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News Article

Power Electronics in a Changing China

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The Chinese government was fast to pump money into their economy after declining growth affected world financial markets. Manufacturers are waiting to see if there is a "˜next shoe' to drop. By: Mark Andrews

 

China's economic woes made financial headlines in August, with reactive stock market declines across Asia, Europe and North America. How a Chinese slowdown will affect power electronics is still an evolving story.

Market researcher Gartner reported recently that smartphone sales in China slowed to their lowest point since 2013; domestic Chinese sales dropped for the first time in second quarter. This will affect mobile device power electronics vendors. The ripple will affect others with market linkages such as Tokyo Electron and Fanuc Corporation that recently pulled-back growth estimates.

The good news is that power electronics products including converters, switches, capacitors, inductors and the silicon that drives them are all "˜mainstays,' meaning that product variants are used in a wide swath of devices beyond mobiles, tablets and laptops that are expected to be hit hardest by slowing Chinese consumption. But whether the Chinese economy is growing at 7.5% or 5.5%, that's still a lot of global opportunity.

The red-hot smartphone market has cooled, which will affect component suppliers. But considering how fast it grew, particularly after large screen products by Apple, Samsung and others were introduced in 2014, some pullback was inevitable. China's woes developed over time, and it will take a while for growth to resume.

Be mindful that analysts study China's economic impact on consumer electronics since this sector has a broad range of vendors and is somewhat transparent. What they don't study is whether individual suppliers have product variants used beyond mobile devices, or the relative benefits of each line.

Shoji Sato, an analyst at Morgan Stanley MUFG, said in recent reports that the effects of China's slowdown will be uneven. The key is whether products offer sought-after capabilities. If a product is commoditized, some sales will decline. The silver lining is there for unique products and for vendors who can sell into other industries, such as automobiles or smart home automation as well as products incorporating semiconductors / power electronics for the first time.

Keep in mind that not-so-great news from China is somewhat off-set by positive growth in the US and other major economies. Even while stock markets continue to have jitters, global fundamentals remain strong.

China continues to signal it is getting its house in order, a good sign for power electronics makers. The challenge is making sure a company's products offer solid value that will buoy sales even while ripples from China's economic issues wash up on worldwide shores.

 


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