Electronics Industry in 2016

Ian Poole
2016 electronics industry predictions
Editor Ian Poole looks at the way the electronics industry will develop in 2016 - some of the underlying industry currents that may surface.

2016 is set to be a very interesting year for the electronics industry. There are rumours floating around about a number of issues and only time will tell what will happen. Although some changes may occur over the long term, many will come to fruition in 2016.

One of the major areas concerns the predictions for the growth of the electronics industry in 2016. It is always difficult to predict growth - even governments need to re-appraise their predictions regularly. However the consensus seems to be that in 2016 growth will be flat. There are many factors affecting this. One if the low level of growth in China - with internal costs increasing and many other factors, the slowdown of this major economic powerhouse naturally reflects into the global economy.

Another factor is the low price for oil that restricts the cash flow in many countries and reduces the available investment. Also with the USA increasing its interest rates, this will have a major impact on economies where their debt is managed in US dollars. It is feared that some countries may not be able to afford their debt as a result. All of this has the effect of slowing the global economy, which in turn reflects into the electronics industry as a whole. Although 2016 will be relatively flat, other factors will come in to make 2017 / 8 much better for the industry.

Another major talking point within the electronics industry is whether 2016 will see consolidation in the distribution sector. In recent years there has been a major shift for electronics manufacturers to use distributors to manage their inventory. This makes a lot of sense as distributors have a significant buying power and are able to consolidate purchases across many equipment manufacturers, giving component manufacturers a much better idea of demand. As a result of the shift to distribution, many of those supplying to the large scale manufacturers have grown very rapidly in recent years

However the market is changing. There is still the need for distributors who supply lower volume for development and for small scale production. It is in this area that there has been a lot of rumour in recent months about consolidation. Some of these distributors have seen significant growth, but others appear to be losing market share. This has brought about talk of mergers and acquisitions. Investor movement in this field spurred much rumour about a possible of Premier Farnell with other companies. However towards the end of the year, no concrete evidence had emerged.

It is likely that any outcomes to these rumours will be seen in 2016. It is quite possible that some mergers and acquisitions will take place - possibly one of the larger distributors more focussed on manufacturing may snap up a smaller company more focussed on low quantities and use their expertise in this area.

Other major drivers for the industry include the automotive section. This has seen steady growth in 2015, and this is set to continue for 2016. With the level of electronics in cars increasing, along with the complexity, this is likely to help improve the performance of the whole electronics industry.

The much talked about Internet of Things, IoT will also start to play a much greater role. As figures of many billions of nodes are being predicted this will have a major impact on the electronics industry as a whole. The impact will not only result from the development and manufacture of the nodes themselves, but also the supporting network and analysis tools and the like. Whilst this will have a major impact on the electronics industry as a whole, momentum is still building and it is expected that the full force of the drive from the IoT will not be felt until 2017 or 2018.

The cellular phone industry has been, and remains a major driver for the electronics industry as well. With 4G now well established and 5G now being developed and standardised, this too will impact the electronics industry. The 1G and 2G mobile phone systems were focussed on mobile voice communications, 3G and 4G were mobile broadband, but 5G will be the mobile communications system that provides ubiquitous connectivity. It is aimed at providing a system for communications for IoT and autonomous vehicles as well as all the expected mobile communications requirements. As such it will help drive forwards both the IoT and automotive electronics industries. With 5G not likely to be seen until 2020 at the earliest, this will not impact the electronics industry just yet.

In summary, the electronics industry globally is likely to remain flat for 2016, but there are likely to be some major drivers like IoT taking off in the latter end of the year or in 2017. Also we are likely to see some movement and possibly consolidation in the distributor area of the market. But the only sure-fire way to find out what will happen is to see it when it really occurs.

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