Chips, Mobile Devices in Spotlight as Tech Slumps
Tech shares continue to decline as even Apple heads south.
Even though sales of some mobile devices are booming, overall confidence in the tech sector continues to erode as economic weakness puts downward pressure on the computer market.
The Nasdaq Computer Index slumped Friday afternoon, hitting 1520.61, down by 15.04 points for the day and by 38.26 points for the week. Even mighty Apple was down by US$15.24 to $532.20, its lowest point since May.
The chip market has done more poorly than expected this year, according to a report this week from market research company IHS. IHS downgraded its forecast for the global semiconductor market in 2012, with revenue now expected to decline year over year by 2.3 percent, to $303 billion.
IHS has been steadily cutting its estimates. In August it forecast a 0.1 percent retreat for the year and in August it forecast a 1.7 percent decline.
The world economy is to blame, IHS said.
"An extremely weak global economy resulted in poor demand for electronics. As a result, the semiconductor industry slipped from stagnation in the first half of 2012 to a slump in the second half," said Dale Ford, senior director, electronics and semiconductor research for IHS, in the report
There is hope for next year, however.
"One of the few silver linings is that the fourth quarter is expected to bring a mild recovery in year-over-year growth, setting the stage for a market rebound in 2013," Ford said.
Still, this year will bring about the first annual decline for the global semiconductor industry since 2009, when the market was in the heart of the recession. Slumping computer sales have hit the chip industry hard, IHS said, even as mobile devices continue to sell well.
However, not all segments of the mobile market are booming. For example, though smartphone shipments this year are expected to total 717 million, a whopping year-over-year jump of 45 percent, overall mobile phone shipments are forecast to increase only by 1.4 percent, IDC said in a report this week. This overall growth is the smallest in three years, IDC said.
Once again, the blame was pinned on the global economy.
"Sluggish economic conditions worldwide have cast a pall over the mobile phone market this year," said Kevin Restivo, a senior research analyst at IDC. IDC, however, is also hopeful about a recovery.
"However, the fourth quarter will be relatively bright due in part to sales of high-profile smartphones, such as the iPhone 5 and Samsung's Galaxy S3, in addition to lower-cost, Android-powered smartphones shipped to China and other high-growth emerging markets," Restivo said.
In a separate report, IDC was sanguine about the tablet market, predicting a steady rise in sales of the devices from the fourth quarter this year through 2016. A strong competitive landscape -- including strong Android tablet shipments and hearty demand for Apple's new iPad mini -- led IDC to hike its 2012 forecast for the worldwide tablet market to 122.3 million units, up from its prior forecast of 117.1 million units.
In its latest tablet forecast, IDC also raised its 2013 forecast number to 172.4 million units, up from 165.9 million units. By 2016 global shipments should reach 282.7 million units, IDC said.
"The breadth and depth of Android has taken full effect on the tablet market as it has for the smartphone space," said Ryan Reith, a program manager for IDC, in the report.
Competition from Android in the phone and tablet markets may be one reason Apple shares have slumped recently even as sales of the company's mobile devices have increased.
This analysis does not square with what some analysts say, however.
"Apple's November iPad mini launch, along with its surprise refresh of the full-sized iPad, positions the company well for a strong holiday season," said IDC tablet research director Tom Mainelli.
However, as the economy heads into uncertain waters, many investors may be selling Apple shares simply to make some money on a stock that has gone through the roof over the past 12 months, before closing out the books for the year.
Meanwhile, all eyes are on holiday season sales, with hopes that they will inject some fuel into year-end fortunes for tech.
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