An Uneven Rise From The Ashes

Current return is rocky, but future markets should provide significantly more growth with less fluctuation.

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There are signs that we are emerging strongly from the recession, and signs that we are still staggering. So which is correct?

Unfortunately, it’s both. The problem with the bulk of the electronics market now devoted to consumer spending is that there’s no compelling need to upgrade. There will always be replacements. Cell phones break. Cars fall apart. Even desktop computers burn up. But can people live with another six months of the same old television or hold off on the purchase of a new digital camera? Unless they’re complete technoshopaholics, the answer is definitely yes.

That wasn’t true when desktop computers ruled the industry and just to be able to stay current, competitive and still communicate with other companies you were forced to upgrade. Windows 7, from all reports, is significantly better than Vista. But you can still send e-mail and do spreadsheets in Vista. You just have to wait longer for the computer to boot.

And while the global demand for new products slowly climbs back out of the rubble, even oil prices are stuck at $75 a barrel, which means no compelling reason to immediately shift to alternative energy. It can wait a few months. And with technology changing so radically on automobiles, it’s hard to justify jumping into the market to purchase a new car when it may be considered a gas guzzling clunker in two years.

We are at a transition point in technology, where almost everything needs to be re-thought with power constraints in mind, and where the next compelling applications may be in areas that have never been huge drivers of the market—health care and alternative energy, for example. These are big growth markets, but it will take time to ramp them into the kind of frenzied momentum that carried much of the electronics industry in the 1980s and 1990s in computers and communications, and more recently in consumer electronics.

What’s different about these markets, though, is that they’re not replacement market or based on the whims and economic comfort levels of the consumer. They will be needs-based markets, similar to the early days of the PC, where advanced technology will be required rather than optional. That’s a huge difference because it’s subject to far less fluctuation than cell phone sales, but it still reaches and serves a sizeable of the globe’s population.

–Ed Sperling


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