Recovery leading to 'panic buying' of IC-equipment
By Mark LaPedus
Silicon Strategies
01/10/2004, 12:00 PM ET
SANTA CLARA, Calif.--The sudden IC recovery has led to "panic buying" of chip-equipment in the marketplace. But it's unlikely that vendors can react fast enough to market conditions following cutbacks in the last downturn, according to a new report from VLSI Research Inc.
At the same time, VLSI Research also reiterated its forecasts for IC and chip-equipment markets, which were released in December. As previously reported, the chip and fab-tool markets are projected to grow 32.8 and 40.1 percent, respectively, in 2004 over 2003, according to the Santa Clara-based research firm (see December 18, 2003 story).
In 2003, the IC industry grew 18.4 percent in 2003. The fab-tool market hit $31 billion in 2003, a modest 4.3 percent growth rate over 2002, according to the report.
Front-end fab utilization is expected to reach 94.1 percent in 2004, compared to 88.7 percent in 2003, the report said. Test and assembly utilization are separately projected to be 93.5 percent in 2004, compared to 90.3 and 91.5 percent, respectively, in 2003.
Indeed, the tables have turned in the industry. "After several years of under investment, chip makers hit their capacity stops in November," according to VLSI Research. "With the chip industry fully utilized, panic buying of equipment is now common. Expect major expansion in 2004, with annual growth for the chip equipment market on the order of 40 percent," the report said.
There's good and bad news in the fab-tool arena. "For equipment manufacturers, 2004 should be a price-led upturn because of the strong likelihood that the equipment industry will not be able to respond fast enough to the sudden spike in demand," according to the report.
"Severe cutbacks by equipment builders and their suppliers have left a weak infrastructure that cannot easily ramp production. Equipment makers and their investors were badly burned as they spent billions to expand in 2000 only to have to tear down most of this infrastructure over the last three years," the report said. "It is unlikely they will make the same mistake twice. At the same time, competition is lower with fewer capable suppliers. With sales growth and market shares dependent on access to equipment for chip makers, 2004 will be a blockbuster year for equipment makers."
It should also be a banner year for IC makers amid the long-awaited upgrade cycle. "Conditions are ripe for the upturn," according to VLSI Research. "For chip makers, three years of withholding on IT upgrades will result in a boom similar to the 1999-2000 Y2K phenomena. This upgrade cycle is being accelerated by Microsoft's decision to stop supporting Windows 95 and 98," according to the report. "There is also the cell phone upgrade wave being driven by the new law that makes phone numbers portable. Furthermore, demand for a multitude of consumer electronics will continue to grow," the report said.
"All these factors are being magnified by the demand push-outs from SARS and the war in Iraq. At the macroeconomic level, the U.S. economy has been put into hyper-drive by the administration and the Federal Reserve. The electronics food chain has never turned down going into a rising economy," it added.
In total, electronic equipment sales are expected to hit $1.19 trillion in 2004, up 10.4 percent over 2003, according to the report.
IC sales are expected to hit $189.6 billion in 2004, up 32.8 percent over 2003, according to the report. In total, IC units are expected to reach 109.8 billion in 2004, up 20 percent over 2003, according to the report. ASPs for ICs are expected to be $1.73 in 2004, up 10.5 percent over 2003, according to the report.
In total, chip-equipment sales are expected to hit $43.5 billion in 2004, up 40.1 percent over 2003, according to the report.
Wafer-fab equipment sales are expected to be $24.1 billion in 2004, up 44.5 percent over 2003, according to the report. Test and related equipment sales are expected to reach $10.7 billion in 2004, up 42.1 percent over 2003, according to the report. Assembly equipment sales are expected to hit $3.2 billion in 2004, up 40.3 percent over 2003, according to the report. Spare parts are projected to grow to $5.5 billion, 20.7 percent. |
