Growth drivers shifting to emerging economies

Global real gross domestic product (GDP) growth in 2015 is expected to be 3.5%, according to the International Monetary Fund (IMF) April 2015 report. 2015 is a slight acceleration of 0.1 percentage points from 3.4% growth in 2014. The IMF projects 2016 global growth of 3.8%, an acceleration of 0.3 percentage points from 2015. The table below shows GDP growth and acceleration/deceleration for advanced economies and emerging/developing economies. Key countries are listed under each category.

The advanced economies are expected to provide the growth acceleration in 2015. The United States, the largest economy accounting for about 23% of global GDP, is the largest contributor to the 2015 acceleration with GDP growth moving from 2.4% in 2014 to 3.1% in 2015 – accelerating 0.7 points. The Euro Area countries combined are the second largest economy and the second largest contributor to the global acceleration. Japan’s recovery from a 0.1% decline in 2014 to 1.1% growth in 2015 is the third major factor in accelerating GDP growth.

GDP Apr15

The emerging/developing economies as a whole are expected to show deceleration of 0.3 points, from 4.6% in 2014 to 4.3% in 2015. However these same countries drive the acceleration of global GDP growth in 2016 with 0.4 points of acceleration. Russia is in a major recession in 2015 with a forecast GDP decline of 3.8%, but begins to recover in 2016 with a 1.1% decline. Thus Russia contributes to global GDP acceleration in 2016 by being less of a drag on the economy than in 2015. South America shows a similar effect, led by Brazil and Argentina.

China has been a major driver of global economic growth for several years. Although China’s GDP is still expected to grow at almost twice the global rate, growth is projected to slow from 7.4% in 2014 to 6.8% in 2015 and 6.3% in 2016. India’s GDP growth is forecast to accelerate from 7.2% in 2014 to 7.5% in 2015 and hold at 7.5% in 2016. Thus India will replace China as the fastest growing major economy. The ASEAN-5 countries (Indonesia, Malaysia, Philippines, Thailand and Vietnam), the Middle East & Africa and Mexico also contribute to global GDP acceleration.

The overall message from the table is the advanced economies have recovered from slow growth in 2014 to close to long term growth rates in 2015 and 2016. The emerging/developing economies are still growing faster than the advanced economies, but growth leadership is shifting from China to India and Southeast Asia.

What is the impact on the electronics and semiconductor markets of these trends? The May 2015 smartphone forecast from market research firm GfK shows near term growth will depend on emerging regions, excluding China. Global smartphone unit growth is projected to slow to 10% in 2015 from 23% in 2014. China, a major growth driver and the largest single market for smartphones, is expected to show a 3% decline in 2015. The developed economies – North America, Europe and developed Asia/Pacific (APAC) – show growth slowing from 18% to 8%. The emerging economies – Latin America, Middle East, Africa and Emerging PAC – drive 2015 growth at 26%.

Smartphone Unit Forecast (Source: GfK, May 2015)
Millions of Units Change
2013 2014 2015 2014 2015
World 998 1227 1355 23% 10%
North America, Europe, Developed APAC 374 440 476 18% 8%
China 359 393 383 9% -3%
Latin Amer., Middle East, Africa, Emerging APAC 265 394 496 49% 26%

The PC unit forecast from IDC in May 2015 shows a 2015 decline of 6.2%. Mature markets show a slightly bigger decline of 6.6% compared to the emerging market decline of 5.9%. The emerging market decline is dragged down by China, which had an 8% decline in 1Q 2015 PC shipments versus a year ago according to government statistics.

PC & Tablet Unit Forecast (Source: IDC, May 2015)
Millions of Units 2014 2015 Change
World PC 308 289 -6.2%
  Mature markets PC 145 135 -6.6%
  Emerging markets  PC 164 154 -5.9%
World Tablet & 2-in-1 231 222 -3.8%

IDC’s forecast for tablets and 2-in-1 PCs is a 3.8% decline in 2015 following 2% growth in 2014. Tablet growth in 2013 and prior years exceeded 50%.

How will these trends affect the semiconductor market in 2015 and 2016? The slowing of key market drivers such as smartphones and tablets will limit growth for semiconductors. The first quarter of 2015 started weakly with a 4.9% decline from 4Q 2014, according to World Semiconductor Trade Statistics (WSTS). The outlook for 2Q 2015 revenue growth for key semiconductor companies is mixed, as shown below.


Several companies are guiding for 2Q 2015 growth with around 3% at the midpoint (Intel, TI, STM and NXP). The highest growth rates are from Infineon at 9% and Avago at 7%. A few companies are expecting double digit declines (Qualcomm, SanDisk and NVIDIA). Weighted average guidance is about 3%, with a high end around 5%.

Our Semiconductor Intelligence March 2015 semiconductor market forecast was 8% for 2015 and 7% for 2016. Based on the weak 1Q 2015 and moderate expectations for 2Q 2015, we have lowered our 2015 forecast to 5.5%. We are maintaining our 2016 forecast of 7% based on some improvement in the global economy and slightly better prospects for the key drivers of smartphones and tablets.

The chart below shows recent forecasts for 2015 and 2016. 2015 forecasts are in a narrow range, from WSTS’ 3.4% to our 5.5%. Forecasts for 2016 range from WSTS’ 3.4% to our 7.0%.

Fcst June15

Overall, the outlook for the global economy, electronics and semiconductors is slow to moderate growth over the next two years. The risk is more on the downside than the upside. Factors which could lead to slower growth are more plausible than factors which could lead to higher growth. However the prospects of an economic downturn in the near future are low.

Global electronics trending upward

Global electronics production is on a generally positive trend. The chart below shows three-month-average change versus a year ago (3/12 change) for electronics production by country or region in local currency. Total industrial production is shown for Europe and South Korea since electronics production data is not available.

ee may15

China electronics production growth has remained strong, with April 2015 3/12 change up 11.4% from a year ago. China growth has been 10% or higher since December 2009. Taiwan electronics production has been volatile over the last few years, with 3/12 change ranging from increases over 40% in late 2010/early 2011 to declines approaching 30% in late 2012. Taiwan 3/12 change has been positive for the last eight months, with March 2015 up 7.3%.

Japan electronics production has been on a downward trend for about 14 years as production has shifted to China and other countries in Southeast Asia. Current production (in Japanese yen) is only about one third of year 2000 levels. However Japan is currently undergoing a short term recovery, with March 2015 three-month-average production of 449 billion yen up 44% from the recent low in June 2014. March 3/12 change was 1.7% compared to a 17% decline in November 2014.

Electronics production in the United States and industrial production in Europe and South Korea have demonstrated steady but slow growth. 3/12 change turned positive in Europe in October 2013, in South Korea in December 2013, and in the U.S. in January 2014. The March 2015 3/12 change was about 1% for each region.

We at Semiconductor Intelligence (SC-IQ) have developed a Global Electronics Index based on data from individual countries and regions. The chart below shows three-month-average change versus a year ago for the Global Electronics Index compared to global semiconductor shipment data from World Semiconductor Trade Statistics (WSTS). In 2011 both electronics and semiconductor growth were decelerating following the strong growth of 2010. Semiconductors decelerated more quickly and went more negative than electronics. Semiconductors and electronics both turned positive in mid-2013. Semiconductor growth in 2014 (averaging 10%) outran electronics growth (averaging 5%). In February and March 2015 3/12 change for both semiconductors and electronics were in the range of 5% to 6%.

global may15

Semiconductor Intelligence projects the Global Electronics Index will continue to show moderate acceleration for at least the next several months, with year 2015 growth of about 6% to 7%. In the long term, semiconductor growth is a few points higher than electronics growth due to increasing semiconductor content in electronics. Our March 2015 forecast was 8% growth for the global semiconductor market in 2015. The current electronics production data still supports this forecast.

2015 Semiconductor Capex led by Memory & Foundry

Semiconductor industry capital expenditures (capex) in 2015 are expected to be $69 billion in 2015, up 6% from $65 billion in 2014 according to IC Insights. We at Semiconductor Intelligence have compiled 2015 capex outlook by company. The major memory companies account for 38% of 2015 capex and the major foundries account for 27%.


capex pie


Memory and foundry companies combined account for almost two-thirds of 2015 capex. The three largest spenders (Samsung, TSMC and Intel) add up to half of total capex. The table below shows capex for 2014 and projections for 2015. The projections are from the companies, Digitimes, and Semiconductor Intelligence (SC IQ). Digitimes forecast Samsung Semiconductor will spend $15.1 billion in 2015, up 13% from 2014. The midpoint of TSMC’s April guidance for 2015 is $10.8 billion, up 13%. This is down from TSMC’s January guidance of $11.5 billion to $12.0 billion, up 23% at the midpoint. Intel also reduced its guidance for 2015 capex from $11 billion in January (up 9%) to $8.7 billion in April (down 14%).


Semiconductor Capital Spending, US$ Billion





Notes on 2015 forecast

Samsung SC




Digitimes, April 2015





down from $11.8 B in Jan. 2015





down from $11B in Jan. 2015

SK Hynix




Digitimes, April 2015

Global Foundries




$9B-10B in 2014 through 2015

Micron Technology




Fiscal year ending August

Flash Ventures




SC IQ, Apr. 2015













SC IQ, Apr. 2015





SC IQ, Apr. 2015

Texas Instruments




SC IQ, Apr. 2015

NXP Semiconductors




SC IQ, Apr. 2015

  Total of above




Total Industry




IC Insights, Jan. 2015






Overall the listed companies are expected to total $55.7 billion in 2015 capex, up 12% from 2014. Based on IC Insights forecast of $69.0 billion for the total semiconductor industry, this leaves $13.3 billion for other companies, down 14%. Eight of the nine biggest spenders are either memory companies or foundries. Flash Ventures is a combination of manufacturing joint ventures between Toshiba and SanDisk which account for most of their memory supply. Four of the companies on the list (Infineon Technologies, STMicroelectronics, Texas Instruments and NXP Semiconductor) are top 15 semiconductor suppliers which once depended primarily on internal wafer fabs. These companies are increasing their reliance on foundries and thus their capex is now rather small relative to their sales. The “others” category largely consists of small to medium size companies producing analog and discrete semiconductors.

Do current industry conditions justify the strong increase in capex by the foundry companies? TSMC, UMC and SMIC combined are expected to increase their capex 17% in 2015. Global Foundries expects $9 billion to $10 billion in capex in 2014 and 2015 combined, but did not indicate the amount each year. The capacity utilization trends of TSMC, SMIC and UMC show high utilization rates since second quarter 2014 after dips in late 2013. TSMC does not report a utilization rate. The TSMC utilization calculated by dividing wafers shipped by wafer capacity results in unrealistic rates above 100%. However the calculated number provides a general trend in TSMC’s utilization.


foundry 1Q15


Bookings and billings for semiconductor manufacturing equipment show a relatively healthy market, based on data from SEMI and SEAJ. Although billings have been relatively flat for the last four quarters, the book-to-bill ratio has been above 1.0 for the last two quarters indicating near term growth.




2014 semiconductor manufacturing equipment shipments were $37.5 billion, up 18% from 2013. Shipments were still well below the $43.5 billion in 2011 and the $42.8 billion in 2007, before the last major semiconductor downturn. The chart below shows shipments by region for 2007 and 2014. Shipments in 2014 were $5.3 billion lower than 2007. The difference is primarily in Japan, which was $5.1 billion lower. Shipments were higher in 2014 in North America (up 25%) and China (up 50%). Shipments were lower in South Korea, Taiwan, and the rest of the world (ROW).


region 2014


2015 should be a good year for semiconductor capital expenditures and semiconductor manufacturing equipment. However it is dependent on continuing healthy demand for semiconductors. Our latest forecast at Semiconductor Intelligence is for 8% semiconductor market growth in 2015, enough to support the current capex outlook.