Tech Sector Won’t Begin True Recovery Till 2010

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Mobile phones should emerge first thanks to continuing demand from emerging economies such as China

The IT industry is beginning to emerge from the recession but the proper recovery won’t begin in a “sustainable” way until next year at the earliest, according to analyst Gartner.

In a statement released this week, the analyst group forecast that although there are signs that parts of the IT industry are beginning to escape the effects of recession, uncertainty about the wider economy and stimulus packages means that a full recovery won’t happen until next year.

“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,” said Klaus Rinnen, managing vice president at Gartner’s semiconductor manufacturing group. “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.”

The analyst also stated that semiconductor sales which reached a peak in 2007 won’t return to these levels until 2012.

“Electronics vendors and their suppliers must give careful attention to the expected recovery pattern of each sector, and a separate response must be planned for each,” said Jim Tully, vice president and distinguished analyst at Gartner. “In particular, new product introductions should be synchronised with the expected sequence of the recovery.”

Going by sector, the analyst company said PC sales hit bottom in 2009 and are expected to begin a proper recovery in the third quarter of 2010. “The outlook for a PC recovery is influenced by depressed enterprise demand and the fact that IT spending is not expected to return until 2010. In contrast, home PC demand has held up better than expected, reflecting the way that consumers now value and use PCs, even in difficult times,” the company said.

Mobile phones are predicted to be the first sector to show a sustainable recovery according to Gartener thanks to demand in emerging markets such as China. “Improving fundamentals in the mobile phone market was a key driver in the upward revision, and Gartner now expects mobile phone unit production to decline only 8 percent in 2009 which is 4 percentage points less than the May 2009 forecast. The rebound has largely come from the demand for basic phones targeted at emerging markets, particularly China, and for smartphones, which continue to perform well as competition increases and prices come down,” the company added.

A recent Microsoft sponsored study claimed the IT industry will help with recovery from the global downturn by contributing around 5.8 million jobs over the next four years and could create around 75,000 businesses during that period. The study concluded that the IT employment rate will be 3 percent a year which is more than three times the rate of growth of the wider employment market. IT spending is also expected to increase 3.3 percent a year between 2009 and 2013.

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