That recovery though remains elusive. The failure of the UK to exit recession in the third quarter, as had been anticipated by almost all analysts, and weaker manufacturing figures in November have raised doubts that the economy as a whole will show any significant growth in the fourth quarter. The Government’s latest forecast for the whole of 2009 shows an economy contracting by almost 5 per cent, possibly the worst performance since 1921.

It had been hoped that by the middle of 2009 economic recovery would have resumed. However, while that might not have occurred signs of recovery have begun to appear and the consensus for 2010 has now shifted to show growth of around 1 per cent.

The budget balance remains a concern and it is expected to rise to -12 per cent of GDP, which would take UK national public debt above 70 per cent of GDP. The rise in unemployment has slowed and is now expected to peak well short of the 3m anticipated back in the summer.

As for the electronics industry a sustained recovery in the second half of 2010 with a reacceleration in sales in 2011 is now being widely forecast.

CIE asked a number of companies to comment on how their markets had performed in 2009 and to try and give us a ‘feel’ for where they thought the industry was and where it could go in 2010.

Martin Southam, Director of Marketing, TDK-Lambda Europe

“Inventory reduction programmes across the electronics industry caused orders to fall off significantly in the final quarter of ’08 and slip further in the first half of ’09. Since the autumn however we have seen our order book increase substantially, which suggests that these inventory reduction programmes are now complete and may even have been overcooked.

While we feel cautiously optimistic that shipments have resumed to a level that meets market demand, there is concern at the prospect of a double-dip in the New Year. The continued weakness of the US economy is also a major cause for concern and phased withdrawal of government fiscal stimulus packages is expected to dampen demand.

What we have seen is that many companies have protected their R&D department during the crisis. There is an abundance of new project design activity across EMEA, with all countries reporting good levels, but it will be 18 months before we see a real impact on sales.

Predictably the hot markets are medical, LED lighting, broadcast and renewable energy. TDK-Lambda focuses on ‘non-commodity’ power supply markets and we expect the market in EMEA to increase by 3-4% in 2010 and 4-5% in 2011. By 2012 we think the market will be back to the levels seen in the first half of 2008.”

Scott Sandler, VP, Corporate Marketing and President, SpringSoft USA

“Visibility remains low for semiconductor and EDA companies even as the end of 2009 approaches, despite recent signs of life in the economy at large. But one thing is clear: the EDA world will need to adapt to the reality that the semiconductor industry is maturing and consolidating rapidly. With the economy ever more dependent on semiconductors, design automation technology will remain critical and EDA will remain a remarkably exciting and rewarding place to work. But EDA suppliers must re-think exactly where they fit in the value chain and the way they deliver value to customers.

The new reality is that creating a new SoC costs so much that, in order to succeed, every new chip must be timed to address a growing market and sell in enormous quantities. Design starts are down and most VCs are simply not funding fabless semiconductor ventures. This puts EDA in a bind because sales are driven by design starts and not by chip volume.

A maturing semiconductor industry will drive EDA companies to adopt more mature practices, but how the business model will evolve is not clear. Semiconductor companies might invest in more of their own EDA development, or foundries might become a channel for tools. EDA startups may no longer build global channels. The EDA companies which succeed in this new reality will the ones that focus on value, deliver products that really work, and think creatively and flexibly about partnerships and channels, creating what previously might have been strange bedfellows.”

Moshe Gavrielov, President and CEO, Xilinx, Inc.

“In 2009, the global economic downturn accelerated business and technology challenges already in play.  Driven by fickle, fragmented consumer markets and relentless demand for hyper-connectivity and mobility, design teams faced shrinking time-to-market windows, capped engineering budgets, escalating ASIC/ASSP NRE costs, spiraling design complexity, and increased risk. 

In the face of new market realities, leading electronics companies have been forced to adapt and traditional semiconductor companies have fought to survive.

Incumbent semiconductor business models and cost structures have proven unsustainable, driving demand for flexible, programmable alternatives for low-cost innovation. For a growing class of underserved mid-to-high-volume applications, programmability is now an imperative. 

Long term, this trend bodes well for the PLD industry to outperform the overall semiconductor industry, as the technology ‘most responsive to change’ displaces costly, high-risk application-specific solutions for all but a narrow set of high-volume commodity markets.

In 2010, we see tremendous opportunities for programmable platforms in compute-intensive electronics infrastructure applications. Wired communications, 3G and LTE deployment require high performance DSP processing in excess of 1000 Giga operations per second and packet processing at more than 100 Gbps. Green IT requires power efficient, high performance, compute architectures to exploit a high level of parallel computing. The smart grid relies on programmable, flexible appliances and metering.  Last but definitely not least, surveillance and security demands sophisticated image processing algorithms.”

Rob Anders, CEO, Anders Electronics

“2009 saw the user interface (UI) continue to grow in importance as a key product differentiator. Advertisements no longer talk about all the features that an electronic product boasts, but concentrate on the experience derived from using it. The intuitive operation of devices such as the iPhone have shown manufacturers that through UI innovation they can gain a major competitive advantage over their opposition.

Increased emphasis is now being placed on the UI in industrial, transportation, medical and various other sectors. As a result development engineering teams that had previously not needed to consider such matters are now taking on major UI challenges – something far outside their usual remit, and not part of their core competence. On top of the severe budgetary constraints and time to market pressures already being faced, they need to find a way to combine display, embedded computing and graphical design elements together in order to create enhanced, colour graphics interfaces that will set their products apart from rival offerings. They must address UI construction earlier in the development process, not let it be a last minute consideration that is simply rushed.

The emergence of intelligent display platforms has already helped engineers to build UIs that are better optimised for required tasks, and from which more fulfilling user experiences arise. Over the coming year we expect this trend to gain further traction within the electronics design community, and that a broadening scope of applications will reap the rewards.”

Dean Hassell, UK general manager, Arrow Electronics

“In the past year the challenges of the global economic environment have affected many sectors that rely on electronic design. The result has been an increased focus on the balance sheet and a corresponding reduction in inventory and capacity. Some segments, however, have coped better than others. Legislation and concern for the environment, for example, are driving growth in LED lighting and renewable energy, while the medical sector shows long-term potential. There are signs of strength in the transportation space and the continued conversion of conventional mechanical and electrical designs to systems with higher electronic content is also great news for the industry.

Looking to 2010, while there remains a general lack of visibility from customers, there is likely to be a small increase in end demand as the last year’s inventory and capacity reductions lead to some short-term spot shortages. What is clear is that the distribution channel is critical to this ‘credit-squeezed’ market, with distributors playing an important role in helping customers through inventory buffering and accounts receivable.

In 2010 the ability of the channel to provide complete solutions will also be important as customers look to increase the focus on their core competencies. Many of these solutions - encompassing product, design-in support, engineering capabilities and supply chain services - will be focused on the evolving requirements of specific vertical markets such as lighting, embedded systems and automotive.”

Oleg Khaykin, President and Chief Executive Officer, International Rectifier

“A sharp downturn in demand at the end of 2008 and early 2009 resulted in reduced industry capacity. The recovery that started in Q2 was largely due to trying to keep up with increasing demand, sometimes unsuccessfully. That is why we are seeing extended lead times today.

Given that demand in many places today outstrips supply, there is a good chance that industry growth will persist into early 2010, countering traditional seasonal weakness of Q1. One caveat here is this upcoming holiday sales season – if it is a disaster, all bets are off.

If consumer sales are satisfactory this holiday season, it is reasonable for the industry to expect to see Q1 being flat to up, followed by growth in Q2 and Q3 on seasonal strength. Net, [if consumer sales are satisfactory] we may see four good quarters for the industry.

The growth momentum we experienced in the September quarter continues into the December quarter and the strong design win activity in the past year in discrete products, servers and notebooks and energy saving appliances, together with recovery in automotive and industrial demand, is starting to show results.”

Richard F Zarr, PowerWise Technologist, National Semiconductor

"From a technology perspective the future looks particularly positive in the area of advanced memory technologies." Shiro Ando, vice president, Toshiba Electronics Europe

“While the “more is better” mantra – faster computers, more bandwidth, bigger displays and such – remains important, the past year saw a larger concern emerge – how to power the new technology being developed world-wide. There has been a tremendous effort to improve the efficiency of power consuming devices. LCD displays are a classic example where manufacturers have begun moving away from CFL tubes and are migrating to LED backlights.

Systems are being redesigned to include new technology that will further reduce energy consumption and allow systems to adapt dynamically as the environment and loading changes.

These trends will continue into 2010 and far beyond as both governments and consumers demand lower energy consumption. Hot markets will include LED general purpose lighting, especially in the retrofit market as well as solar, wind and other co-generation technologies to offset the increase in consumption.”

Doug Mercer, European Marketing Manager PEI-Genesis

“Despite the current gloom PEI-Genesis has seen turnover increase 22 per cent in its European operations in the last 12 months.

Demand has been buoyant across the board, with rising sales in every major market sector that the company addresses including: industrial, railway, aerospace and defence sectors. We’ve invested $60 million in inventory of connector piece parts and automating the assembly processes wherever possible.

Key to that success is having continued to invest during the downturn, not only in additional component stock but also in new equipment. For example, at our European connector assembly facility in Southampton, we have responded to increased demand for military circular connectors by expanding our MIL-DTL-38999 production capability into two dedicated assembly lines, and we expect that to continue into 2010.”

Alastair Boyd, Country Sales Manager, Linear Technology Corporation

“In today’s economy, economic value comes from the making and selling of ideas and solutions. It’s clear that the companies that will succeed in today’s market must be focused on innovation and customer support. 2010 will certainly see that trend continuing.

With the global economy stabilising, customers are now ordering products at a faster rate.

For those of us who have been around the industry for several cycles of expansion and contraction, it is obvious that the low cost deal that may have sounded enticing some months ago is not such a good deal when the supplier quotes 20 to 30+ week lead times.

If you cannot manufacture your end-product due to a component shortage, you may incur cash flow issues and loss of reputation with your own end-customers. Throw in possible component obsolescence and the headaches for Supply Chain Managers become a daily occurrence.

Design engineers need to become much more savvy when choosing components for a design. Ability to deliver innovative products with short lead times, best in class quality and non obsolescence must be taken into account when choosing a supplier. Do not assume all suppliers are the same.

Price is not the only cost …a fact that customers are now realizing as the market begins to show signs of recovery.”

John Chilton, Senior VP, Marketing and Strategic Development, Synopsys, Inc.

“The past year was tumultuous across economic tiers, industries and geographies. However, the few companies with predictable business models, strong customer and technology momentum, solid expense control, and the ability to make strategic investments were able to remain steady or even improve their positions.

Due to the recession, EDA customers have reconsidered their expense structures and aligned with fewer key suppliers. The integration of flows and platforms to achieve better and faster designs has become not just a technical necessity, but a cost-driven reality. In fact, all of high tech has embarked on a cost-efficiency drive that should last a number of years.

Moving into 2010, semiconductor markets are rebounding, but the lack of visibility is causing continued caution. While there is optimism among tech industry executives regarding a return to growth, most feel that the move to integrated EDA products, methodologies and flows from fewer suppliers will still be necessary to help semiconductor companies bring down the total cost of design.

The electronics industry is a key driver of global recovery. The main question is not whether things will turn around, but when and how strongly. Green energy, healthcare and the latest consumer electronics gadgets are just a few of the areas in which developments can help us grow.”

Howard Ingleson, Managing Director, Syfer

For most passive component companies, 2009 has been a challenging year with rapid changes in demand and markets. The European market was hit particularly badly and from 2008 Q4 demand dropped in almost every sector, bar military and medical, to a low point in mid 2009. Elsewhere the picture was more mixed with China’s infrastructure spend and strong internal demand helping sustain business levels, the US has seen fairly strong demand for military equipment, whilst telecom, industrial and automotive saw a decline but not as severe as Europe.

Since August demand has begun to come back and lead times from most Asian suppliers have stretched. The strong Euro is also helping Syfer’s exports, and the $ has moved back to a more normal position allowing us to compete in $ based economies such as Asia & China, as well as the US. However the majority of MLC supply is still from Japan and the strong Yen has made pricing, profitability and in some cases the sustainability of supply a real issue.

Stocks of MLC and other passives in distribution, at the OEM and EMS are all at low levels and the manufacturing capacity has been reduced at most major Asian suppliers, so 2010 could well see shortages and higher prices.

For 2010, we foresee moderate growth at around 5% for the market, which will mean that the TAM will be less than 2008, however well placed financially strong businesses, like Syfer, are likely to better this figure substantially.”

Shiro Ando, vice president, Toshiba Electronics Europe

“Clearly 2009 was a challenging year, with the macro-economic environment having a significant impact on many of the global industries that increasingly rely on semiconductors. However, while there may have been lower demand for system LSIs and discretes as a result of the global recession there were some positive signs. Toshiba, for example,  saw sales of memories increase, reflecting improvement in the supply and demand balance for NAND Flash technologies.

Though the global economy may remain weak for a while there are signs of an upturn in Asia and indications of a possible end to continuing declines in the economies of the USA and Europe. Certainly some industry analysts are predicting an improved scenario in 2010 and beyond.

From a technology perspective the future looks particularly positive in the area of advanced memory technologies. We will see ongoing developments in the capacity and performance of discrete NAND memory; high-density memory cards for high-capacity, high-performance consumer and professional portable storage; and the growing use of solid-state disk (SSD) technology. The latter allows NAND technology to fulfil system requirements in new and demanding applications including value PCs, mobile terminals, portable equipment, Mobile Internet Devices (MIDs), automotive infotainment and industrial designs.”

Ian Crosby, Sales and Marketing Director, Zytronic

“The iPhone’s phenomenal success, with its novel, highly user-friendly interface which supports two simultaneous touch inputs and gesture recognition, combined with its myriad of touch-based applications, has energised the entire touchscreen market, inspiring many competitors.

Proliferation of touchscreen technology in the consumer electronic space is setting the expectation for displays in all other environments – every user faced with a screen now demands the same attractive, intuitive functionality, whether checking-in at the airport, shopping, or operating industrial equipment. This demand, coupled with the continued fall in the cost of displays, is fuelling rapid deployment of touchscreens in previously unconsidered applications including medical terminals, street level digital signage and home appliances. 

The recently launched Windows 7 operating system, the first mainstream PC platform to offer in-built multi-touch capability (when used with Microsoft approved touch sensing technology/firmware), is certain to have a profound effect on the touch market over the coming years. As with the iPhone, software developers are expected to rapidly produce engaging new Windows 7 apps to further stimulate consumer acceptance of touch interactivity.

With major display manufacturers waking up to the impact of touch interactivity and its value-added opportunities, we are beginning to see a new wave of ‘in cell’ technologies with touch sensing capability integrated directly into the pixels or front face of the display, rather than applied as a separate overlay. These developments are certain to shake up the consumer electronic space in coming years and result in industry consolidation.

Looking further ahead, it will also be interesting to observe how touch manufacturers innovate in response to the emergence and commercialisation of flexible and 3D display technologies.”

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