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Will 2018 see the long-expected industry consolidation gather pace? Part 4

It’s time to accept that Europe + USA are not only mature, but small markets

 

One last comment I would like to add is more on geo politics that goes beyond our industry, though High Tech is at the core of it. There is an economic battle with a larger scope than our industry taking place between Asia and the USA, Asia not being a single entity either.

 

Last year Lexmark shareholders sold the company to Chinese interests. The companies involved are closely associated with Lenovo and the idea is to give access to the Chinese market. Lexmark had no serious access to China so the plan is to get the Lexmark advanced technology into the Chinese market and pump the volumes up significantly.

 

Also Foxconn acquired a substantial share of Sharp (mainly for the LCD screens activity) but this included the copier division whose long-term future is still unclear. It delivers profits, as is, today but is small player on the WW scene and cannot hope for a renewal of the HP contract.

 

So let us not forget simple demographics that extend way beyond 2018.

The population of the USA amounts to roughly 310 million people; the population of Europe amounts to roughly 500 million people.

In Asia, you have China with roughly 1360 million flat; India with roughly 1250 million growing; Other Asian countries 1700 Million, of which Japan is 125 but diminishing.

Now that Asia is richer than it used to be, they are in comparative buying power terms, equivalent to 2x or 3x the combined US and European markets.

 

The latter 2 markets are saturated for our industry (flat to diminishing volumes) so companies want to equip Asia with much better penetration rates than it used to see. This is the growth (read survival) opportunity.

But Asian people have no intention to let westerners benefit from what they can very well do themselves. And American shareholders hope they can make more money with industries that can deliver faster growth (GAFAM, unicorns, and similar others). So China buys the western technology and does it. Japan defends itself by allowing/forbidding such activity.

This is not entirely different from what happens in various other industries like nuclear, trains, aerospace. And is a good base to understand what Mr Trump means when discussing Korea, trade relationships with Asia and protecting American jobs.

So in 2018, IDeAs will continue to bring its independent view on the market, with multiple perspectives from the mega-trends down to the nitty-gritty activities of running a business in our industry. This is our promise to our readers and our support and value to our clients.

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This article was written on 05 Apr 2018, and is filled under Business Forecast, Point of View.

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