September 2010

2010 will go down in the history books as one of the greatest recoveries the semiconductor industry has experienced. Contributing to this recovery was the fact that the industry underinvested prior to the downturn. In addition, the fears and uncertainty surrounding the length and depth of the recession and its impact on electronics sales resulted in an overreaction by the supply chain which stripped inventories to near zero. As it turned out, electronics is one of the segments that has fared the best during this recession. As a result the supply chain has been in a catch-up mode for the past year.

Housing continues to languish with foreclosures, falling prices and restricted banks loans. The automotive industry has made some nice recoveries yet is still well below production levels from just a few years ago. The new consumer is different. They are younger and two things are apparent. One, cars are not the highest priority for these consumers. Two, buying a house is also not high on the priority list. What is a priority is the ability to have access to social networking, games, videos, pictures and music. These priorities drive consumers to upgrade their smart phone, iPod, tablet/iPad and notebook. These products are priced such that they do not require credit and are considered a necessity in today's world.

It has been reported lately that tablet PCs, namely Apple iPads, are having a significant impact on notebooks and netbooks.  Are the tablet PCs cannibalizing netbooks and low-cost notebooks?

It should be noted that what is cited is consumer sales in the US.  Let us keep in mind that the US represents less than half of the world wide PC market and that consumer is about half of the US market.  Late last year it was anticipated that PC sales would be driven mainly by corporate sales in 2010.  Many companies had delayed PC upgrades in 2009 due to economic conditions.

We heard the same thing about netbooks cannibalizing notebooks when they first emerged.  Netbooks did cannibalize some of the low end of the notebook market, but it also established a new market segment which added new users to the total computing market.
Semico’s forecast for netbooks from a year ago already showed that netbook growth would slow down in 2010 (even before the iPad emerged) just because it would become mainstream very quickly.

Total iPad shipments are 3.27 million at the end of 2Q 2010.  Assuming additional growth each quarter and the introduction of competitors in 4Q 2010, the tablet PC is expected to reach 12 million units in 2010, Semico's forecast.  Netbooks will reach 38.5 million, so tablet PCs will be less than 1/3 the size of netbooks.  Notebooks are projected to hit 175 million in 2010.