The electronics industry is still hurting, but better times could be here before you know it.
Research firm Gartner says it has spotted a recovery already percolating for the sectors including PCs and mobile phones, with a sustained recovery pattern likely to take shape in 2010. What's holding back the optimism for a faster rebound this year, according to Gartner, is continuing uncertainty about the economy as a whole and, more specifically, about the effectiveness of government stimulus plans, especially when the stimulus runs out.
Gartner's forecast on the electronics industry was compiled for a report called "Signs of Improvement for End-User Electronics Recovery," published in late September.
"Almost all sectors of the electronic equipment market have now hit bottom and await signs of 'first growth' in comparison with the same quarter last year," Klaus Rinnen, managing vice president at Gartner's semiconductor manufacturing group, said in a statement. "The first signs of growth will be led by seasonal buying patterns in the PC market during the third quarter of 2009, although other major sectors will not begin to show first growth, year-on-year, until 2010."
Gartner has revised its forecasts for recovery in each of the electronic segments it tracks. Its latest findings:
PCs: After bottoming out in the first quarter of 2009, the PC sector should enjoy a sustainable recovery in the third quarter of 2010. Computer sales will continue to be constrained by slow growth in IT spending, but consumer demand has held up better than expected and is likely continue to rise. Gartner has revised its forecast for PC sales upward, anticipating good performance in the U.S. and China.
Cell phones: The mobile phone sector also hit a low in 2009's first quarter but should be the first area to show sustainable growth by the first quarter of next year. Thanks to the popularity of smartphones and to demand in emerging markets, especially China, Gartner expects mobile phone production to sink only 8 percent in 2009, 4 percentage points less than it predicted in May.
Consumer electronics: Though consumers have scooped up LCD TVs and Blu-ray players, overall sales in most areas of consumer electronics were flat or down throughout 2009. Gartner sees the market in a state of limbo right now, expecting little growth until the second quarter of next year. Beyond that, the segment is unlikely to return to pre-recession levels until the first quarter of 2011.
"Although the first signs of recovery are starting to appear for the electronics industry," Rinnen said in the statement, "the damage from the current industry recession will be felt for a long time."
It's not really a secret that Sony is in trouble. But the consumer electronics company is taking some calculated steps to change its fortunes.
On Friday, Sony announced it has hired longtime IBM executive George Bailey as chief transformation officer. He will report to Sony CEO Howard Stringer beginning June 1 as head of the Transformation Management Office and consult with two main company divisions: Consumer Products and Devices and Networked Products and Services.
George Bailey
(Credit: IBM)Bailey served for five years as the global managing partner of IBM's electronics industry consulting practice. His new title at Sony--though grand--describes exactly what Bailey has been known for in his career: fixing the way consumer electronics makers approach the business and help them make money--he even wrote a book about it.
Someone who can transform or kick-start Sony's global business is something the company desperately needs. Stringer has been saying for years he will reinvigorate Sony and figure out a way to get the many different parts scattered around the world to be more tightly integrated. But the results have been dismal: On Thursday, Sony reported its first annual loss in 14 years, to the tune of $1 billion.
Stringer has reshuffled some executives between its Japanese headquarters and its U.S. electronics division and most recently set out a manifesto of sorts for his company during his keynote speech at the Consumer Electronics Show. In it he said they needed to be focusing on the creation of better networked devices with long-term value and that embrace open standards and green materials.
Bailey has a simpler approach. In his book, "Irresistible! Markets, Models and Meta-Value in Consumer Electronics," he says the key to successful electronics companies involves shepherding innovation and giving customers what they want, from the packaging to advertising.
He has in the past praised Apple's approach to both the computer and consumer electronics markets, and specifically compared it to Sony's. It's a pretty easy bet that Bailey will be pointing out these differences to Sony and trying to steer the Japanese giant toward mimicking some of Cupertino's best practices.
A tech industry watchdog plans to investigate conditions at a Chinese hardware factory that supplies IBM, Microsoft, Dell, Lenovo and Hewlett-Packard, following a damning report on conditions there by a human-rights organization.
The National Labor Committee report, "High Tech Misery in China," said these tech giants use Meitai Plastic and Electronics, a keyboard supplier that operates a factory that "dehumanizes young workers."
In response, the Electronic Industry Citizenship Coalition (EICC), a self-regulating body set up by tech companies, will carry out a third-party audit into the working conditions at the factory, IBM told ZDNet UK on Friday.
"Through the Electronic Industry Citizenship Coalition, of which IBM is a founding member, a joint-audit is being conducted to assemble the facts and address this issue with the supplier or suppliers involved," an IBM representative said in an e-mailed statement. Microsoft, Dell, Lenovo, and HP are also members of the coalition.
The report by the National Labor Committee, a human-rights group based in Pittsburgh, covers the work environment in the Meitai Plastic and Electronics factory in Dongguan City, Guangdong, China. According to the report, released this month, workers sit on hard wooden stools for 12-hour shifts, seven days a week. Overtime is mandatory, with workers being given on average two days off per month.
Cover of the National Labor Committee report
(Credit: National Labor Committee)The report also said that while workers are on the production line, they are not allowed to raise their hands or their heads, and they are given 1.1 seconds to snap each key into place. Workers are prohibited from talking or listening to music and are encouraged "actively monitor each other" to see if any of the multiple company rules are being transgressed. They are also monitored by guards, according to the report.
It also found that workers are fined if they break the rules, that they are locked in the factory for four days per week, and that they sleep in crowded dormitories. The workers' gross wage is 64 cents per hour, which the report claims "does not even come close to meeting subsistence level needs," while their take-home pay is 41 cents per hour.
Report co-author Charles Kernaghan, who is co-director of the National Labor Committee, questioned whether the EICC probe would be effective.
"It's excellent (that there will be an investigation). But the fact that they've announced the date, of February the 23 and 24, guarantees the investigation will be compromised," Kernaghan told ZDNet UK on Friday. "It gives the factory time to threaten the workers, who will be coerced and terrified."
Kernaghan called on Lenovo to put pressure on the Chinese government to improve working conditions. "Lenovo is very important," he said. "As a Chinese company, they have the power and the right to approach the Chinese government and demand that labor laws be enforced."
Lenovo told ZDNet UK that it is involved in the investigation as a member of EICC, but that it does not purchase supplies directly from the Meitai facility.
"Lenovo makes every effort possible to investigate and ensure that our suppliers adhere to and comply with accepted international manufacturing standards and labor practices and takes these matters very seriously," it said in a statement.
In addition, Lenovo said it will call on its intermediate supplier to investigate the facility to verify the findings of the report and "help identify corrective actions." HP said that it will wait until the results of the EICC audit until taking action.
"The factory named in the report is not one of HP's direct suppliers, but is a supplier to two of our suppliers," the company said in a statement. "HP will audit this facility through a validated industry audit. Based on the results of the audit, we will work together with our supplier to develop corrective actions where appropriate."
Microsoft and Dell had not responded to a request for comment at the time of writing.
Tom Espiner of ZDNet UK reports from London.
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