Electronics OEMs Face Slower Growth

Strong 2017 created overcapacity, which is expected to balance out this year, as demand increases.

Growth in the electronics industry is projected to slow in 2018, according to Gardner Intelligence, a division of Gardner Business Media, publishers of Plastics Technology. Gardner based its projection on the historical results of more than 230 publicly traded electronics-industry and industry-related firms, along with Wall Street analyst projections pertaining to these firms (where available).

The industry’s robust expansion during 2017 created overcapacity, which will be balanced by increased demand during 2018. According to IC Insights, Scottsdale, Ariz., a leading semiconductor market-research company, growth of logic and memory integrated circuits is expected to come in at 10.8% and 60.1%, respectively, for 2017 once the final numbers are tabulated. By comparison, growth in both areas in 2016 was a respective 0.8% and -0.6%.

The average electronics industry fourth-quarter 2017 reading of 59.1 was the fastest rate of expansion for the electronics industry during a single quarter in the history of the index.

Data from the Gardner Business Index (GBI) corroborates this view. In 2017, the GBI for electronics was 55.2, compared with 51.5 in 2016. That jump represented the fastest average annual expansion rate in electronics since at least 2012. An index value of 50 indicates no change; values above 50 indicate industry expansion, while values above 50 indicate contraction. The farther the value is from 50, the faster the rate of expansion or contraction.

Among firms that supply the electronics industry and participate in the GBI, our fourth-quarter 2017 data reveal strong expansion in production, new orders, and supplier deliveries. These three factors were the primary drivers of Gardner’s overall index of the electronics industry over the first three quarters of 2017. For Q4 2017, an index of 59.1 was the fastest rate of expansion for the electronics industry during a single quarter in the history of the index.

Looking forward, news of new capital investment by consumer and industrial electronics manufacturers during the early weeks of 2018 imply that capital spending and growth of the electronics industry may have additional room for expansion.

ABOUT THE AUTHOR: Michael Guckes is the chief economist for Gardner Business  intelligence, a division of Gardner Business Media (Cincinnati, OH US). He has performed economic analysis, modeling and forecasting work for nearly 20 years among a wide range of industries. Michael received his BA in political science and economics from Kenyon College and his MBA from The Ohio State University. mguckes@gardnerweb.com