I recently had a chance to partake in a discussion of sorts about the value of market analysis and forecasting in the TOP electronics sector. Certainly illuminating to say the least. (I thought we did a pretty good job of not promoting hype but I guess some people think otherwise). Nevertheless, it did prompt some discussion internally about what we do as industry analysts here at NanoMarkets besides pretend that we are smarter than everyone else and put out content with the intent of impressing people.

Part of what we get paid to do is prognosticate on future opportunities and the resulting requirements that arise in pursuit of them. Fun job but not a simple one since different people have different questions and need different answers to fulfill different agendas. The technologists out there think in terms of Can we? How should we? What will it take to create&? Etc. The finance people want to know, How much it will cost? ROI? ROA? How does it compare to other spending priorities? whereas the people who have to build the stuff need to know How much of what and when? and the sales and marketing types look at How big is the market? How fast will it get here? Where do we sell our products? Why are people buying? Etc., etc..

In the end though, the answers have to tie into some cohesive thought process that supports both a qualitative and quantitative assessment because the market demands it. (For some it is easy to sit back and throw rocks at those who try to measure the market but I think that credit is due for those, including my colleagues and competitors who have the moxie to make a statement about the market and make it part of the public record. They at least leave something behind to be accountable for&but I digress). No one save for the fool will support risk without a roadmap that shows possible (and plausible) reward. In the case of emerging markets, creating that map is a fairly challenging task since there is often a lack of historical data that allows one to confidently predict the future.

Nevertheless, even without the ability to look back at shipments of particular technologies it is possible to create models of where an emerging market is headed if several factors are considered be they economic data points, usage trends, established replacement cycles, capital investment, manufacturing capacity and support from major companies. The VCs play a role in this as well since it is their willingness to fund technology development that kicks emerging markets into high gear. In TOP electronics we are starting to see that just like we are seeing manufacturing ramp up and products being introduced to the market.

It is always interesting to watch an emerging market start to spread its wings and there is certainly a lot to get excited about. However, people are still going to have to be patient here. While there are going to be billion dollar market segments in PE they will not happen overnight. NanoMarkets' last forecast of printed electronics applications called for $354 million in revenues in 2007. That was stretched across 12 segments (displays, RFID, memory, signage, etc.) whose total value is measured in the hundreds of billions of dollars. Sobering when you think about it. For all the talk out there PE based products are still a drop in the bucket. But that's where we are today. These PE based products will begin to grab market share in the coming years and even with a few percentage points of market share will create large revenues. This is possible solely because we are talking technology replacement and expansion of what already exists today. Getting to those market opportunities though is going to require a hell of a lot of work, innovation and industry leadership.

The flip side to all this is that anyone can put out a forecast or market prediction for a host of reasons. I think one time or another we have all seen examples of blatant and exaggerated numbers that serve no purpose other than to convince foolish investors to part with their cash. The other times I have seen silly forecasts is when the analysts fall in love with cool technology and overstate what's possible whereas others sell their services (and sometimes souls) to vendor marketing departments with no thought whatsoever to the implications of their projections.

That's not to say that all forecasters are naïve or up to no good. Anyone who tries to sell the future is likely to get it wrong at some point. The questions of how much we miss and why are our individual and collective measure as analysts.