Technology Focus: Looks Like 2013 Will Be A Rough Ride

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snakes
Lydia Chako thought that her baby was covered in snakes.

We should have known: 2012 on the Chinese Zodiac calendar has been the Year of the Dragon. Too bad it's followed by the Year of the Snake.

Now that forecasts for technology shipments for the year are nearly complete, there's reason to be wary. Third-quarter chip sales were only $74.8 billion, down 4.7 percent from last year in what Semiconductor Industry Association President Brian Toohey termed “a choppy global environment.”

Full-year chip sales are expected to be about the same as last year. That's no sign of growth, especially when more semiconductors than ever are inserted into new cars and machinery, as well as computers and smartphones.

Shipments of PCs and laptops are expected to fall below 2011's level of 352.8 million units, estimates IHS iSupply (NYSE: IHS).

Bellwether companies like Dell Inc. (Nasdaq: DELL), the No. 3 PC maker that's desperately trying to shift to selling services and software, set a three-year low Friday of $8.69 Friday after beating third-quarter results by a penny but issuing a challenging forecast for the current quarter, usually the strongest, bolstered by holiday consumer sales and new enterprise orders.

Dell's in “a weaker demand environment,” CFO Brian Gladden said after results came out. “And that's something we expect will continue for a period here.”

Is it any wonder that International Business Machines Corp. (NYSE: IBM), the No. 2 computer company that's been reporting solid earnings, announced a new, $4 billion global financing campaign, quadruple one announced a year ago? IBM executives acknowleged that offering small- and medium-sized business clients 0 percent financing for a year is intended to win new business.

IBM even rolled out a mobile app to apply for financing up to $500,000.

IBM also reported cash and investments exceeding $12.2 billion and has enormous cash flow. But its conduct is no different from the Big Three car makers in a slow market.

There are other other reasons for wariness: The European economic crisis is about to enter a third year, trimming demand for products there. Big companies like IBM, Cisco Systems (Nasdaq: CSCO), the No. 1 Internet equipment provider, which reported solid first-quarter results last week, and Hewlett-Packard Co. (NYSE: HPQ), the No. 1 computer company, have been fretting about Europe for 18 months.

Added to the headache: China. The No. 2 global economy is slowing down, trimming expectations for heady new markets. Indeed, Apple (Nasdaq: AAPL) has a handful of retail stores there now and it's a good PC market for HP and Dell, although China's Lenovo Group (Pink: LNVGY) has now outpaced them as the No. 1 PC vendor. China is everyone's favorite technology market because it's a huge foundry nation with a growing middle class hungry for technology products.

For sure, demand for two sectors of technology products is going through the roof: smartphones and tablets.

The two smartphone product leaders, Samsung Electronics (Seoul: 005930) and Apple, have respective hits with their Galaxy and iPhone product lines. As many as 821 million smartphones will be shipped this year, Gartner Group (NYSE: IT) estimates.

Apple and Samsung are the big gorillas in tablets, too, with huge shares of a market estimated to reach 117 million units this year, IDC estimates, compared with 70 million for 2011.

But that's about it. The Big Three mobile carriers, AT&T (NYSE: T), the Verizon Wireless unit of Verizon Communications (NYSE: VZ) and Sprint-Nextel Corp. (NYSE: S) have all reported decent gains in subscribers and volume to handle that traffic.

Still, all signs point to a choppy end to 2012 and a tricky beginning for the Year of the Snake.

The bellwether Philadelphia Stock Exchange Semiconductor Index closed Friday at 356, 2.3 percent below its opening on Jan. 3. Clearly, that's a bearish indicator.

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