Some telecom vendors see silver lining amid economic woes
On Wall Street there seems to be no end to the doom-and-gloom headlines: “S&P 500 falls into bear market territory“; “Mass COVID testing announced for Beijing district“; and “Inflation sped up again in May.” However, one new report out of the telecom sector appears to indicate a slim silver lining amid broader worries of an inflation-driven economic slowdown.
“Macro slowdown in other parts of the economy could help free up semi [conductor] capacity for networking gear,” wrote the financial analysts at Rosenblatt Securities in a recent note to investors. The analysts cited recent meetings with executives from network equipment suppliers including Ciena, Adtran, Viavi and others.
“A slowdown in consumer PCs, phones and TV demand could lead to a better supply chain environment for networking companies in 2023 as chip resources are shifted to markets where demand remains strong,” the analysts explained. “We take this as a strong sign the [telecom] sector is better positioned than most for this macro environment.”
That may be just one positive element to emerge from a much broader landscape of economic distress. Indeed, economic worries have already slowed the sale of smartphones. Research firm IDC recently predicted that the smartphone market will decline 3.5% to 1.31 billion units in 2022, a reversal of its previous projection of 1.6% growth.
Meaning, customers aren’t buying the new phones that could spark increased demands for new networking services.
A breather
Nonetheless, any prospect of easing the world’s supply of economic components would be a welcome development for network equipment vendors. Virtually all suppliers have complained that they would be making far more money today if they could obtain the components they need to build their products.
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