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Weathering the recession storm, Part 1
Vishay sees big potential growth in LED lighting, renewable energy and electric vehicle markets
If there is one thing that leading suppliers in the electronics industry agree on is that the downturn hit fast and steep. As a result, most suppliers moved quickly to reduce cost by consolidating plants, cutting their employee headcount, and pruning product lines. However, most suppliers tried to keep their research and development investments intact, particularly for key projects.
After tightening their belts for four quarters, suppliers are now starting to see some signs of a recovery in traditional markets and opportunities in emerging markets such as lighting and renewable energy that could pave the way for growth next year.
Here’s our first interview with David Valletta, executive vice president worldwide sales for Vishay Intertechnology.
Watch for interviews with Avnet, Molex and Fairchild over the next few days.
Editor: What have been your biggest strategies for business survival during the downturn?
Valletta: This was such a dramatic downturn. We had to move fast. We saw business start to plummet at the end of the third quarter [2008]. When you see business drop off the way we saw it, which was greater than 30 percent, you have to start cutting costs, and we’re all feeling the effect of that. For us, it was staff reductions and putting our plants and people on reduced hours. You’re out looking for business or trying to hold onto business. Quite frankly, no one was aggressively trying to pick up market share, the industry was focused on reducing cost and holding onto as much margin as you could.
Editor: Have you or do you plan to shift your product focus as a result of current economic conditions? In which areas?
Valletta: A time like this forces you to look at your product lines and address the ones that aren’t so profitable. It’s across all of our groups — discrete semis, resistors, capacitors, etc. When you’re in survival mode you have to look at every bit of margin, and for unprofitable products lines that means end of life or increased prices. If customers say “we need you to supply this” we will consider it but at a higher price.
Editor: Are there you beginning to see signs of a possible recovery in the second half of 2009?
Valletta: The recovery really started at the end of the first quarter. The low point was probably January. It was quite dismal. We were coming off the Christmas holiday; Chinese New Year came early this year and inventories were still at quite high levels.
At the end of the first quarter, we started to see a pickup in Asia. It’s been growing at a healthy pace driven mostly by the computer business. The Americas and European markets are reaching the bottom and we’re starting to see some signs of improvement in the second half. We’re lagging behind because a large percentage of our business is in the industrial market segments.
Another factor for us is automotive. This downturn has had a huge impact on the automotive business. The downturn started as a credit crisis. Consumers found it more difficult to get financing to buy cars, and at the same time during a downturn it’s a purchase that can be held off. On the business side, a lot of fleet purchases were held back and companies cut back on leases. It will take a longer time to recover but we are seeing some signs of life in small cars driven by various government incentive programs.
Editor: What will be the biggest drivers of future demand?
Valletta: Fixed telecommunications is doing quite well. Many governments have put programs in place to invest in infrastructure, which is benefiting the fixed telecom sector. We’re seeing it worldwide. The gaming and consumer businesses will be strong though there could be some maturation in those markets. Notebooks have been selling incredibly well for the past few years. Automotive will come back and could have a big rebound in a year or so. We’re also watching medical very closely, which has been consistently a very fast growing area. The military segment over the past two years also has been a good market.
Editor: Which emerging markets show promise as potential growth drivers over the next few years?
Valletta: Renewable energy and electric vehicles are very hot segments. The volume is small today but the potential could be big.
Lighting-related products are also a big potential market. LED lighting is in its infancy right now and any products associated with that have a tremendous amount of potential. The future belongs to LEDs when it comes to lighting. Government money is having an affect when it makes it down to a level where it is accessible.
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Weathering the recession storm, Part 2
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