Looking Forward

Bishop & Associates’ market segment directors present a brief forecast for the year ahead. Uncertainty is projected in all markets, and this may be a major understatement as the year progresses. If you have specific questions or would like to contribute to stories on these market segments in 2009, email atanghe@connectorsupplier.com, or call Alice at 763.559.3633.

Telecom/Datacom
The global telecom/datacom market for connectors is expected to top $7 billion in 2008. The forecast value of connector factory shipments for 2009 is $7.62 billion, representing a gain of 4.8 percent. In early 2008, we witnessed a shift in capital investment from network equipment modernization to acquisitions and industry consolidation among service providers. In late 2008, we experienced the current market liquidity crunch. The combined impact of these developments is a longitudinal shift to the right for equipment-related capital spending. However, much of this deferred investment is aimed at reducing operating expenses and increasing competitiveness. Therefore, we project that 2010 will be a catch-up year, with a year-over-year growth of 9.2 percent.

Medical
The world medical market for connectors is expected to close at $1.23 billion in 2008. The forecast value of connector factory shipments for 2009 is $1.33 billion, representing a gain of 8 percent. The medical equipment market is largely driven by demographics and the need to manage health care costs. Consolidation among health care providers is driving network-centricity in all aspects of health care delivery, including tele-medicine.

We also see rapid growth of diagnostic and therapeutic modalities that enable early detection of chronic diseases or that have the ability to shorten hospital stays. An example of the latter is robotically controlled endoscopic surgical systems.

—John Colwell, Director of Telecom and Medical

Military and Aerospace
The military/aerospace market will certainly change in 2009, but experts cannot project exactly how much the market will change. The budget for the next year is set, so the Obama administration will have responsibility for the budget beginning in October 2009. However, with the increased Democratic majorities in the House and Senate, the odds are probably good that the defense sector and programs for defense are going to be cut. The good news is that with the economy doing so miserably in almost every other sector, the defense area is one place where there is employment, business, and money being made and paid into the tax coffers—which the new occupants of the White House and Washington are going to find getting smaller and smaller. It is noble, perhaps, to want to bail out everyone who is in trouble, and there certainly are lots of folks in that category, but this money has to come from somewhere. The defense sector pays taxes, and the government will need all the tax income it can get in this economy.

Yes, there will be cuts in defense. Will they be draconian? Absolutely not! Will over-budget and late programs be targeted? You can bet on it. Will the big-ticket items, like some Navy ships and other high-cost technology programs get cut back or get the ax? You can be sure of it. Let’s face it, even with the war over—estimate its cost at more than $150 billion per year—that money may be taken for other bailouts and social programs. But it is not going to happen in 2009, or even to a large degree in 2010. It will take more than a few months to disengage and redeploy a full Army Division with all its support, aviation, vehicles, and equipment.

The key in the next year is to read and understand all one can about the military programs and deduce what areas and programs are going to be funded by the new Washington. The Bush years are over, but the Defense sector continues on.

Read voraciously, attend those meetings, briefings, and expos, and follow the Bishop Report. We can help you through the “minefield” of the next several years.

—Scott Clay, Director, Mil-Aero

The Cable Assembly Market
The cable assembly market for 2008 continued growing, taking its lead from the connector market. Although it has slowed in the last half of the year, overall, it will show growth for the year. The pressures on pricing continued throughout the year, particularly on the high-volume standard assemblies, such as USB and Ethernet cables, which continue to drive off-shore sourcing for this type of product. Military cable assemblies continue to be a strong point in the market, with the military spending for repair and replacement running at an elevated pace.

The market for 2009 will depend greatly on the outcome of the current economic uncertainties. Continued growth of wireless technologies will undoubtedly impact some of the traditional business in the computer and consumer electronics arena. Military spending should continue to be a bright spot in this market segment.

Bishop & Associates plans to release a new cable assembly market study early in 2009. This study will focus more on the overall material content of the assemblies by assembly type, giving a more detailed perspective on the overall value of the market.

—David Pheteplace, Director, Cable Assembly

Computer, Peripheral and Office Equipment
Fourth quarter 2008 appears to be the beginning of a worldwide recession. How long and how severe the downturn will be is yet to be seen.

Significant trends in computer and office equipment markets:

Notebook PCs will overtake desktop volume in 2009 (182 million vs. 170 million units).
Servers will continue to shift from proprietary to X86, from box to blade.
Hard disk storage will increase from 556 million in 2009 to 1.12 billion by 2014, but solid state drives will increase at more than 60 percent from 27 million units in 2008 to 270 million units in 2013.
Outsourcing of manufacturing is nearing 100 percent—Mexico, Eastern Europe, Asia-Pacific, and China. The global players are on the rise and include Apple, HP, Acer, Sony, and Levono.
Networking has consolidated around fewer players, with Cisco achieving dominance.
Xerox and several Japanese players dominate the office equipment arena. All-in-one devices proliferate and will continue to do so.

Connector content in the above markets is stable and increasing with equipment volume. Wireless (802.11, Bluetooth, Wireless USB) will impact cables. WUSB is suspect. USB 3.0 is in development at 4.8 Gb/s and may revolutionize I/O port applications.

Many other connector developments are moving forward: Display Port, Micro-TCA, 10 Gb backplanes, fiber optic connectors and cables, Gb serial (vs. parallel) interfaces, high-density/low-mating connectors, and environmental.

Consumer Electronics
The impact a 2009 world recession would have on consumer demand depends on many factors. A few thoughts:

Smart Phones are a growth segment of mobile phones, 10.4 percent vs. 2.6 percent CAGR 2009 to 2014. Mobile phone demand could be reaching a saturation point in the developed world. This could also be the case with digital cameras, iPods, and other devices. Future demand may be less, with more upgrades vs. original procurement.
Liquid crystal displays (LCD) will trend toward dominance: 2.13 billion units in 2009, 3.35 billion units in 2014. Organic light emitting diodes (OLED) are beginning to emerge as a serious contender for future LCD applications. New applications in this area include wireless TV, 3DTV, Internet radio, HD radio, and 1080P.
The appliance market will be affected by the housing downturn and recession. High-end appliances could be significantly impacted.
Connector applications are centered around I/O ports, LCD displays, mobile phones and other mobile devices.
Significant players include USB, IEEE1394, micro-USB, RCA, HDMI, FPC, wire-to-board, micro-coax, other RF, and antennas.

—John MacWilliams, Director of Computer, Peripherals, and Consumer