With the slingshot effect of 2010's rebound year (aka, post-recession) coming to an end, the question of the pace of sustainable growth has been on everyone's mind. What are the growth forecasts for semi and where are we right now, post-recession, post-rebound, post-Japan disasters?
The mature economies of the US and Europe continue to struggle with various challenges that range from sovereign debt problems to jittery confidence and volatile fuel prices. These problems translate to worry along supply chains and in board rooms where suddenly CAPEX spends quietly get pulled back (as we saw in 2009, for example).
While economic troubles linger for mature economies, the emerging markets are still looking to push through as "the growth generators of the world," as characterized here today by Financial Times. According to the International Monetary Fund (IMF), the emerging markets are forecasted "to grow three times faster than those in the developed world over the next three years," as commented on here, also by Financial Times. What this means for semi is that regardless of the jittery economic situations for the mature economies, emerging markets are the sustainable growth drivers today and into the future.
According to the Word Semiconductor Trade Statistics (WSTS) Spring Market forecast out yesterday, 2011 forecasted semiconductor industry growth is 5.4%, which equals US $314.4 billion, followed by a higher, 7.6% growth, in 2012, equivalent to US $338.4 billion. This forecast is in line with the expected pull-back to normalized growth levels for our maturing industry after 2010 growth of 31.8%, or $298.3 billion. Overall, the compound annual growth rate (CAGR) for the next three years (2010-2013) is a healthy 6.13%, which is well above the GDP forecasts for developed market economies - that means very healthy report card for semi worldwide averages.
Cross-checking these WSTS data with those from today's SEMI forecasts for semiconductor equipment and manufacturing capacity, the growth predictions for the industry are well-founded. Specifically, SEMI reported yesterday a 2011 forecast of a 31% rise in semiconductor equipment spending, reaching US $43.99 billion, a record year in terms of dollars spent (not percent changes). The reasons for this rise are based on the return of healthy CAPEX investments committed to last year that are beginning to be spent this year. This investment is not expected to continue at this pace past 2011, as 2012 is forecasted to see a pullback to a -6% level (decline), but still a healthy US $41 billion, well above even 2007's US $38.09 billion level. So, while this is the boom year, the pullback will not see a significant diminishing of CAPEX spends in dollars, just percentages. All this trending bodes well for continued confidence and growth along the semiconductor value chain with good demand drivers seen both for components and end-devices, globally.
Hand-in-hand with the CAPEX spending, of course, comes the increase in manufacturing capacity. SEMI is forecasting a respectable 9% rise for 2011, according to the same report out yesterday. This number is for installed capacity and is forecasted to have a 2012 follow-on rise of 7%. According to the same SEMI report:
"In 2010, the growth rate in capacity of Foundry fabs surpassed Memory fabs, and this trend is expected to continue in 2011, as Foundry capacity will increase by 13% while Memory capacity will increase by 8%. Growth of LED dedicated fab capacity remains in the double-digits with over 40% estimated in 2011, though lower capacity growth is forecasted in 2012."
So, what about semiconductor and electronics growth? To be sure the hot products in demand in the developed markets are also in demand worldwide; in addition, the demand is surging from new corporations (for traditional PCs & notebooks, network infrastructure, servers, telecommunication devices, and other business electronic devices) and from consumers alike (such as for all home appliances, automobiles, handsets, etc.). The demand drivers for the semiconductor and electronics industries are varied, healthy, and sustained in the emerging-markets, particularly the more mature emerging-markets of BRIC (Brazil, Russia, India and China), watch for our upcoming MarketWatch Quarterly articles on Brazil and semiconductor supply chain opportunities available with a free subscription mid-month, and publically by the end of June.