Gartner reduces capex, fab-tool forecasts
Mark LaPedus
EE Times
(07/07/2005 2:26 PM EDT)
SAN JOSE, Calif. — Casting a shadow on next week's Semicon West trade show in San Francisco, Gartner Inc. on Thursday (July 7) reduced its forecasts for the semiconductor-equipment market, saying that a "mild" down cycle is becoming more apparent.
All segments of the semiconductor capital equipment market are projected to decline in 2005, including the front- and back-end sectors, according to Gartner (Stamford, Conn.), a market research firm. (See table below)
That's bad news for vendors, especially as they head into the Semicon West show. As previously reported, it's not as bad as the last downturn, but the semiconductor-equipment market is headed towards a slow and painful down cycle for the second half of 2005. Chip makers are still digesting the plethora of fab tools they procured in the last up cycle and are hesitate to make a new round of capacity buys until business conditions improve (see July 1 story).
In fact, worldwide capital spending is projected to reach $45.6 billion in 2005, down 6.5 percent over 2004, according to Gartner. In comparison, capital spending jumped a staggering 64.3 percent in 2004.
The overall picture also looks bleak in 2006. Capital spending is expected to fall by 8.5 percent in 2006, but will increase by 9.5 percent in 2007 and 37.4 percent in 2008, according to Gartner. In 2009, capital spending is expected to fall by 9.6 percent, the firm said.
Meanwhile, worldwide semiconductor capital equipment sales are expected to hit $33.1 billion in 2005, down 11.9 percent over 2004, according to Gartner. In comparison, worldwide semiconductor capital equipment sales jumped 64.2 percent in 2004, according to the research firm.
Chip-equipment vendors will see little relief in 2006. Worldwide semiconductor capital equipment sales are projected to fall by 1.7 percent in 2006, but are expected to increase 16.9 percent in 2007 and 31.5 percent in 2008, according to Gartner. In 2009, the market will see another downturn, as equipment sales are projected to decline by 15.8 percent, according to the firm.
"While the first quarter of 2005 marked the peak of the last upcycle, declining orders over the past few months and quarters paint a picture of slower sales for the rest of the year," said Klaus Rinnen, an analyst at Gartner, in a statement.
"Last year, equipment sales surged to correct for serious under investment in the face of strong semiconductor demand," he said. "Production capacity has now exceeded demand, and equipment manufacturers are settling down to shipment levels commensurate with longer-term growth trends for the industry. Therefore, we expect this to be a mild downturn."
Rinnen recently reiterated his firm's IC forecast, in which the semiconductor industry would grow moderately over the next two years — 5.9 percent in 2005 and 6.5 percent in 2006. He forecast that the photomask market would grow 5.3 percent in 2005 and 0.1 percent in 2006 (see June 28 story).
But as the semiconductor industry moves into a slower growth period in its business cycle, the equipment industry is expected to respond with lower shipment rates required for slowing capacity expansion.
"Overall, it appears semiconductor manufacturers are maintaining their investment discipline and investing carefully and in some cases strategically to gain market advantage," Rinnen said. "We expect customers to spend cautiously, releasing orders late and hesitantly, until a strong demand trend can be established."
Worldwide wafer fab equipment spending is projected to decline 9.6 percent in 2005. This market is forecast to decline in 2006 as well and return to positive growth in 2007.
The packaging and assembly (P&A) equipment market has performed better than previously expected. Worldwide P&A equipment is forecast to contract 16.5 percent in 2005. This is better than Gartner's earlier projection in April of this year for a 23.5 percent decline.
"The P&A market will experience more positive conditions throughout the second half of 2005 as utilization rates tighten and move above the 85 percent mark," Rinnen said. "The improved situation in late 2005 will help drive the market into positive growth for 2006."
The short-term outlook for the automated test equipment (ATE) market has had a sharp reversal in recent months. What looked like a mild spending decline through 2005 has turned into a major spending contraction.
The ATE market is now forecast to decline 21 percent this year, with weakness throughout all regions and product segments. However, Gartner analysts said the sudden drop in spending means the ATE market is poised for an earlier start to subsequent recovery. The market is forecast to see growth of 25 percent in 2006, which should mark the beginning of the next industry growth cycle.
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