Tough times ahead for tech industry

A few posts below, KT highlighted how the art market (the high-end market in particular) is booming despite the economic crisis. This article, on the other hand, shows how the opposite is happening for the technology industry.

Summary: the technology industry will suffer until the end of 2009 (a year almost everyone agrees will bear the brunt of recession). Prices are pressured to rise due to a fall in demand for high-end components found in goods like latest-technology cellphones, although demand for basic products in China and India are sustaining shipment volumes. People prefer to extend leases on office equipment, holding on to personal equipment longer to prevent buying a new product. Despite the success of certain products (think: anything Apple churns out) the market as a whole as a pessimistic outlook. One quote from an executive: “It is one of the worst markets I have seen.” However, producers are looking at hybrid and electric cars as a new market for complement goods, and acknowledge that they make higher returns on capital than on “glamorous,” consumer-based products.

While goods in the high-end market are relatively inelastic, with there being only so many dead formaldehyde-preserved cows in the world, you can always find an alternative if you can’t afford a certain technological good. If you don’t want to buy a new cellphone, you can buy used or a cheaper, basic model. You can also choose not to replace something even if it’s old, as long as it still works. Art remains valuable and even gains value over time – most technological goods depreciate in value the minute they’re bought, rather like cars.

It seems that the window for technological innovation may shrink next year, due to a decrease in super-normal profits to invest with. On the other hand, producers are hoping that the hybrid market will provide them with opportunities, which means they may actively help out in widening the market. That would have environmental and economic benefits. Furthermore, producers say they gain higher returns on capital, so they may redirect their production process and focus on improving capital goods instead of TVs and computers.