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2010 signals recovery of new product designs

Posted: 29 Dec 2009     Print Version  Bookmark and Share

Keywords:India  product design  recovery  semiconductor  2010 

Rajam: We can look forward to a strong growth in electronic new product design market in 2010.

The electronics industry has survived the toughest recession period of 2008-2009 and thankfully, that period is coming to an end. During this time, most of the focus has been on the decline in consumer spending, product sales and cash flow. As we embark on 2010, it is helpful to first review what the past two years meant for new product designs and then derive the path for 2010. This is especially important for India electronics design industry as it leverages the global market as a key driver for its growth.

Recession impact
The impact of recession on new product design was lastly felt. Even though sales of semiconductor and electronic end equipment dramatically started falling from mid- 2008, it appeared that the brakes on new product designs were not applied immediately. It took some time for the companies to assess what was going on and the budgets for new product design starts were untouched for one or two quarters. Of course, it was only a matter of time and towards the end of 2008, the industry could witness that the new product design and R&D budgets were under the full grip of recession resulting in project cancellations, postponement, market opportunity review or combination with other projects. The design resources of people, capital and tools were reduced in many cases and then kept in a frozen state.

In 2009, we have seen the opposite end of the above trend of 2008. From around middle of 2009, key industry players have started reporting sequential (quarter-to-quarter) growth in sales of semiconductor and end equipment. This has been enabled first by low inventories and next by robustness of select market segments. Still, companies have held a very cautious view of this recovery and deliberated if there could be further turbulence ahead. Thus the resource constraints on new product designs have continued to remain even though forward looking sales plans are turning more and more optimistic.

2010 vision
The electronics sales recovery that has started in late 2009 is expected to fully bloom in 2-3 years, i.e. by 2011-2012. This presents a huge market potential which cannot be served with only the existing products and there will be a glut of new designs. Thus it is reasonable to expect that companies will place major emphasis on new product designs in 2010 as the demand is projected to grow strongly.

New opportunities
The nature of new product demand is somewhat different between a continuous growth period and one at the beginning of recession recovery where we are at now. While the former is broad based, the latter is likely to be very selective as resource availability is gradual and companies would like to make safer bets. In addition to being selective, companies would also like to look for product opportunities with shorter timeframes for Return on Investment, which would lead to new designs that are somewhat incremental in nature.

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