On Wall Street, there seems to be no end to the dire headlines: “The S&P 500 falls into bearish territory“; “Mass COVID tests announced for Beijing district“; and “Inflation picks up again in May.” However, a new report on the telecommunications sector appears to point to a thin silver lining amid broader worries of an inflation-fueled economic slowdown.
“The macro slowdown in other parts of the economy could help release semi- [conductor] networking ability,” financial analysts at Rosenblatt Securities wrote in a recent note to investors. Analysts cited recent meetings with executives from network equipment vendors including Ciena, Adtran, Viavi and others.
“A slowdown in demand for consumer PCs, phones and TVs could lead to a better supply chain environment for networking companies in 2023 as chip resources shift to markets where demand remains strong,” analysts said. “We take this as a strong sign of the [telecom] sector is better positioned than most for this macro environment.”
This is perhaps just one positive element that emerges from a much larger landscape of economic distress. Indeed, economic concerns have already slowed the sale of smartphones. IDC research firm recently predicted that the smartphone market will shrink 3.5% to 1.31 billion units in 2022, a reversal of its previous growth projection of 1.6%.
This means that customers are not buying new phones that could drive increased demand for new networking services.
Nonetheless, any prospect of easing global sourcing of cost-effective components would be a welcome development for network equipment vendors. Virtually every supplier complained that they would make a lot more money today if they could get the components they need to make their products.
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