About 2 weeks ago, we did a quick survey to a select group of companies to find out how the recent economic volatility is impacting the AIDC industry. We spoke with leading firms from the component, device manufacturer, channel and end user communities to ascertain the market’s health and identify where (if any) the impact is occurring within the value chain. What we found out was that there was very little change; most remain cautiously optimistic about the near-term future. The following are some key takeaways:
Components:
Speaking with leading IC, Inlay, Ticket, Tag, Label, Card and Printer Ink suppliers, we noted that although there has been a slowdown of sales, growth is still occurring at a healthy pace. Most suppliers attributed this slowdown to high inventory levels within their channels – a trend VDC has been tracking since mid-last year (i.e.: silicon in RFID, Petroleum related printing products) – and correlate only a very small portion of this slowdown with the current economic conditions.
Device Manufacturers:
The scanner, reader and printer manufacturers are seeing a tremendous amount of activity in nearly every market, with several claiming growth in excess of market and internal expectations. There were no reports of cancelled or delayed deployments and, for most, growth from new accounts remains stronger than the same time last year. This community also indicated that it is their perception that the majority of the end user population is more prepared for economic volatility and that enterprises will not need to significantly curtail technology investments.
Channel:
Although growth remains strong and is exceeding expectations in many device markets, this community – SIs, VARs, Dealers, Distributors and OEMs - remains a bit skittish. Most firms cited robust sales; however several indicated that they were lagging in the development of their opportunity pipelines and are considering implementing programs to stimulate demand, such as cutting prices and increasing incentives to package services and consumables. This reaction has been deemed premature and not necessary by the supplier and component communities. No channel company interviewed had knowledge of end user budget reductions, hiring freezes or deployment delays.
End Users:
Speaking with some of the larger end user accounts in retail, manufacturing, healthcare, transportation, commercial services and government, only the government community stated that the economic conditions were impacting their business. Most companies interviewed expect demand to wane and the level of volatility to remain high, which they expect will result in a moderate impact on their business; however, they also feel they are more insulated than previous periods of economic uncertainty and do not expect to delay or retract technology investments. With that said, nearly every company interviewed from this community felt that continued economic downturn and uncertainty will have a significant and incremental negative impact on their business.
So … on a scale of 1 to 5, where a 1 means that the demand is ‘falling off a cliff’ and a 5 correlates to demand exceeding expectations, it seems that the AIDC market is currently a 3.5 – a slight slowdown in growth expectations mixed with a sentiment of cautious optimism.