Electronics demand may recover late this year

Recent demand for electronics products is the first sign of bottoming, but end demand won't improve until the third quarter

The current uptick in electronics production may be a first sign of bottoming, but real end-user demand for electronic devices will not emerge until the final quarter of this year, Gartner said in a report Sunday.

"The bottoming of PC-related production is breathing the first signs of hope into the electronics supply chain," said Gartner analyst Klaus Rinnen, in the market researcher's Semiconductor DQ Monday Report.

"Still, the majority of the industry will not bottom until the third quarter of 2009," he added.

Almost all sectors of the electronics equipment market remain in decline, according to the report. It will take time for all IT markets to hit bottom, but once they do they can return to growth.

The rebounding process will take around two years, he said.

The Gartner analyst is not alone in his view. Despite some positive news recently in the electronics sector, such as a pickup in chip manufacturing activity over the past month and the strong sales of BlackBerry smartphones reported by Research In Motion (RIM) last week, the overall electronics sector remains in decline.

Bhavtosh Vajpayee, technology industry analyst at CLSA Asia-Pacific Markets, says improvements in the technology industry over the past few months have been driven by companies restocking their inventories after working them down, not real end demand.

Companies are also selling more products at significantly lower prices, which is great for users but not so good for corporate profits.

"We expect disappointments to follow in the absence of end-demand revival," he wrote in a report last week.

Gartner says a recovery in global electronics markets depends on economic recovery and the effectiveness of government stimulus packages.

The trouble is that despite some more recent positive news flow for financial institutions in the U.S., expectations for global growth remain dim.

The Economist Intelligence Unit last month reported that there was no let up in the deterioration of the global economy in the first few months of the year.

"In particular, the collapse in global trade since end-2008 is causing severe problems for export-dependant economies, particularly those in East Asia and Germany," the group said in a report.

The researcher now forecasts the world economy will contract by 2.6 percent year-on-year. A global recovery will begin in 2010.

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