A Matter of Confidence
August 25, 2010
The OED defines confidence as the mental attitude of trusting in or relying on a person or thing. Webster’s New Collegiate defines it as faith, trust, a feeling or consciousness of one’s powers or of reliance on one’s circumstances. Whichever definition you prefer, confidence is clearly a matter of choice. Lack of confidence is a choice not to believe in the future, perhaps because the future seems less real than the struggling labor market, the depressed housing market, and uncertainty about a variety of things including taxes, health-care costs, climate-change, as well as the seeming palpable potential for global disasters whether man-made or natural.
But the future of the electronics industry is clearer and the outcome more certain than all of this. In the past fifty years, the worldwide electronics industry has grown from a few tens of millions of dollars in annual revenue to a figure approaching two trillion. Regardless of the ups and downs of economic cycles, electronics technology continues to pervade all facets of our lives. A simple comparison demonstrates the underlying strength of the industry. Before the telecom crash of 2000, communications represented more than 50% of the electronics industry. It is now less than 20% of the industry that as a whole is larger today than it was before the crash.
In the midst of all the current angst and handwringing, the electronics industry continues its relentless march upward. In the last few weeks we have seen one industry bellwether after another report solid financial performance. Much of the attention seems to have been focused on Cisco’s results which some analysts chose to characterize as disappointing. But a close reading of Cisco’s quarterly report suggests solid performance and growth ahead. Would Cisco hire 2,000 people as it disclosed in its report if it lacked confidence in the future?
McKinsey just released an encouraging economic conditions snapshot for August compiled from their survey of 2,850 international executives. Sixty percent report that the economic conditions in their country are improved (substantially or moderately better) compared to six months ago. And, perhaps more important for Data I/O, more than half the executives reported that their companies are proceeding with their planned capital investments.
McKinsey’s results are consistent with what we have seen at our microeconomic level. The electronics industry has grown, is growing, and will continue to grow for many years to come. LeCroy, a manufacturer of oscilloscopes, one of the most ubiquitous instruments that are used throughout the electronics industry, reported that in their quarter ending July 3rd, their oscilloscope business was up 44%. And, today we saw that North America-based manufacturers of semiconductor equipment posted their strongest figures in more than nine years, hitting $1.83 billion in orders in July.
What does this robust industry environment mean for Data I/O? Our programming solutions are a critical link in the manufacture of millions upon millions of electronic products each year. And, most importantly, Data I/O is well positioned in the industry segments that are growing the fastest. SmartPhones, a key part of our business are growing at a rate greater than 50%. The automotive industry has rebounded sharply over the past year and the electronics content is soaring. Data I/O continues to win new business in the geographies that matter such as Korea and China. Finally, the anxiety about the back-to-school market for PCs has to be viewed in light of the tremendous growth in smart mobile devices such as the tablets that incorporate Flash memory and represent a programming opportunity for us.
Data I/O has been around for 40 years as the only public company in this space. I have confidence that the company has a future that is brighter than ever. That confidence is rooted in the demonstrated soundness of our business model and the demonstrated resilience and long-term growth of the electronics industry. Virtually every new electronic product produced represents demand for our equipment.
President and CEO of Data I/O Corporation