RealTime IT News

Spending on Semis Stays Hot

Capital spending is still looking strong for semiconductors in 2004, according to the latest forecasts from Gartner .

The research firm said that at the mid-point of 2004, worldwide semiconductor capital spending is on pace to reach $44.8 billion this year, up by close to 51 percent from the same time last year. Overall, capital spending is forecast to grow 63.5 percent in 2004.

"The surge in new equipment sales in 2004 is a direct result of demand visibility and capacity tightness," Klaus Rinnen, vice president for Gartner's semiconductor manufacturing and design research group, said in a statement.

"However, now that capacity increases are keeping pace with unit demand, equipment orders are slowing. It seems the industry is attempting to more closely match its supply and demand ramps to maximize much-needed profits."

Right now, it's hard to find sectors in the industry with forecasts that aren't so hot. Each of the major sub-sectors is expected to jump by 60 percent this year. Take the wafer fab equipment (WFE) market. Gartner's expectation is that 63.4 percent more sales will be notched compared to last year.

The packaging and assembly equipment (PAE) market is slated for a 63.2 percent boost and the automated test equipment (ATE) market will increase 64.2 percent in 2004, Gartner said.

In some ways, the cautious buying sentiment of 2003 gave way to a boomerang of a boom that is driving use rates much faster in 2004, Gartner's analysts added. On a worldwide basis, semiconductor wafer fab use reached 94.3 percent at the end of the second quarter of 2004, up from 93.2 percent at the end of the first quarter.

"These high utilization rates provide ever-increasing momentum for growth in the WFE market," Rinnen added. "The industry needs more capacity to continue meeting increased device demand, and the industry is finally reacting to the need with a degree of urgency."

As for which region ranks as the hottest in terms of investment, Asia/Pacific takes the prize with almost 44 percent of the market, driven by China's fast-growing economy, Gartner said. Thanks to growth in the United States, the Americas region clocked in next with an expected 23 percent of total spending, followed close behind by Japan with about 21 percent of spending. Filling out the balance, the report added, were Europe and the Middle East with 12 percent of overall spending.

But how long those rates in the U.S. can be sustained will depend on the Federal Reserve Board's ability to move the economy from recovery to sustainable growth, Gartner's Rinnen added. "In China, virtually everything will turn on the ability of the central leadership to downshift the economy without stalling it."

But for now, spending is aglow, while Gartner expects the next cyclical decline to hit in the final quarter of 2005. The report from Gartner comes ahead of its Semicon West Forum slated for July 14th in San Francisco.