Semi Capital Spending Up 10% in 2006
Online Staff -- Electronic News, 3/16/2006
It looks like 2006 will prove to be the second largest year on record for capital spending, second only to 2000.
Worldwide semiconductor industry capital spending in 2005-2006 is forecast to increase 10 percent to $50.4 billion in 2006, second only to the $60.3 billion spent in 2000, according to a report Wednesday from Scottsdale, Ariz.-based integrated circuit research firm IC Insights.
Earlier guidance in January for semiconductor industry capital spending was set for a 4 percent increase.
In 2004, semiconductor capital spending increased 53 percent and represented the peak market growth year in the current industry cycle, according to IC Insights. Although 2006 semiconductor industry capital spending is expected by IC Insights to increase only 10 percent, it would still be the highest growth rate in the second year after the cyclical peak year than in any previous industry cycle.
In 2005, semiconductor capital spending represented only 20.2 percent of semiconductor sales of $227.5 billion. IC Insights forecasts an 8 percent increase in the 2006 worldwide semiconductor market to $246.7 billion and predicts a 10 percent increase in capital spending to $50.4 billion.
Capital spending as a percent of semiconductor sales is expected to rise to only 20.4 percent in 2006. In contrast, capital spending as a percent of semiconductor sales reached 32 percent in 1995 and 30 percent in 2000, two periods of severe overcapacity build-ups.
IC Insights believes that the IC industry will not build an excessive amount of capacity in 2006. However, overcapacity in individual IC product segments, such as flash memory, is still a potential problem. With significant spending by new competitors such as the Intel/Micron joint venture, IM Flash, coupled with aggressive spending by existing players such as Samsung and Toshiba/SanDisk, the flash memory segment appears to be at risk for overshooting its capacity requirements late this year or early next year.
Last month El Segundo, Calif.-based iSuppli Corp. reported that even after the NAND flash overage is resolved the excess supply will continue to have a significant negative impact on pricing for DRAM. |
