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To: TREND1 who wrote (51602)	7/14/2000 12:39:06 PM
From: DJBEINO	Respond to of 53903

Chip industry could be 'throttled back' from overheating by inability to add capacity, say some CEOs By J. Robert Lineback Semiconductor Business News (07/14/00, 12:22:10 PM EDT) SAN JOSE -- Is the semiconductor industry being saved by its inability to quickly set up expensive and complex chip production plants? This notion was being floated at the Semicon West trade show here and in San Francisco this week by a number of semiconductor capital equipment executives, who did not want to go along with the new higher forecasts for industry spending on wafer fabs and chip plants in 2000. In recent weeks, several market researchers have upped their forecasts for capital investments in 2000, pushing the growth rate has high as 70% from last year's spending and introducing the likelihood of an earlier downturn in 2002 as a result of too much chip capacity (see July 6 story). Executives attempting to question those upwardly revised forecasts say they feel a little bit like party poopers with all of the attention being placed on growth acceleration. Most executive have in fact upped their own forecasts for industry growth and capital spending in the past several months, but they don't believe up to 70% more investments is possible this year because of bottlenecks in the supply chain and the lack of time to set up facilities. After hosting a financial analyst meeting during the week of Semicon West, Jim Bagley--chairman and CEO of Lam Research Corp.--made headlines in the business press as suggesting that industry growth was being choked by shortages of parts for production gear and new systems for wafer fabs. Well, yes that's what he said, but Bagley believes his meaning was misconstrued by a financial reporter, who posted a Web story, and some analysts. "I didn't say that the industry won't achieve its revenues because no one really knows what that revenue potential will be," Bagley said later in an interview with SBN. Bagley's forecast for wafer fab equipment spending stands at $27.5 billion, an increase of 55% over last year. Lam's CEO added, "That's pretty good growth, but I don't believe Dataquest's forecast [of 69% growth in 2000 based on a revised outlook issued last week--see July 6 story]." For 2001, Bagley is forecasting 29% growth over 2000 wafer fab equipment spending to $35.6 billion. His total capital spending estimates--counting buildings and gear--is $48 billion in 2000 vs. $58 billion by Dataquest. Bagley said his forecasts this year have been consistently below Dataquest's numbers, but like the San Jose-based research firm, he has also raised his forecast since the start of the year. "It seems that some are viewing my forecast of 55% growth as the industry losing revenue," Bagley said. "I don't understand that thinking because there is no such thing as a 'composite' industry forecast." He cited this week's release of a midyear forecast by the Semiconductor Equipment and Materials International (SEMI) trade group, which is calling for a now-conservative growth rate of 36% in 2000 to $34.5 billion in total capital spending by chip makers vs. $25.5 billion in 1999 (see July 11 story). Bagley noted that even after a year is over, analysts often spend several months revising their estimates for capital spending in the last 12 months. The size of fab capital spending worldwide is getting to the point that it is impossible to forecast "anything in this industry in the $1 billion range," he noted. But Bagely does believe part shortages and the difficulty that equipment makers face in ramping up their own production--after the severe downturn of 1998--is going to hold back some of the spending by chip makers and help to prevent too much capacity too soon. Agreeing with him is C. Scott Kulicke, chairman and CEO of the world's largest supplier of backend assembly and packaging systems--Kulicke & Soffa Industries Inc. of Willow Grove, Pa. During a press luncheon on Thursday at the second portion of the Semicon West trade show, Kulicke attempted to douse the forecasts for much higher growth in capital spending this year. He also said this would help to "throttle" back the potential for overspending by chip makers and most likely keep the next downturn from occurring as early as some analysts have predicted. "Unless some macroeconomic [bad] thing happens, our customers should be able to avoid self-inflicted trauma for at least the next year or so," said Kulicke, who believes 2001 will be another good year for industry growth. "For a number of reasons, wafer fab capacity is not coming on stream particularly quickly right now and it will not come on streams as quickly as the optimists predict," he said. "There are a number of reasons for that. "One is that there were not enough [lithography] stepper lens sets started 18 months ago. The cycle time to build a stepper--including making the lenses--is in the neighborhood of two years," said the CEO and chairman of K&S. "Nikon, Canon, ASML and SVGL just did not order enough glass two years ago, and putting a natural throttle on the business. So, our customers cannot add enough capacity." Kulicke also believes the coming 300-mm wafer generation will help to hold off quick ramps of capacity because it will take a while for chip makers to work out their processes and tool-set selections. "I think they are going to be a bear to bring up," said Kulicke," and that will actually help to mitigate [overgrowth] at bit." semibiznews.com