The spectacular market performance of electronics stocks in the past few years has encouraged a great number of companies to enter the field, leading to a condition of current unprofitability in many areas, especially in the transistor and other semiconductor fields. This historical piece offers some great insight.
The industry is confronted with a shakeout of great magnitude. It will probably go through the same evolution of other great industries, notably the automobile industry, whose story was a grim testimony how a battle among nearly forty different types of automobiles 45 years ago has led to the survival of comparatively only a few.
That does not mean, however, that investor bullishness about electronics stocks is not basically justified. Even disarmament would not mean the end of electronics despite the industry's heavy dependence on government spending.
Disarmament or no disarmament, government expenditures for electronics goods and services would most probably remain at a very high level. For, unless there is a basic change in U.S. and Russian world policies, the best that can be hoped for between them is a sort of armed truce.
"The nature of this armed truce," said Dr. Harry Greenfield in What Shakeout in the
Electronics Industry? "Is such that the armaments of which it is comprised are becoming progressively more electronic. From four percent of total military spending in 1950, electronics is expected to reach approximately 20 percent by 1965. So long as neither we nor the Soviets are ready to alter our respective politicoeconomic systems, so long will an element of distrust exist. The ensuing modus vivendi will be almost entirely electronic in nature, for only through electronics can the necessary hearing, and communicating over vast distances, on, above or beneath the earth's surface be effected.
The electronic core of such a system will in all probability consist of active and passive satellites, telemetry systems, global computer complexes, ultra-sensitive detection systems, as well as global communications networks, he continued. I would go so far as to say that a thoroughly effective surveillance system, constantly changing to remain at maximum efficiency, will entail costs that may equal and very likely exceed current government spending for electronics."
And, there is the tremendous potential market for industrial electronics.
The industrial electronics market is estimated to reach $4.1 billion by 1965, a 128 percent increase over 1960's approximately $1.8 billion and a hefty 317 percent increase for the decade. That's why experts see it as a successor to the automobile industry. Should defense spending behind electronics decline, the professionals envision greater government use of this innovation by private industry to help the transition to peacetime usage on a grand scale.
Though a relatively new science., electronics already has become important in almost every realm of human activity. Its impact might be as great as the invention of the steam engine or the introduction of the wheel in the history of human progress. Electronics is not just another great growth industry. It is a whole field of science. It is what Louis H. Whitehead termed "MANY Industries."
The scope of its application is constantly expanding. Medical electronics is one of those areas. Data processing is another. Rapid strides in data processing, for instance, should continue to be made with great increases in application. On the one hand, its tie-in with communications will lead to far greater application of each; on the other, it permits more complete automation in many manufacturing processes as well as in process industries.
There never has been the slightest doubt about electronics being a growth industry.