, have broadband. By 2008, Rago expects that number to reach 350 million.
Meanwhile, driven by the emergence of Chinese brands, the wireless handset market is poised to ship 670 million units this year, representing 17.5 percent growth over the 570 million units shipped in 2003. For 2005, iSuppli predicts shipments of 705 million units.
However, this growth will depend on cellular service providers' ability to attract new subscribers and spark demand for handset upgrades with new services and phone features, said iSuppli vice president Dale Ford.
"In 2003, 58 percent of sales were driven by upgrade demand," Ford said. "By 2008, 90 percent will be driven by upgrade demand."
The good news is, people haven't run out of ideas. Today's hot features like ring tones and integrated cameras will lead to next-generation features like video- and music-on-demand, 3D sound, TV, and video telephony, creating a host of opportunities for chip makers, he said.