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Spring is bringing new growth to global markets at a sustainable pace, which is exciting for the supply chain. Europe, like North America, is showing real signs of a return of consumer confidence and foreign investment. Meanwhile, many of the emerging economies are also gaining momentum, although some remain clouded in political issues, like Russia; and internal economic issues, like China. These dampen prospects or at least add some question marks in those markets.
Disclaimers aside, the global market holds new promises for the semiconductor and electronics industry at a time when OEMs are strategically targeting emerging-market consumers with lower-priced hand held devices. As we know, the drive behind these new market strategies for smartphones, tablets, and "phablets" is that these devices are reaching saturation points and becoming more commoditized. At the same time, service providers are positioning themselves to handle growing data transfer traffic as consumers look for 4G and wider apps use on these LTE- capable devices.
New market strategies for OEMs can be understood as setting up a push-chain for smartphones and a pull-chain for tablets and phablets. The changes in global supply chain dynamics will open new relationships and opportunities as manufacturers work to meet the demand for lower and more competitive ASPs while providing regional and/or local distribution channels to trim margins and ensure support.
LTE driving emerging consumers
As recent component and device announcements show, the industry is seeing competitive pricing for components that are targeted for low-cost LTE devices. This focus on lower ASPs is pushing design engineers and component suppliers alike to take a second look at mature components to meet the price demands of these low-cost, LTE mobile products.
China is about to complete its 4G rollout in 3Q14. This marks an important date because 4G LTE networks will lead in growth of the next generation of low-cost LTE devices. Some consumers are targeting these devices as replacements for their current mobile phones; others are making them their first-time buys as high speed data transfer and internet connectivity via a mobile device has become available.
Growth for the industry is found not just in the emerging market opportunity for low-cost smartphones, but in network infrastructure providers and related network device manufacturers and their suppliers. Looking further into new market opportunities related to the introduction of high-speed data transfer capabilities, cloud storage and automation, the door is also opening for the wearable device market and for IoT. If we add the low-cost device forecasts with emerging growth seen for wearable health and fitness devices, we could see strong global opportunities once they are widely adopted and fully integrated into our daily lifestyles. One reason for linking these market opportunities together is because wearable tech relies on connectivity with a smart wireless device to enhance users' experiences with their smartphone or tablet.
Emerging doors for new growth
Where are these growth markets? While we still look to the original BRIC nations (Brazil, Russia, India and China), Russia's ability to stay on the list is in question because of internal economic and political issues. Also, there are many questions surrounding how China will react to its economic challenges. China has lowered its growth forecast a bit and there are questions around internal economic stability. However, the sheer number of consumers and the investment in network infrastructure as well as the physical presence of so many companies in the industry makes it unreasonable to remove China from the list of growing emerging markets. Other emerging markets where we are seeing growth and demand through the distribution channels include Indonesia, Singapore, and Turkey.
Sitting at the new beginning of global smart phone adoption is an important moment for the industry. In the mature markets, we are seeing two simultaneous commoditizing events: (1) bare bone servers are under cost pressures through scale (driven by the need to optimize latency and throughput demand as data transfer volume and demands increase as M2M and applications drive smart device use); and (2) high-end smartphone sales are slowing due to saturation. As a result of these market situations, the opportunity for new growth through low-cost smartphones with LTE capabilities is open to both OEMs and the entire supply chain. Distributors have an equally exciting opportunity in new markets by leveraging their existing networks to support new growth while realizing opportunities from the device commoditization.
Dustin Ford is vice president, corporate strategy, for Smith & Associates
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