The end-user Technology Market (USD 1,027bn in 2015, a -4.2% decline on 2014) will experience weak market development, growing every year at a compounded rate of 1.2% and expanding by USD +35.9bn by 2018. Underlying drivers of this market development are the different subsector dynamics. The main contributions to absolute growth in the end-user Technology Market will come from Consumer Electronics (USD +28.7bn) and Networks (+21.5bn).

The Personal Devices market (e.g., mobile phones, ultramobiles, PCs, etc.) will decline USD -14.3bn by 2018. The majority of this decline will be caused by the continuous deterioration of the Ultramobile & Notebooks market becoming even more pronounced (USD -11.7bn). Mobile Devices have reversed from a growth driver to a declining segment, with an expected CAGR of -0.3% and an absolute decline of USD -2.6bn until 2018. Increasing saturation of markets that used to be pockets of growth (such as China) and increasing competition from new Asian brands that target the low-end segment have proven to be crucial factors for this market. Furthermore, following the latest launches of new flagship products, it is increasingly evident that the level of new product innovation per dollar is perceived as insufficient to boost replacement sales.

The decline in Personal Devices is also influencing the overall growth prospect of various geographies. The Middle East & Africa (MEA) region will see the largest 2015-18 increment with USD +11.8bn and the highest CAGR (+7.9%), surpassing Asia Pacific. Compared to the forecast at the beginning of 2016, Asia Pacific’s growth contribution has significantly declined from USD +18.6bn to +7.2bn. India (+4.1bn) and Indonesia (+1.8bn) represent the largest growth opportunities, while China is considerably slowing down (+0.5bn). The other BRICMI countries (Brazil, Russia and Mexico, once characterized by boosting growth) will face substantial downgrades in expectations (combined USD -3.5bn).

Although further slowdown in the overall market is expected, the underlying dynamics of subsectors, products, and regions are important to build a robust strategy. The sole growth driver in the overall declining Mobile Devices market is the Smartphone segment in MEA (USD +6.5bn). A major substitution effect will continue to occur in the Ultramobiles & Notebooks segment with Premium Ultramobiles (i.e., very light notebooks) still showing strong potential. Beyond the declining markets in revenues, the number of units sold is expected to increase, and changes in preferred form factors will have an impact on total device weight (declining -4.8% for Ultramobiles & Notebooks and growing +2.1% for Mobile Devices). These are important factors to be considered for companies’ logistics strategies.

For other subsectors, the trends outlined in the previous forecast persist. Positive development in Consumer Electronics is characterized by home appliances and wearables growth. The Networks subsector is driven by increasing adoption of 4G/LTE solutions and small cells networks, which is taking place globally with new infrastructure investments (in emerging markets) and network upgrades (in more mature countries). Big data and cloud computing are driving the Enterprise Computing subsector. Datacenter consolidation and virtualization remain key strategies to improve IT efficiency, resulting in opposing trends for hardware sales in the Servers (USD +2.6bn) and Storage segments (USD -1.9bn). The Semiconductor subsector is currently facing declining revenues, but is expected to recover with a strong USD +32.2bn market increase by 2018. The expansion will still be in traditional data processing and communications, but with an even stronger dynamic in industrial and automotive applications.

For supply chain decision makers within the technology industry, the challenges provided by the fast-paced and competitive market prevail. Main requirements relate to creating flexible and agile supply chains to respond to increasing volatility in demand and to support the strategic repositioning that many companies are undergoing. Customer centricity and the shift from hardware to service offerings supersede sole market differentiation by hardware and technology features. New service-oriented supply chain models are needed, which allow for simplification, cost efficiency, and compliance in an increasingly complex environment.

WHAT COMES NEXT

The DHL Technology Sector Market Intelligence team constantly follows the latest developments. DHL will soon be publishing other Market Data Books and Subsector Monitors.

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DHL TECHNOLOGY MARKET INTELLIGENCE SUBSECTOR DEFINITION

The DHL Technology Market Data Book is among the key reports regularly issued by DHL. The estimations and analyses performed and presented are mostly based on Gartner reports (1Q 2016). The interpretation and conclusions derived from this data result from DHL internal intelligence and target the business scope that DHL serves. For more information on DHL Technology Market Intelligence reports, please contact us at info.technology@dhl.com

Published: June 2016

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