November 24, 2014

Global Electronic Equipment Production Outlook and Forecast Report

ELECTRONICS.CA PUBLICATIONS, the electronics industry market research and knowledge network, announces the availability of a new report entitled “World Electronic Industries 2012-2017“.  This new edition details production structure and forecasts for more than 50 lines of electronic equipment, for all world regions from 2012 to 2017.  Global electronics production, valued at more than 1,410 billion euros in 2012, is completely intertwined with the global economy and should grow on average at 3.2% per year until 2017 to reach 1,655 billion euros.

General Outlook: Towards more professional electronics, a chance for North America and Europe

Ten years ago, North America, Europe and Japan recovered from the Telecom crisis but still represented, as a group, around two-thirds of global electronic equipment production. In 2012, the historically developed economies represented only slightly more than 40% of this world production. This share has constantly declined ever since as their specialization in lower-volume professional production segments has not compensated for the migration of mass-market device production towards the emerging growth markets in Asia.

Global electronics production, valued at more than 1,410 billion euros in 2012, is completely intertwined with the global economy and should grow on average at 3.2% per year until 2017 to reach 1,655 billion euros.

World electronic equipment production by region in 2012 (center) and 2017 (on the edge)

Electronics manufacturing industry report

 

Source: DECISION, World Electronic Industries 2012-2017

Naturally enough, China benefited most from this production transfer and its share of world production more than doubled in the last decade to reach 38% in 2012. However, its development is now evolving to focus more than ever on internal demand, diversification to professional electronic segments and international investment. In addition, due to rising labor costs, China is seriously challenged by other economies in the Other Asia-Pacific region, which includes emerging countries like India, Vietnam or Malaysia, capable of churning out some of the same consumer electronic goods at a cheaper cost. As a consequence, while China should remain the largest electronic equipment manufacturing country in value, its production share is expected to decrease over the 2012 ­ 2017 time frame to 36% at the end of the forecast period.

Less impacted by the financial crisis compared to developed countries, emerging countries are still targets for foreign direct investment due to good market prospects and their relatively cheap production factor costs.

In 2012, the Other Asia Pacific region accounted for 16% of the world electronic equipment production. Over the forecast period, we estimate the region to experience the highest regional average annual growth rate with 7.9% and to consolidate its rank of second largest electronic manufacturing area with 20% of the world electronic production share. This strong growth can be explained by the trend to delocalize electronic plants from China to adjacent countries to lower production costs especially for low-end mass-market products (like basic mobile phones, etc.) in a first step. And, not least, it is due to the fact that this group of countries includes India, a country that will soon rival China as the world’s leading economy.

Similarly, the electronic production in the Rest of the World (South America, Africa, etc.) is forecast to be also very dynamic with an average growth rate of 7.2 % through 2017 driven by a strong demand in telecommunication equipment, industrial electronics, aerospace and defence electronics. With the will of emerging countries to develop their electronics industry, industry players are politically encouraged to establish production sites to reinforce their presence in these markets. A trend proving the dictum that production follows markets.

Electronic equipment production growth rates per year in China, Other Asia Pac. and ROW

Electronic equipment production growth rates per year in China

Source: DECISION, World Electronic Industries 2012-2017

In this context, Europe, North America and Japan are facing a much more sluggish situation as none of these regions will see its share of electronics production rise during the forecast scenario. In the end, we can’t all be emerging countries.

 Electronic equipment production growth rates per year in Europe, North America and Japan

World electronic equipment production

Source: DECISION, World Electronic Industries 2012-2017

Indeed, the developed countries will all continue to suffer from the harsh competition of the emerging countries producing mass-market electronic goods for their fast-growing markets. Some of the historical electronic leaders are in difficult positions. After 15 years of domination, the former European mobile phone leader, Nokia, passed up the chance to impose its view during the smartphone revolution and now its production strategy is to be outside of Europe. For different reasons, Blackberry is in an equivalent situation. The collapse of the production of telecommunication equipment in Europe and North America is one of the reasons that explain their global weak performance in electronic production.

Even more consumer-oriented, Japanese manufacturers have to cope with the pressure of their Asian neighbours especially on the Audio-Video segment. Japan continues to produce consumer products such as TVs or Game consoles, where Sony, Panasonic, and the other national manufacturers experience increasing competition from South Korea and from new comers from China. With both an ageing population and industrial base requiring huge investment to maintain its competitiveness, Japan should continue to shift or outsource more and more of its consumer electronic output outside Japan.

In Europe and North America, however, the production of electronic equipment dedicated to automotive, aeronautics, industry and medical should compensate for the difficulties in the ICT (information and communications technologies) segment, enabling growth rates of respectively 1.7% for Europe and 1.9% for North America over the period 2012 ­ 2017. This will be in spite of public budgetary constraints hampering some market segments like defence or medical equipment, as Europe and North America manage to strengthen their lead by benefitting from the high demand worldwide for these professional products with rapidly increasing electronic content.

World electronic equipment production in 2012 (center) and 2017 (on the edge)

World electronic equipment production

Source: DECISION, World Electronic Industries 2012-2017

Traditional 3C markets (Consumer, Communication, Computing), better known under the ICT acronym, still represent the largest market/production share for electronic equipment worldwide with 66% of the global electronic output. These end application sectors remain essentially driven on the one hand by mass-market demand and corresponding devices such as smartphones, PCs, Tablets, Smartphones or TVs produced by hundreds of million or even billion units every year and on the other hand by the related infrastructure equipment necessary to cope with increased data traffic over the internet.

These markets are now fully engaged in the digital convergence era with profound consequences on suppliers’ strategies and organizations. The most striking example of this trend is the cannibalisation of PC production by mobile devices like digital tablets and smartphones. In 2012 PC production (desktops and laptops) value was already overtaken by the combined production of smartphones and tablets. By the end of 2012, tablets had only 2.5 years of existence and just 6 years for smartphones. And in that same year, the sole revenues created by iPhone sales generated more profit than Coca-Cola or Boeing !

On the other hand, professional electronic production, comprising electronic equipment embedded into aircraft, defence and security systems, automotive, trains, ships, medical equipment… but also into a myriad of products used throughout industry like automation, power supplies, etc. is expected to increase significantly in value, from 486 billion euros in 2012 to 656 billion in 2017 ($655 to $885 billion) or 40% of worldwide electronic production compared to 34% 5 years earlier.

Electronic equipment production growth rates per end-sectors

Electronic equipment production growth rates

Source: DECISION, World Electronic Industries 2012-2017

Indeed, the annual average growth of all the professional sub-segments together should outperform the world global electronic production trend set at 3.2%.

1) With an average growth rate of 4.3% until 2017, the electronics dedicated to the Aerospace, Defence & Security sectors is driven by several factors:

The societal need for security is deeply related to the globalization process and the vulnerability of developed economies to both external and internal threats. The security market covers in fact a wide spectrum of concepts from the security of citizens and countries (homeland security) to the trust in digital technologies (IT-security), making security a very heterogeneous market both from a demand and a supply side perspective (air and sea port protection, biometric IDs, chemical detection, etc.).

While defence budgets are squeezed in mature economies, they continue to rise in developing countries.

Last but not least, the civil aeronautics market is booming, driven by high demand in air travel especially in emerging countries. In addition, the value of electronic equipment used by modern aircraft will increase dramatically with the arrival of the generation of “more electric aircraft” like the B787 or the A350. DECISION estimates that the share of on-board electronic equipment will nearly double from 6% for old generation aircraft to 11% for new wide bodies and future aircraft projects. This will naturally boost electronics production for the aeronautics market.

2) With an average growth rate of 7% until 2017, electronics dedicated to the Automotive business sector are pulled by two main factors:

Structurally, global demand for automotive will continue to grow thanks to high demand from emerging countries whose automobile penetration rates are still at a low level.

As in aircraft, the amount of electronics per car will soar thanks to new embedded technologies. The three main electronic innovations that will drive automotive electronics growth are:

- Increased energy efficiency with the electrification of drive trains, the replacement of mechanics by smart electronics, smart grid connection, etc.
– More devices enabling communication between cars, people and infrastructure –
– More advanced safety equipment like traffic management systems, driver assistance technologies, etc.

3) With an average growth rate of 6.5% until 2017, production of electronic equipment for industry should increase at a fast pace.

Including many differentiated segments, the electric and electro-mechanic industry is also benefiting from progress in terms of performance and productivity provided by electronic technology. To answer the universal challenges of energy consumption management, healthcare expense control of ageing populations, or demands for increased mobility, all industrial segments are reinventing their products and solutions.

Globally linked to dedicated investments, the world industrial and medical electronics production will start a new growth cycle from 2012 to 2017.

Details of the new report, table of contents and ordering information can be found on Electronics.ca Publications’ web site. View the report: World Electronic Industries 2012-2017“.

 

 

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