Global Technology Market Finds Turning Point in Down Market

Despite ongoing reports of cutbacks, layoffs and negative growth, the global economy is not doomed for an endless recession. In fact, according to a recent New York Times article, one of the first areas that could show signs of a strong recovery is the global technology industry.

A report from the Organization for Economic Cooperation and Development shows the global technology industry may have passed a turning point. Recent weeks have shown a marked recovery as production of semiconductors, computers, mobile phones and other electronic equipment have rebounded strongly.

“Even a few weeks ago, we didn’t see the bounce-back in the data,” said Sacha Wunsch-Vincent, an O.E.C.D. economist, in the New York Times. “We were still grappling with the size of the downturn. Now, this could be the turning point.”

It may still be too soon to make positive assumptions as the market did slump deeper than anyone predicted. OECD data, compiled from national statistics offices, showed productions of information technology products was down as much as 40 percent this year. Asia suffered the deepest fall, but is also recovering the most rapidly.

Recovery has also been seen in Japan, Germany, France and Britain; although through June there was still no recovery in the United States. Industry figures through June show that while U.S. production was down 15 percent year-on-year, but stable from the previous month.

The OECD is not the only industry firm reporting a positive outlook. Gartner (News - Alert) highlighted that while global shipments of PCs fell five percent in the second quarter, the drop was only half as big as it had expected. Gartner’s outlook for the year forecasts a six percent drop, with a ten percent rebound in 2010.

Some industry analysts suggest the technology sector is at risk for a second dip if consumer demand fails to grow as expected, although Wunsch-Vincent said he thought the recovery looked more robust and instead highlights the possibility of capacity shortages in the middle to long term. The cuts companies have made in the past year may present themselves as challenges in the recovery.

In March, ABI Research (News - Alert) estimated shipments of GPS semiconductors would increase by 15 percent on a unit basis in 2009. This area of consumer electronics is driven by the demand and purchase of products that rely on or incorporate this technology. Mobile phones and the use of GPS technology for location-based services is a key driver for GPS semiconductors.  

It will be a challenge for every company to determine how best to manage the recovery in light of the changes made internally. Consumer demand will play a large part in this strategy and for some, it really will be a “wait and see” dance.