The Uncertainty of IT Business in the Second Half of This Year

The world IT business industry being expected to recover rapidly shows a sign of economic slump.

In the first quarters of this year, domestic and foreign economists forecasted IT business optimistically on the base of economic index, but the decrease in demand and decline in price make the industrial prospects are dark again.

Semiconductor D RAM, the main component of IT, declined in price at 50% level compared to the beginning of this year. The demand for PC, networks equipment, PCS, etc decreases and it is worried to squeeze the business profits. LCD may also suffer the same difficulties in long term, even if the price increases because of replacement demand for.

The domestic IT business exporting 80% of total products has kept foreign market with technological competitiveness, but it is prospected to suffer difficulties from the second half of this year if the demand of foreign countries such as US, Japan, etc doesn’t recover.

▽ Recovery of investment, Recovery of IT business = Mr. Greig Barret, The CEO of Intel commented, “ PC manufacturers cleared inventories the end of last year and began to accumulate new components from the beginning of this year. So it caused the increase in the price of semiconductor” and added “there is still no reason for the increase in demand for, and it is too early to comment the recovery of IT business”

The turnover of Intel, Nokia, Apple, AMD and Lucent for the first half of this year didn’t meet the expectation, and NASDAQ Index began to fall because of the anxiety about the turnover of the second half of this year.

Oh hyun-seok, senior researcher of Hyundae Securities said, “the demand has not increased and the businesses are reluctant to invest because of being worry the inventories”, and added “it is very difficult to expect early recovery of IT business without confidence and the extension of investment”

Dr. Kim Jae-yun, Technology & Industry Team of Samsung Economic Research Institute said “the boom of IT business was expected from this year considering the average replacement cycle (three years) of PC, however, the demand for semiconductor doesn’t meet the expectation and the recovery of IT boom may takes long time”

▽ The recovery is estimated to begin from the next year = Most of economists estimates the recovery of IT to begin from the next year, but semiconductor may be expected to begin to recover from the three quarters of this year because of seasonal factors.

However, networks system and telecommunication equipment are expected to begin the recovery from the second half of the next year because of excessive investment.

The expected world demand for PCS will be decreased from 420 million units to 390 million units, and LCD industry in booming can not expect the condition for the second half of this year because of excessive supply.

Mr. Kim Il-woong, Marketing Director of Samsung Electronics commented, “Even some leading companies estimate the three quarters of the next year as the bottom of the IT business cycle. So many companies are anxious about the decline in the management” and added “However, as some companies, such as Samsung Electronics are equipped with technological competitiveness, they increase market share with high value added products and their cash flow is very stable”

Jeong-Hun Park Ho-Won Choi sunshade@donga.com bestiger@donga.com