After two consecutive years with year-over-year decrease, Technology market for End User Devices and Infrastructure Equipment will step up a gear,  growing at compound annual rate (CAGR) of 4.6%, expanding by $155 bn until 2019. Growth is expected across all major Technology Subsectors, in particular on Consumer Electronics and Home appliances.

Taking a different view on subsectors based on market dynamics of product groups brings an interesting perspective of the future landscape.  Compelling 71% of total market increment comes from Emerging products (Smart Home, Wearables, Drones and 3D Printing), while Traditional products (e.g. Mobile Phones, PCs & Notebooks, Home Appliances, Printers, etc.) are projected to stay flat in 2017. The $279.1 bn global Mobile Phones market, which was growth driver in previous years will record $4.8 bn incremental growth between 2016 and 2019, while drones are projected to increase for $4.9 bn increment in the same period, an 27,8% increase per year.

Among emerging products, Smart Home will surge from $53.0 bn in revenue in 2016 to $118.3 bn in 2019, driven by Home Automation products such as Amazon Echo and Nest. Growth in Wearables is mainly coming from Head Mounted Displays (HMD), such as PlayStation VR Gear and Microsoft HoloLens, with $21.1 bn increase by 2019. As many top technology providers are planning on supplying or supporting HMDs and ecosystems as part of their product portfolios, the market is quickly evolving.  Smart Watches, increasing $7.7 bn by 2019, will see dramatic gains in functionality in the lower-priced offerings, which will compress prices. Another up-and-coming market, 3D Printing, will expand for $7.9 bn until 2019, at staggering 67.8% CAGR. North America and Europe are driving the growth in 3D printers, while facing a negative growth trend in conventional printers & copiers.

 

Markets for Traditional products stay flat (+1.3% CAGR), and growth is mainly driven by emerging regional markets.  In Mobile Phones, the U.S., the second largest market worldwide, is shrinking at -3% per year, world’s fastest growing market, India, is projected to expand for $5.0 bn between 2016 and 2019 at 10% CAGR.  Demand shift between product categories can be observed in mature Traditional products. For example, market for PCs and Ultramobiles is staying flat in the next 3 years, but with divergent growth trends per product. While PCs and Notebooks market is shrinking for -$18.2 bn, Ultramobiles are growing for almost as big of an increment, driven by strong performance of Premium Ultramobiles (such as Microsoft Surface Pro, MacBook Air and Lenovo Yoga 3).

Data and Connectivity products market is projected to increase in the same period at 2.4% CAGR, led by growth in Servers and Telecom Operators Equipment (CSP OT). Out of $4.4 bn worldwide increment in Servers, majority of 60% will be sold in China. Demand for connectivity will increase across all regions as Communication Services Providers Operational Technology (CSP OT) rise by $12.0 bn. 

What does it mean for Supply Chain?

Technology is a fast paced, competitive and complex sector and supply chains have to respond to this ever changing market environment. For companies, it will be important to consider shifting gears and driving transformational change instead of incremental optimization.

  • Emerging product categories are characterized by fast-paced innovation cycles, requiring short-time-to-market supply chains serving consumer and business segments in mostly mature markets. High flexibility to respond to volatile customer demand will be critical to position the new products effectively.
  • Supply chains for more traditional product segments will need to be further streamlined balancing user experience and efficiency levels. More transformational approaches leveraging omni-channel logistics, circular economy concepts, supply chain collaboration models and digitization could be basis for a competitive strategy going forward.  Growth opportunities remain in developing countries, which require a targeted go to market approach supported by resilient supply chains in typically difficult markets.

One thing is certain – the pace of supply chain innovation and transformational change must not stay behind the market dynamics in the technology sector. Leading companies have understood that supply chains are an integral part of a successful positioning in the market.

Published: April 2017

Images: DHL, Shutterstock