By Bill McClean, president, IC Insights
The expectations for global economic growth consistently deteriorated throughout 2012, with worldwide GDP eventually growing by only 2.6% last year. It should be noted that 2.5% or less worldwide GDP growth is typically considered a global recession. IC Insights’ forecast for 2013 worldwide GDP growth is 3.2%. Although this figure is higher than the 2.6% increase logged in 2012, it would still be 0.3 points below the 3.5% long-term average annual global GDP growth rate.
One of the primary reasons for weak 2012 worldwide GDP growth was the negative growth registered by the Eurozone and U.K. economies. Unfortunately, the Eurozone is not expected to display a strong rebound in 2013, with 0.0% growth forecast for the Eurozone economy this year.
China’s GDP growth rate dropped to only 7.7% in 2012 with a modest rebound to 8.1% growth forecast for 2013. While many developed countries would welcome 7% or higher GDP growth rates, for China, this figure is significantly below the 10% and greater annual GDP increases logged from 2002-2009. In an attempt to address its economic “slowdown,” the Chinese government was quick to inject stimulus into its economy starting in the second half of 2012 by aggressively lowering interest rates as well as enacting $156 billion in construction project programs. While this stimulus was too late to have a significant positive affect on its 2012 GDP growth, China’s GDP is likely to get at least a modest boost from this activity in 2013.
While the correlation between worldwide GDP growth and IC industry growth has historically been good, IC Insights believes that the correlation in 2013 will be very good, as it was in 2012. Using a worldwide GDP forecast of 3.2%, the most likely range for worldwide IC market growth in 2013 is 3-7%.
The election-year cycle is one reason why IC Insights has identified 2013 as a possible slow growth year in the worldwide economy and IC industry. Over the past 10 post-U.S.-election years, worldwide GDP growth averaged 3.1% with worldwide IC industry growth averaging only 4%. Moreover, worldwide IC industry growth exceeded 8% in only three of these 10 post-U.S.-election years (1973, 1977, and 1993), and only once since the late 1970s.
IC Insights believes that the IC industry cycles are becoming increasingly tied to the health of the worldwide economy. While poor IC market growth has occurred during periods of strong worldwide economic growth, primarily due to IC industry overcapacity and the resulting IC price declines, it is rare to have strong IC market growth without at least a “good” worldwide economy to support it. Thus, over the next five years, annual global IC market growth rates are expected to closely mirror the performance of worldwide GDP growth.
Overall, the IC industry is set to emerge from a difficult 5-year period of minimal growth. From 2007-2012, the IC market grew at an average annual rate of 2.1%. In IC Insights’ opinion, the “bottom” of the current cycle in the worldwide economy and IC industry was reached in 2012 and 2013 will mark the beginning of the next cyclical upturn—one in which the IC market CAGR will more than triple to 7.4% in the 2012-2017 timeperiod.