Cleanroom markets in the Americas
Other than U.S., most countries will continue to be minor players
By Robert McIlvaine, The McIlvaine Company
The Americas segment of the cleanroom industry comprises mainly the United States. Other countries on the two continents are and will continue to be minor players. The cleanroom industry in Central and South America is tiny compared to that in Taiwan, Singapore, and South Korea. The future president of Singapore attended a seminar at Harvard in the 1960s, about the time the first cleanrooms were being built. He was told by the lecturers that growth in South America, with its large natural resources, would far outstrip that of Southeast Asia, with its lack of such resources.
In retrospect, it turned out that political institutions, education and infrastructure were more important than natural resources. This will continue to be the case for economies in general, and for the cleanroom industry in particular.
Venezuela is enjoying a surge in oil revenues, but its political institutions are likely to prevent the windfall gains from boosting the economy long-term. International cleanroom operators will be unlikely to invest in this country unless the political situation changes.
Table 1: Room revenues by 2010 ($ millions)
There are six countries that have significant activity in the cleanroom industry in the Americas. The cleanroom room revenues (investment in new cleanrooms including ceilings, walls, HVAC, minienvironments, etc.) in 2010 have been projected for each of these countries (see Table 1).
The aggregate cleanroom purchases in all these countries will be less than 13 percent of that in the U.S. Mexico will enjoy slightly larger room revenues than Canada, but then its population is much larger (see Fig. 1).
All five of the countries listed are experiencing solid economic growth. Presently, Chile posted a record GDP equivalent to US $112 billion in 2005, which reflected a rate growth of 6 percent. This year, the physical GDP growth is estimated at 5.8 percent, which, with the stronger peso, will give it a GDP of US $115 billion.
Brazil’s central bank lowered its 2006 economic growth and inflation forecast. It cut its growth forecast from 4 percent to 3.5 percent and reduced its inflation forecast from 3.8 percent to 3.4 percent.
Mexican Finance Minister Francisco Gil Díaz recently said that the economy in Mexico should grow around 4.2 percent this year. Gil, who had previously predicted a growth rate above 4 percent, noted that some private forecasts are above that level.
“The rate of economic activity this year has been accompanied by important increases in job creation,” said Gil, noting that industrial production and exports have driven the better-than-expected economic growth. Gross domestic product grew 3 percent in 2005.
The government predicted that more than one million jobs would be created this year. President Vicente Fox estimated a growth rate of between 4.5 and 5 percent for 2006. Gil noted that some private estimates are within that range, but “we won’t know until the end of the year.”
Canada’s economy, the world’s eighth largest, showed economic growth of 3 percent for the third quarter, according to the Bank of Canada’s latest estimate. The economy slowed to 2 percent in the second quarter, short of the bank’s 3.2 percent estimate. Policymakers have since said they remain confident that the 4.25 percent bench-mark rate is at the right level to bring inflation to the central bank’s 2 percent target.
Canada has the infrastructure and political strengths to develop a strong cleanroom industry, but its population is small and, therefore, its potential is limited. However, the countries with the larger populations-Brazil and Mexico-have political and infrastructure problems.
The only cleanroom segments where the five countries have any appreciable market share are in “other electronics” and “pharmaceuticals.” They are not active in semiconductor, flat panel display, disk drive, or aerospace.
Table 2: “Other electronics” industry through 2010 (percent of world in 2000)
McIlvaine has projected the share of the “other electronics” segment for each American country in future years through 2010. Each of the numbers represents the percentage of the world market in 2000. The U.S. 2010 forecast of 36.16 percent is a percentage of the world market of 100 percent in 2000. Between 2000 and 2010 the world market will grow to 204 percent, but the U.S. market share in 2010 will actually drop to 18 percent (see Table 2).
Mexico is a relatively strong player in the “other electronics” segment due to the concentration of manufacturing along the northern border for shipment into the U.S.
The U.S. is the world’s largest purchaser of pharmaceutical cleanroom hardware. Other countries in the Americas are small purchasers and will continue to be. Purchases of cleanroom hardware, as a percentage of the world in 2000, are shown for the period through 2010 (see Table 3).
Table 3: Pharmaceutical industry through 2010 (percent of world in 2000)
In terms of cleanroom classes, the comparison is even more extreme for Class 1 (ISO Class 3), but becomes increasingly more favorable through Class 100,000 (ISO Class 8). This is because some assembly operations with this cleanroom classification are located in lower wage areas.
Unless there are political changes, which are not anticipated, the rest of the Americas will continue to be a small market for cleanroom hardware and supplies (see Fig. 2). Most of the activity will continue to be in the Class 1,000 (ISO Class 6) to 100,000 (ISO Class 8) range.
Robert McIlvaine is president and founder of The McIlvaine Company in Northfield, IL. The company first published Cleanrooms: World Markets in 1984 and has since continued to publish market and technical information for the cleanroom industry. He can be reached at [email protected]