ICT Industry Trends United States - 2022

The credit risk situation of US ICT businesses remains good, due to the still satisfying demand situation and good access to external financing sources. ICT Industry Trends United States - 2022 Lower, but still solid ICT sales and production growth [Asset Included(Id:1435222765509;Type:AT_Media_C)] ICT production and sales in the US remain robust, despite a certain slowdown of growth expected in 2022 and 2023 compared to last year. Demand for home office products and connectivity-related accessories, cloud services, mobility solutions and network security offerings remain solid. However, ongoing high inflation could have a negative impact on households´ discretionary spending and, in turn, is likely to result in lower device purchases. For instance, we expect that after a whopping 11.5% increase in 2021, consumer electronics output will grow only 1.5% in 2022. [Asset Included(Id:1435222766560;Type:AT_Media_C)] Due to the ongoing semiconductor shortage, output of computers, telecommunications equipment and consumer electronics has slowed down, while the production of electronic components (which includes chips) will grow 8.5% this year. Despite this increase, chip demand will still outpace supply into 2023. Providers have recently announced major investments in US chip making capacity, and US Congress passed the so-called “Chip Act”, which earmarks USD 52 billion of subsidies for domestic production. However, it is likely to take a few years to ramp up production. While silicon remains the primary component of chips, neon gas is highly utilized in the etching of silicon. The war in Ukraine could have an adverse impact on chip manufacturers, particularly because two of Ukraine's biggest producers of neon gas have halted production. However, the major US chip manufacturers tend to maintain large reserves, limiting the near-term impact for the time being. Average sales prices for semiconductors increased by 15% in 2021. Additionally, ICT businesses are facing higher energy and transport costs (in particular, costs for shipping containers have increased substantially). Given the delays caused by supply constraints, some businesses have to sustain high costs of airfreight in order to meet the demand of buyers in time. Profit margins of US ICT businesses increased in 2021, driven by strong demand, and we expect them to level off in the coming twelve months, as demand eases somewhat across all major product categories and competition in the market is high. On the positive side, most ICT businesses are able to pass on a large share of price increases to end-costumers. In order to sustain growth, most ICT businesses are heavily reliant on bank financing to fund the necessary working capital. The willingness of banks to provide sufficient financing helps improve the liquidity profile of most ICT companies. Payment terms in the industry range between 30 days and 60 days on average, and the payment behavior has been good during the past two years. Due to the still satisfying demand situation and good access to external financing, we expect no increase in payment delays and insolvencies in the coming twelve months. Given steady growth and sufficient access to liquidity, our underlying strategy remains open for all subsectors.