<div><p>The electrical equipment manufacturing industry, covered by SIC Group 36, covers all companies engaged in manufacturing equipment, machinery, and supplies for generating, storing, transmitting, and utilizing electrical energy, with the exception of computer equipment. The industry includes power distribution equipment, communications equipment, semiconductors, radio and television receivers, lighting and wiring, electronic components, industrial electronics, consumer electronics, and household appliances.</p><p>Industry Overview</p><p>The electronics industry supports a broad range of industries, including telecommunications, computer and other technology manufacturers, and the industrial manufacturing sector. Electronic components are essential for a wide range of modern consumer goods such as cars, home appliances, mobile phones and other wireless devices, and consumer entertainment products like televisions, DVD players, and stereo systems.</p><p>The economic downturn has reduced spending in many of the industries that provide demand for electronic goods and components. Declines in the residential construction market, for example, have reduced demand for lighting and other electrical fixtures, as well as for power tools and construction equipment. Declining sales on consumer electronic products impact both the firms that make such products and the semiconductor companies that make the chips needed to operate them.</p><p>The electronics sector can generate a measure of new demand by developing newer, more efficient products, hoping that buyers will feel the need to update their equipment in order to remain competitive. The growing consumer concern for environmentally friendly products is also creating a market for electronic goods that use less power and incorporate efficiency improvements like powered-down standby modes and other power conserving features.</p><p>Semiconductors</p><p>With most modern devices incorporating integrated circuits, the semiconductor sector is a significant part of the electronic components industry. The sector supports a number of technology products, including image sensors for digital cameras and cell phones, power transistors and radio frequency transistors, computer microprocessors, and controllers for automotive and process control systems.</p><p>The global economic downturn has dramatically lowered demand for the semiconductors that provide the computing power for PCs, smartphones, and other consumer electronics. A number of semiconductor companies have reduced their sales forecasts in response to slower demand for PCs, mobile phones, and flat-screen televisions.</p><p>The semiconductor industry saw significant revenue declines in 2008 and analysts predict that 2009 will continue the downward trend. According to research firm Gartner Group, 2009 revenue is expected to total just $219.2 billion, a 16.3 percent drop from 2008. If the predictions are accurate, it will be the first time the industry has suffered two consecutive years of revenue decline.</p><p>Gartner also stated that semiconductor industry has a more tightly controlled inventory now than it did when the tech bubble crashed in 2000, which should allow the industry to recover more quickly this time around. Gartner predicts the sector to turn around in 2010 or 2011. Other analysts have noted, however, that excess semiconductor inventories in the global electronics supply chain are likely to increase sharply as sales continue to decline. Research from iSuppli Corporation indicates that growing stockpiles could delay the semiconductor market's recovery from the current downturn.</p><p>Consumer Products</p><p>Prices on consumer goods generally trend downward over time. The latest products - - Blu-Ray players, flat screen televisions ~ are introduced to the market at high prices and then become more affordably priced as manufacturers began to recoup their research and development expenses.</p><p>This trend, however, can be subject to various economic influences. Japanese consumer electronics giant Sony, for example, is lowering prices in the US in order to remain competitive while raising prices in Europe to contend with losses from foreign currency exchanges. The yen has risen more than 25 percent against the euro between July 2008 and the end of the year. A reasonable price in euros suddenly drops when converted to yen. Sony's price increases in Europe are likely to be followed by similar price hikes from other Japanese manufacturers.</p><p>Sony competitors in South Korea, such as Samsung Electronics Inc. and LG Electronics Inc., saw the Korean won fall 30 percent against the US dollar and 25 percent against the euro in 2008, allowing the South Korean firms to hold prices flat in Europe while absorbing some of the price cuts in North America. This gives the companies a competitive advantage against Sony in pricing.</p><p>As in other sectors of the electronics industry, consumer electronics firms can use innovation to help bolster interest in new products, but the strategy is risky in the current economy. Advancements in cell phones, digital cameras, personal computers, digital set-top boxes, and high-definition systems for televisions are likely to provide demand for new electronic components. The ongoing development of such products, however, is supported by consumer spending. The decline in the overall economy is reducing consumer spending, particularly on luxury products. Since the latest technologies are generally introduced at high prices, it becomes more difficult to use them to generate demand while consumers are pinching their pennies.</p><p>Broadcast television is switching from analog to digital signals. The old analog format is being retired on February 17, 2009. While many consumers already have digital systems in place, the electronics sector may see a boost as late adopters spend on new equipment and systems.</p><p>Outlook</p><p>The electronics industry supports a broad range of corporate, industrial, and consumer products. As a result of this widespread demand, the fortunes of the industry tend to rise and fall with the overall economy, which strongly influences both consumer and corporate spending. Unfortunately, the current weak economy is limiting spending in many of the sectors that provide demand for the electronics industry. The industry can potentially generate demand by creating new and innovative products, but that strategy requires the ongoing allocation of capital resources, which may be in short supply.</p><p>Sources: Information Week, Reuters, Value Line, Wall Street Journal</p><p>© 2008 NVST, Inc. Provided by ProQuest LLC. All Rights Reserved.</p><img src="http://admatch-syndication.mochila.com/images/ad.gif?aid=40717682&bid=informcom" /></div><div id="copyright"><div>

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