Components Suggest 2009 Downturn in Electronics

(MoneyWatch)  One way to get a fix on how the electronics market will do is by looking at projections for components and retail. If companies aren't buying parts, then pretty much by definition there aren't going to be enough products available to keep sales flat, even if consumers and businesses wanted to purchase. By that measure, things are looking grim for next year.

Start with one of the basics on electronic devices: the printed circuit board (PCB). According to analyst firm Prismark, 2008 will end up seeing the lowest growth since 2002, and it projects that PCB sales will fall by 6.5 percent in 2009. That's a total swing of about ten percent. Prismark suggests that flexible PCBs, used in cameras as well as high-end handsets and smart phones, will see continued growth, but that is a more limited market.

iSuppli has trimmed its year-over-year semiconductor dollar growth estimates from four percent to 3.5, and says there's a big chance for even more downside. Memory is taking a beating. There has been a glut in at least some types of memory due to over investment in production capacity, and that results in lower prices, but demand is also starting to slow. The analyst firm expects increases in ASSP, or application specific standard product, semiconductors that provide key functions to many different devices, but with memory sales down, vendors are going to be bruised.

There are also indications that less exotic components may be feeling the crunch. Murata Manufacturing's operating profit fell by over half earlier this month because sales of capacitors were off.

Larger LCD panel prices have been sliding because of slow demand and the general economic outlook. Companies are getting close to selling the panels for their cash costs, which means they are going to be losing money, as cash costs won't cover things like overhead. If panel demands are lower, figure on fewer sales of laptops, desktops, and televisions.

In short, while there may be some bright spots in terms of individual products, overall the electronics industry looks as though it is heading into the tank.

PCB image via stock.xchng user sundesigns, standard site license.