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A very large part of electronics production goes into consumer electronics products such as televisions; games such as the Nintendo wii, Panasonic ( ) Playstation and Microsoft ( MSFT - Analyst Report ) X-Box; cell phones; personal computers; digital cameras and many toys.
In our opinion, sales this holiday season are likely to be flat, at best, with 2007. This does not bode well for Panasonic and Sony ( SNE - Snapshot Report ) , the two major Japanese consumer electronics companies in our universe.
The strongest area in 2008 has been flat panel TVs, mainly high-definition [HD] LCD sets that are 40" or larger. In anticipation of a good selling season, the manufacturers had produced significantly more sets than had been sold through the retail channels.
Thus, there is an inventory build-up back through the supply chain as far as the LCD glass manufacturers such as Corning Glass ( GLW - Analyst Report ) , including the component producers like Trident Microsystems ( ) . This has caused larger-than-average price declines for components and finished sets, which has pressured margins at the major retailers -- as shown by Circuit City ([url=http://www.zacks.com/research/report.php?t=cctyq]CCTYQ[/url]).
We do not see things improving, since consumer demand is expected to remain weak for at least the next six months. There will be some good bargains in after-holiday sales for LCD TV sets.
The cell phone market is now a mature market, with the winners being the producer of the latest hot fashion cell phone and the losers being the companies with last year's product. Although the Apple ( AAPL - Analyst Report ) iPhone has been a phenomenal success, other companies are now building similar products for phone companies with faster networks than AT&T (T) has. In our opinion, the cell phone market in most of North America and Europe is saturated, and the practice in Asia of wearing several phones as fashion accessories will not survive the current recession.
The PC market is now a declining market due to the weak economic activity. Sales to consumers are declining -- impacting Dell ( DELL - Analyst Report ) and Hewlett-Packard ( HPQ - Analyst Report ) -- and the fall in corporate profits will impact the business end, as capital spending is reduced. Even the high-performance end of the gaming market is showing weakness, impacting NVIDIA ( NVDA - Analyst Report ) .
For the electronics industry, it is not likely to be a Merry Xmas.
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