Top Ten Trends That Will Impact High Tech Supply Chains in 2014
The global high tech industry is currently going through a period of immense change. From restructuring global supply chains through to diversifying operations into other industry sectors, companies across the high tech industry are having to embrace new technologies and new markets in order to survive. So I thought it would be useful to summarise some of the key trends that will impact global high tech supply chains for the remainder of 2013 and the first half of 2014. If you would like to understand some of the trends that are likely to impact the automotive industry in 2014, then please CLICK HERE to read my predictions……
- Consumer demand for tablet devices is changing the face of the PC industry, not only are PC sales continuing in a downward spiral but the structure of the tablet related supply chain is very different to those suppliers found in the PC supply chain. This is due to the difference in components used in tablet devices. The tablet market is also driving increased innovation and development costs across high tech suppliers, for example the introduction of flexible OLED displays.
- High tech suppliers are diversifying into other industry sectors, one example is the automotive industry where consumer demand for connected vehicles is providing new opportunities for companies such as Qualcomm who are designing bespoke semi-conductors for next generation in car entertainment systems. In future, there will be a greater emphasis on in car software with Apple expected to license their IOS platform to allow car manufacturers to improve the interaction with vehicle systems.
- Increasing interest in wearable high tech devices, a potentially lucrative new sub-sector of the high tech industry where Google, Sony and newcomers such as Jawbone are starting to introduce new, wearable devices. This provides a great opportunity for the high tech component supply industry but at the same time presents challenges as components have to be scaled down in size even further and there is a much stronger emphasis being placed on extending the battery life of these devices.
- The so called ‘Internet of Things’ is providing another sub sector for high tech companies to diversify into. Improving machine to machine (M2M) communications is driving the need for connecting more devices to the internet and being able to remotely monitor equipment such as power generators or wind turbines. GE, IBM, Cisco and Infineon are some of the leading companies who are starting to explore new business opportunities in this particular market.
- There is an increasing shift for software companies to develop their own hardware. Microsoft was one the first to do this by introducing the XBOX console. But now Google, Facebook and others are keen to either work with external hardware partners or acquire other companies. For example Motorola Mobility has just released the Moto X phone, but this company is owned by Google. Software companies do not have a direct supply chain as such and they certainly do not have production facilities. So this presents a strong opportunity for the contract manufacturing industry as Google and others will be reliant on these particular companies to bring their products to market.
- New regulations being introduced in 2014, for example Dodd Frank, will make high tech companies and their suppliers more accountable to ensure they do not use any conflict minerals in their electronic components. Every company submitting a filing to the SEC in North America in May 2014 will have to prove they do not have conflict minerals in their supply chains. This means that companies will have to improve the way in which they assess their supply chains and improve day to day management of key contacts at every company across a high tech supply chain. This will become increasingly important as we move into 2014.
- As production costs start to rise in China, more high tech companies will continue to look at alternative manufacturing locations. Taiwan, Vietnam and Thailand are expected to grow their respective high tech industries considerably as they attempt to attract inward investment from the world’s leading high tech companies.
- The Japanese high tech industry has primarily been built upon home grown software based ICT infrastructures. Recent natural disasters have led many Japanese companies to rethink their ICT and supply chain strategies. Moving into 2014 it is expected that more Japanese high tech companies will look to upgrade older legacy ICT platforms and it is very likely that more companies will adopt cloud based services in order to support their rapidly expanding global operations.
- The PC industry is expected to contract still further with consolidation and merger and acquisition activity expected to rise significantly. Whereas the software companies are diversifying into the hardware space via their contract manufacturers, traditional PC manufacturers such as HP and Dell are expected to adopt/acquire more service based solutions to help maintain or better still increase revenues.
- China is expected to continue globalising their own high tech operations by acquiring distressed assets in other markets. Lenovo is a good example of a Chinese manufacturer acquiring an established business and this trend is likely to continue as we head into 2014. Whereas many western manufacturers have expanded their operations into China over the past two decades it is expected that Chinese companies will now continue the globalisation trend as they look to acquire recognised high tech brands in other markets.