Semiconductors and Solar Cells Driving Increased U.S. High Tech Spending in 2011

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Researched by Industrial Info Resources (Sugar Land, Texas)--The high-tech sector of the U.S. Industrial Manufacturing Industry is, for the most part, cyclical in nature when it comes to capital spending opportunities. Until recently, this sector would go years without a significant capital spending presence, but thanks to the renewed interest in solar power, spending has been increasing. Semiconductor spending has always been erratic, as companies must wait for the costs associated with new semiconductor technology to reach a point where consumers are willing to purchase the technology. However, looking ahead at the projects currently scheduled to begin construction in 2011, we see that the stars have aligned for the high-tech sector, and spending will increase significantly in the coming year.

Solar power has seen a resurgence of interest in the past two years, and as a result projects related to manufacturing the components necessary to produce solar power have seen an uptick. This trend appears to be continuing into 2011 as several projects aimed to either expand or construct grassroot manufacturing plants for solar cells, solar panels or silicon ingots are scheduled to begin construction between January and December. In the coming year, $1 billion worth of solar power components will begin construction--an amount that it likely to grow as the year progresses and interest in the technology grows.

Semiconductor manufacturers often take several years off when it comes to spending significant amounts of capital on either new facilities or retooling existing facilities to begin production of the latest technology. Most plants are currently producing 45-nanometer and 32-nanometer microprocessors that are put onto 300-millimeter wafers. However, semiconductor manufacturers are taking advantage of the down economy to bring the next generation of microprocessor technology to life. Companies are investing billions of dollars to retool plants to manufacture the new 22-nanomerer microprocessor technology, and most of this work will take place in 2011. While these same plants will continue to produce both 45-nanometer and 32-nanometer technology, companies are getting a jump on the new 22-nanometer technology now, rather than waiting for the economy to fully recover when the costs associated with such projects may increase.

One of the profound differences we are seeing with this round of semiconductor technology is the move from creating grassroot plants to retooling existing plants to handle new technology. In the past, semiconductor manufacturers would often construct completely new plants, in most cases at a cost of more than $1 billion per plant, for each round of new technology. This would also mean that as older technologies were phased out, these plants would be idled and eventually sold or sit empty when a buyer could not be found. In some cases, plants were constructed at exorbitant costs and never actually began operations, as the owner decided at the last minute that the plant was not necessary or the technology was out of date. With this round of spending, semiconductor manufacturers are retooling their existing plants, which saves money for the company and allows the owner to consolidate operations in one location rather than having multiple plants spread all over a city, county or state.

Three regions of the country are poised to benefit greatly from this boom in high-tech spending. The Rocky Mountain region, with its tech-heavy presence, is expected to see more than $3 billion in investments in the coming year. The Southeast region, where solar panel-related companies have found a home, will see more than $320 million in investments in 2011, and the West Coast region, another hotbed of technology, will add another $2.6 billion worth of high-tech projects in 2011. While other regions of the country are seeing some investments in this sector, in 2011 the focus appears to be on these three regions.

The spending currently scheduled to occur in 2011 will represent a significant increase in total high-tech-related spending within the U.S. Industrial Manufacturing Industry. In 2010, only $900 million worth of high-tech projects began construction in the U.S. In the past year, solar cell production took more of a front seat within the high-tech sector, while in the coming year, semiconductor manufacturing will take firm control of the sector and drive spending, boosting total investment by a significant amount. While there are no indications yet that this spending boom will continue into 2012, it is likely that additional significantly sized projects will develop as 2011 evolves. Once one or more companies start retooling or expanding to produce the newest semiconductor technology, it is often not long before the balance of the companies in the sector follow suit. 2011 will certainly be a banner year for this sector and should only get better as the months roll by.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.