Industrial, Wearable Electronics Top 2015 Market Opportunities

Industrial, Wearable Electronics Top 2015 Market Opportunities

2015 represents the start of something big as the connectivity trend ramps up, creating new opportunities in industrial, automotive, and wearable technology markets.

Supply chain leaders anticipate modest growth in 2015, with the overall economy set to grow moderately and the trend toward connectivity across all markets promising even better growth patterns down the road.

Economist Daniel Meckstroth, of the Manufacturers’ Alliance for Productivity and Innovation, offered a positive outlook to manufacturing and distribution leaders at October’s Executive Conference of the Electronic Components Industry Association (ECIA), noting that the economic uncertainty that had characterized the economy since the 2013 fiscal cliff has substantially declined and that the electronic components outlook, in particular, is upbeat.

“There are no signs of a recession any time soon,” Meckstroth told attendees at the meeting, held in Chicago in late October. He pointed to information technology, industrial markets, transportation equipment, and medical manufacturing as key growth areas in 2015.

The need to upgrade or replace aging equipment in many of those markets bodes well for components suppliers—a factor other industry leaders echoed as well.  Dale Ford, chief analyst and head of electronics for industry researcher IHS, pointed to the Internet of Things (IoT), wearable technology, and the cloud as important technological advances for those markets. IoT, in particular, holds promise for industrial markets, as the need for building automation, advanced communications, and better lighting solutions—all of which can benefit from connectivity trends—ramps up.

“Industrial is the biggest opportunity,” Ford said. “The key benefits are cost and time savings and efficiency gains.”

Ford predicted high single-digit growth in industrial markets in 2015, adding that industrial electronics will replace wireless applications as the greatest growth opportunity going forward.

He added that demand for sensors in a wide range of markets will spur growth in related electronic components, another boon to suppliers. Their penetration into smartphones and tablets, for instance, drives demand for processors, memory chips, and the like. The same is true of the automotive industry, where demand for sensors is also growing.

Industrial Markets Heat Up

Lew LaFornara, vice president, supplier marketing and product management at electronic components distributor TTI, Inc., said he expects modest growth in 2015, following a good 2014. Like Meckstroth and Ford, LaFornara pointed to industrial and automotive markets as bright spots, particularly in light of today’s demand for “connectedness” across those industries. He added that, in general, TTI is witnessing a need among customers to move more data across their organizations, spurring demand for products related to networking and communications. He said there is also considerable demand among industrial customers for wireless solutions, including radio frequency (RF) products, sensors, and the like.

“Everything is interconnected. And now, all of that is being adapted for the industrial world,” he said. “But industrial customers are more concerned about reliability than ‘leading edge’ [technology]…systems that are not only high-tech and speed the flow of information, but that are durable enough to survive in harsh industrial environments.”

LaFornara points to demand for ruggedized and moisture-sealed high-tech components as examples.

Dan Stewart, vice president of marketing for distributor Allied Electronics, concurred with the solid outlook for industrial markets, a key strength for Allied. He pointed to pent-up demand in the sector as companies look to upgrade equipment and seek opportunities to streamline productivity. He added that the key challenge for distributors is educating customers on the advantages of upgrading (not just fixing) aging equipment.

What’s more, Stewart said 2015 may be a turning point in North American manufacturing as some companies seek to build more products here at home. Mexico is a prime example, as it is less expensive for many companies to manufacture in that country compared to China. Although security is a concern, Stewart said the Mexican marketplace represents considerable opportunity over the next few years. Allied launched a Mexican version of its website in 2014 as a step toward capitalizing on the long-term growth potential.

Automotive, Wearables Up, Too

In a nod to the increasingly connected world, the theme of ECIA Executive Conference was “Living Connected”— a title TTI’s Michael Knight explained has more relevance to the electronic components industry than many of its executives may realize. The drive to “connect” everything from appliances to automobiles is a technological innovation in itself, creating demand for new products, innovation, and productivity gains—all of which depend on electronic components.

“This new trend—what many are calling ‘the next great thing’—is most relevant to our industry,” Knight told attendees at the ECIA conference, adding that he thinks this new wave of technology will “unleash the next transformation in our industry.”

Knight, who is senior vice president for TTI Americas, pointed to the automotive industry as a case in point. He told the audience that by 2025, 100% of cars will be connected to the Internet in some way, adding that some automakers expect to have driverless cars on the market in the next 10 years. These trends not only create opportunities to supply components for new vehicles, but open the door to a large aftermarket business for connecting existing cars.

“This is coming,” Knight said. “It’s right around the corner. If you didn’t think today that you’re supplying the automotive industry, think again.”

Knight pointed to growing demand for sensors as well, echoing Ford’s prediction that such demand will spur the need for related components, driving considerable business opportunities. With the automotive outlook in positive territory, both say it’s a market the supply chain cannot overlook. Ford predicted that by 2018, the auto industry will generate $5 billion in business just by connecting cars alone. From there, he added, the opportunities are endless.

“What follows are things like smart cities, which will create all kinds of new economic opportunities,” Ford said.

Ford pointed to another area the supply chain should not overlook: wearable technology. He characterized 2015 as a “breakout year for wearable electronics,” pointing to medical industry products such as contact lenses that monitor blood glucose and consumer electronics such as the Apple watch as some of the greatest opportunities ahead.

“We’re moving into a very exciting future,” Ford said.

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