LOS ALTOS, CA -- Slowing GDP gains will have a domino effect on electronics equipment demand, with replacement cycles losing momentum, according to a just released report.

Demand for everything from PCs to handsets to autos will suffer, although unit growth will remain respectable, said research firm Henderson Ventures (hendersonventures.com).

Henderson picks civilian aerospace and some industrial cyclicals as sectors that will continue to do well. The former will pick up thanks to higher passenger counts and new aircraft offerings. Other sectors poised for expansion include oil exploration, security systems and medical electronics.

New game boxes due this fall from Sony, Microsoft and Nintendo will boost consumer electronics, Henderson said.

The prime beneficiary will be – where else? – China, Henderson says. The firm forecasts equipment growth of 26.3% this year and 17.6% next year. “Consumer electronics is the ultimate price-sensitive equipment category, which plays to the strength of Chinese manufacturers,” Henderson said in its monthly newsletter, published today.

Slowing in the overall pace of economic growth will hold down electronics equipment sales, however. Henderson forecasts 8.2% growth worldwide this year, down from 11.8% in 2004. Continued deceleration is predicted for 2006, with rates dropping to 5.9%.

The U.S. should be steady, Henderson forecasts, with growth of 6% this year and 3.6% next year. Western Europe and Japan will be sluggish; Japan will actually hit a short recession this year (-1.5%) before rebounding in 2006 (0.2%).

Equipment demand in Western Europe will rise an anemic 2% this year and just 1.6% in 2006, Henderson says.