Recession's effects to linger on electronics industry

The recession's after-effects could slow down growth for some sectors

Some sectors in the electronics industry are showing signs of recovery, but the damage caused by the recession may be felt for a few years, Gartner said in a study released on Monday.

Most of the sectors in the electronics market, including the consumer, wireless and semiconductor industries, are awaiting the first signs of recovery, Gartner said in its report. There is still uncertainty surrounding the stabilization of product demand and effectiveness of government stimulus packages.

Gartner predicted recovery for some industries, such as the wireless and semiconductor, to resume in earnest starting in 2010. However, the damaging effect of the recession will be felt for a few more years, and some industries will have to wait a few years to achieve highs of previous years, Gartner said.

"Almost all sectors of the electronic equipment market have now hit bottom and await signs of 'first growth' in comparison with the same quarter last year," said Klaus Rinnen, managing vice president at Gartner's semiconductor manufacturing group, in a statement.

The PC industry is an exception, with signs that product demand stabilizing in the third quarter this year. The PC industry bottomed out in the first quarter, and consumer demand for PCs has remained "better than expected," Gartner said. Analysts have attributed stabilization of PC demand to lower prices and increasing demand for netbooks, which are inexpensive laptops characterized by small screens and keyboards. Netbooks are designed to run basic Internet applications and office productivity applications like word processing.

However, other major sectors will have to wait till next year before showing signs of growth, Rinnen said. Recovery for the semiconductor arena could begin next year. Revenue could peak in 2012, when it reaches the levels of 2007, after which the chip revenue skid began.

The global mobile phone industry should recover in 2010, as it is showing signs of sustainable recovery. The rebound should come from demand for products in emerging markets like China, and from smartphones, which could see a drop in prices as demand increases.

The consumer electronics category still faces longer term of instability as revenue and unit shipments for many products dropped during the recession. Demand for some products like LCD TVs and Blu-ray players remained stable and could continue to grow, but the industry overall faces a rough 2010. The industry could stabilize in first quarter of 2011, when demand for products reach growth rates prior to the recession, Gartner said.

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Agam Shah

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