Semiconductors Overview

The cyclical nature of the semiconductor industry, coupled with the economic downturn, meant that it experienced significant decline between 2001-2002. Since that time, the industry has posted higher growth rates, driven primarily by growth in demand for wireless communication chips. The US market was estimated at $44 billion in 2004, following annual growth of 14.1%. Demand from the processor-based electronic goods industry is expected to propel growth going forward, leading to continued double-digit expansion.

Microprocessors and chipsets form a substantial part of the semiconductor market. These segments of the industry have witnessed most of the cutting-edge developments and growth in the last few years. Areas such as SOCs (System on Chip) and wired networks have also seen strong growth. However, integrated circuits and memory chips experienced slow growth on account of availability of more competitive products abroad, principally from Taiwanese manufacturers.

Due to the capital-intensive nature of the industry, with only large players having the financial muscle to invest large sums of money, there has been significant consolidation in recent years. Most of the smaller players have moved to less competitive areas or have been acquired. Even the larger players are facing significant pressure on margins driving them to outsource manufacturing.

The leading players in the US semiconductors industry include Intel, Samsung Electronics, Texas Instruments, ST Microelectronics and Infineon Technologies. The top five players have a share of approximately 33% in the global market. Intel leads the industry with a global market share of 13.7%. The company is a leader in the microprocessor market with almost four out of every five PCs sold across the world running on its processors. Intel has had increasing success with its nanotechnology initiative, and in 2004 started manufacturing processors with a 65 nanometer thickness, the first company in the world to do so.

Fabricated Rubber and Plastics Overview

The US fabricated plastic & rubber industry has expanded relatively strongly in recent years, as the number of end-users for plastic and rubber products has increased. The industry now supplies a wide range of sectors, ranging from agriculture to healthcare.

The industrial rubber sector has grown at a compound rate of 5% in the last few years and is expected to match this performance through to 2008, when it is forecast to reach a value of $16 billion. This sector has been the driving force behind market growth in recent years. In contrast, the past few years have been challenging for the plastics sector due to continued volatility in the resins market.

Going forward, growth in US non-residential construction is expected to drive demand across the fabricated plastics and rubber market.

A common problem facing manufacturers has been the impact of rising raw material costs, which has led to a fall in margins. Consolidation among suppliers of commodity resins, one of the primary raw materials for the industry, has created a sellers market.

The leading players in the US fabricated plastic & rubber industry include Carlisle, Spartech, A. Shulman, Myers Incorporated and Atlantis Plastics. Rising costs have led firms to streamline operations and focus on core businesses. For example, in 2004, Carlisle Companies announced its exit from the automotive business, resulting in a vertically integrated company focused on plastic and rubber products.

Medical Equipment and Supplies Overview

The aging US population offers strong potential for the medical equipment and supplies industry. The US market for medical equipment & supplies was estimated to be worth approximately $240 billion in 2004. Growing healthcare spending, expected to rise by around 7% in each of the next 10 years, offers a strong basis for optimistic growth predictions concerning the future of the market.

Supplies form the largest part of the industry, accounting for 52% of sales. Cardiology and diagnostics equipment account for a further 10% each, although the optimistic outlook for cardiology equipment could result in the sector accounting for a growing proportion of the market. Orthopedic products are another growth sector, currently at 8% of the market. Other notable segments include laboratory equipment (8%), opthalmology (4%) and respiratory products (3%).

US demand for disposable medical supplies is expected to increase by 5.6% annually to $79.1 billion in 2007. The home healthcare market will be the fastest growing market for disposable medical supplies as consumers explore self-treatment and preventive medicine. However, hospitals will remain the largest and most diverse consumers due to the complexity and product intensive nature of inpatient procedures.

The major players in the US include Boston Scientific, Stryker, Henry Schein, Siemens, GE HealthCare and Zimmer. The industry has seen rapid consolidation in the recent past. Strategic alliances amongst various players have also led to streamlining of operations and better focus on core operations.

Biotech Sector Overview

Consistently strong growth of around 15% is a result of the rapid innovation and massive investment of capital into the US biotechnology and drugs market. The relentless technological advancement within the sector shows no signs of slowing with the biotechnology market set to reach a value of $80 billion by 2008.

Product sales are the most abundant revenue source in the market, although funding initiatives in terms of venture capital are increasingly important to the smaller players in the market. Whilst the markets innovative approaches to discovery offer great potential, the investment community and many strategic investors have been very cautious with recent investments, focusing on late stage development opportunities and products close to approval. However, the introduction of a zero capital gains tax rate on entrepreneurial equities could spur biotech investment into 2005.

Developments within the genomics sector are set to inspire growth as companies begin to incorporate complex genomics into their products, saving huge amounts on drug registration fees and changing the business focus of the sector from simply mapping proteins to catalyze drug discovery. The threat of bioterrorism has provided a substantial government investment into the industry although the misuse of bio-products and the controversy surrounding cloning will continue to provide the industry with negative publicity.

The US is expected to maintain its position as the worlds dominant market for biotechnologies in the near future with Amgen, Biogen Idec, Chiron, Genentech, Biogen Idec and MedImmune amongst the major players. The huge potential of biogenerics, whilst currently limited by existing legislation, is attracting the interest of companies currently faced with limited scope for profitable expansion in the commodity generics markets. The potential introduction of regulatory pathways for the approval of generic versions of biologics by the FDA could promote massive expansion into this sector, driving revenue growth for the industry moving forward.

Intel Cutting Over 10,000 Jobs!

Intel Corp. said it is cutting 10,500 jobs, or about 10 percent of its work force, as part of a plan by the world's biggest microchip maker to become more competitive.

The cuts, along with other cost-cutting measures stemming from a three-month top-to-bottom review of operations, would help the technology giant save $1 billion this year, $2 billion next year, and $3 billion in 2008, Intel said.

Intel said it would take a charge of $200 million in severance costs. Its shares fell 25 cents, or 1.3 percent, to $19.74 in extended trading following the announcement.

Analysts have said Intel needs drastic action to reverse sliding profits and halt steady market share gains by rival Advanced Micro Devices Inc..

Read more here.

Aeropsace and Defense Sector: Industry Snapshot

Revenues within the US aerospace and defense industry have improved considerably after a 1.4% slump in spending on commercial aircraft caused by a weakened tourism market in the aftermath of 9/11. Increased spending during the recent Gulf War did buffer industry growth rates somewhat and the industry is expected to reach a value of $464.3 billion in 2004.

Defense expenditure is still the leading source of revenue for the US industry, essentially due to the substantial and ever increasing defense budget of the US Government. Projects such as the missile interception network and the revamp of the US armed forces account for a large proportion of this spending whilst providing welcome revenue boosts for companies such as Boeing during the decline in aerospace spending.

Increasing cost pressures within the aerospace industry have resulted in massive reform as aircraft manufacturers attempt to cut costs whilst producing cost-efficient, highly marketable aircraft to promote sales and stimulate growth within the industry. Growth in defense expenditure has served to compound the problems for the aerospace industry as leading players reduce their aircraft production in order to concentrate their resources on their defense outputs.

Major players within the US aerospace and defense markets include Boeing, Northrop Grumman, Lockheed Martin, General Dynamics and Raytheon. The initial reaction towards Boeings prototype 7E7, expected to enter service in 2008, has confirmed the huge market potential for midsize, fuel-efficient aircraft in the US whilst proving that cost-effective air travel does not necessarily rely on high capacity aircraft. However, the launch of the new Airbus A380, the worlds largest passenger jet, is expected to impact on the sales volumes of Boeings 747 in the international market.

Integrative Medicine: The New Wave

Integrative medicine, more prevalent in the western United States than on the East Coast, takes a whole-person approach to health care, integrating therapeutic massage, hypnotherapy, Reiki, healing touch, acupuncture and Chinese herbal medicine with allopathic, or modern, medicine.

If it sounds way out there, it's not. Complementary medicine, which means treatments not typically taught in medical schools, is a $40 billion-a-year industry. One out of two Americans has consulted a practitioner of complementary medicine. It's growing and someday may overtake what we consider mainstream medicine today.

Are your local healthcare institutions getting with the "new sciences?" They should be. They might not survive if they don't.

Read more here.

Branson's Story

The small middle-American town of Branson, Missouri is becoming a popular tourist destination. It has fewer than 8,000 residents — but attracts seven million visitors each year. Most are Americans, but there are visitors from other countries, too. VOA’s Zulima Palacio explains why the town is so popular.

Branson, in the Midwestern U.S. state of Missouri, is a jewel of fun and scenery in the heart of America. It is known around the world for its big stars and family-centered shows — 100 a day in 47 theaters. Branson’s fare ranges from music and dance to magic and comedy, along with shopping and theme parks.

Branson mayor Lou Schaefer says, “They get a variety of entertainment here in one area that you can’t find anywhere, you can’t go to Las Vegas and find the types of shows we have here, and we have some Las Vegas types of shows. But it’s not all Las Vegas. It’s not all Orlando. It’s not Nashville. It’s not all the other entertainment community but is some of all of them.”

Read more here.

ED Futures Newsletter

Dear ED Futures Reader:

Lots of interesting articles posted to the ED Futures website in the past week.

Perhaps all of us should heed the life-work balance issue discussed in the article immediately below.

Wishing you a great start to Fall, which is right around the corner.

Best wishes,

Don Iannone
Publisher, ED Futures
Email: dtia@don-iannone.com
Tel: 440.449.0753

Work-Life Balance More Important

According to the U.S. Census Bureau, 28 percent of workers are on the job more than 40 hours a week, and 8 percent work 60 or more hours a week.

Work hours for parents are way up. Married, middle-income moms added the equivalent of three months of full-time work to their annual schedules in the past 25 years, according to a study by the Economic Policy Institute, a nonprofit, liberal think tank. Married parents' combined work hours are up 18 percent, according to the report.

Because people are so busy, work-life balance is a hot topic. The phrase, coined in the '80s, is used in the popular media thousands of times a year.

"We have the term because we don't have any work-life balance," said Barbara Gutek, a University of Arizona management professor who teaches a class on the subject. "Life becomes what's left over when you get done with work obligations."

Read more here.

Utah Looking at Its Image

A record level of companies may be considering expansion in Utah, but others remain turned off by the state's quirky image, the leader of Utah's economic development agency reported recently.

"Our single biggest challenge is our image," said Jeff Edwards, chief executive officer of the Economic Development Corporation of Utah, which works under a state contract to attract companies to the state. "We continue to be pestered by misconceptions."

Read more here.