by James Montgomery, news editor

May 18, 2011 -  Bill McClean offered his by-now-familiar overview of electronics and semiconductor market trends. At this point he's projecting 10% growth in semiconductors to $346.8B, 19% growth in capital spending to $61.7B, and a 9% increase in the materials sales to $47.7B. Updating his famous IC Industry Cycle wheel (think a Chinese New Years calendar for ICs), we're right in the middle of the best of times with a trio of bullish growth trends (firming prices, a strong market, and aggressive capital spending). The bad news: coming up next are significant capacity additions, then softening prices, and a weak market, a trend that historically takes 3-4 years to work through.

Total worldwide GDP growth will slow a bit to 3.6% in 2011 (vs. 4.3% in 2010). It was originally expected to be 3.9%, but in Japan -- which accounts for $174B in electronic components and devices -- its prequake 1.5% GDP projetions have been revised down to -2%. Within that overall GDP total, though, emerging markets are surging (6.4%), notably China (9.2%) and India (8.1%) -- in fact China's growth is nearly equaled by its share of total global economics ($4.71T of worldwide $59.22T, or 8.2%).

And as goes worldwide GDP so goes semiconductor industry growth (both ups and downs), particularly tracking together since 2009's meltdown (global recessions typically are followed by multiple good years) and looking ahead all the way to 2015, McClean showed.

McClean's forecasts across the board show generally good growth annually through 2015 (high single-digits for electronic systems sales, low-teens for semiconductors, mid/high-teens for capex), all wrapped around a blip in 2013 (2% electronics, -3% semis, -16% capex).

Updating his short-term forecasts for the post-quake world, McClean sees improving climates for electronic system sales (2Q weak, 3Q moderate, 4Q strong) and Japanese GDP ("strongly negative" to "moderately negative" to "moderately positive"), with semiconductor sales activity improving from 2Q's "moderate" sentiment to "strong" in 3Q, and pulling back to "moderate" in 4Q. Brisk business in 1Q set the table for a solid 2011 -- almost without fail since 1984, any 1Q11 growth from the immediately preceding 4Q period has led to double-digit growth for the entire year, he noted. (Speaking of quake impacts, Japan's the poster child, along with Taiwan, for regions possessing significant seismic risk to IC industry capacity, McClean noted -- and the fact that 90% of pure-play foundry capacity is in a seismically active zone should give pause.)

Semiconductor content in electronic devices is still increasing: 25.4% in 2010, up slightly through 2014 to 26.8%, then a notable jump to 28.5% in 2015. PC shipments continue to rise, albeit more slowly in 2011 (12% vs. 18%), but still better than 2009 or 2008 and about the same rate as 2006 and 2007. Cell phone shipment growth will slip in 2011 as well, he said, to 9% from 13%. IC unit volumes are for now right on a 10% long-term trend line, but should move higher in 2H11.

Capital spending should stay at or slightly above/below 16% of sales for the next four years, McClean says; it was ~20% in the early/mid 2000s, and 26% in the late 90s into the 2001-2002 downturn. He sees capital spending rising 19% in 2011 to $61.7B, after more than doubling (101%) in 2010 to $51.8B. The spending continues to narrow to a concentrated few (the top five capex spenders making up 58% of all spending, top 10 is 73%, top 15 is 81%), with even more concentration in 300mm capacity (top 10 = 85%), as exemplified by a power ranking" system meant to illustrate who are likely to be the primary players in future chipmaking capacity additions. (Those not expected to whimper, not flex: fab-lite firms and financially-strapped tier 2 memory suppliers.) The herd will thin even more once the 450mm wafer-size transition comes, McClean asserted, projecting 12 possible 450mm adopters: Intel, Samsung, Toshiba, TSMC as the first, followed by GlobalFoundries and other memory firms, and possibly also by IBM, SMIC, and UMC.