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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: StanX Long who wrote (59035)	1/17/2002 9:45:41 PM
From: StanX Long	Read Replies (1) \| Respond to of 70976

January outlook: where IC markets are headed By Robert Henkel Semiconductor Business News (01/17/02 15:26 p.m. EST) siliconstrategies.com Even more than in recent years, the predictions range all over the map. And they're often a bit discouraging. Capital spending by the chip industry, for example, will fall again hard this year. And we'll be lucky if R&D spending simply matches the inflation rate. But on the plus side, one big chip customer, the IT industry, is expected to get back on the growth track. The hardest prediction to make in the chip business, as far as I'm concerned, is trying to figure out what the chip customer--the systems maker--will sell of his products in the coming year. If a big systems market slows down, you can kiss a lot of the chip business good bye. Having perhaps the greatest impact on chip sales is information technology spending. IT spending in the U.S., which had its first-ever drop in spending last year, should experience a modest rebound in 2002 Some see a slow recovery this year for the chip industry, and for the entire nation for that matter. That still includes me. For nearly a year now, I have predicted the chip business would not be back in full swing until at least the third quarter. That still sounds about right to me. Capital spending to fall again hard this year, says Dataquest Dataquest didn't have much in the way of good news early in January year for the world's semiconductor production equipment industry. Because there still is a giant glut of capacity, chip makers will cut their capital spending for plants and production equipment by 24% this year, according to the big market research firm. That would be down nearly as much as it was in last year's debacle when this spending fell 29%. That would amount to a drop of more than $10 billion from last year's $44.4 billion. Dataquest expects spending on just chip production systems to recover in the second half, but that chip gear revenues this year will still end up down 19% from the $25.2 billion spent by chip makers in 2001, according to the market research firm's new forecast. These expenditures fell 29% in 2001, it estimates. "A macroeconomic recovery and returning electronic equipment demand should finally bring the 'demand-component' of the down cycle under control," says Klaus Dieter Rinnen, who heads Dataquest's semiconductor manufacturing research. "However, overcapacity remains excessive and still demands industry attention," he adds. Capital spending cuts was rampant throughout the world last year. But foundries and DRAM vendors made the deepest cuts, which resulted in Asia Pacific-based chip makers reducing their capital spending by nearly 47% in 2001, Dataquest says. And Taiwan's chip manufacturers cut their capital spending by more than 50% in 2001 downturn, according to the research firm's latest estimates. The blood bath, though, wasn't that bad in the U.S., Europe, or Japan. U.S. chip companies cut their capital spending by 21%, Europeans by 26%, and the Japanese by 18%, according to Dataquest. R&D spending in U.S. this year uncertain, and at best will only match inflation rate The annual R&D forecast from Battelle is usually not only interesting, but is a fair indicator of innovation in this country. But this year's numbers gave me a mixed, uneasy feeling. The overall increase over 2001 was expected to be only about 3.5%, or barely matching the estimated inflation rate. Total U.S. spending for R&D is predicted to hit $285.6 billion this year, according to the Ohio research firm. Three significant factors have confused and complicated the R&D outlook for 2002 and made it difficult to get a handle on where R&D spending is going. They are the new Republican president, the recession, and the impact of the Sept. 11th terrorist attacks. "The effects of these [three events] are not simply isolated and cumulative," declares Jules Duga, a Battelle senior researcher and co-author of the report. "The impact of [these] significant external forces cannot be underestimated... their effects are somewhat more difficult to deal with." Analyzing the emerging patterns of R&D in previous years could accommodate almost any singular disruption and present a "reasonable picture of the anticipated effects," Duga says. "However, the concurrent triple-whammy experienced over the past few months creates a degree of uncertainty that is higher than usual and adds a layer of complexity to the forecast." The big guy in R&D continues to be industry. Companies are predicted to spend nearly $195 billion in 2002, which would be a 3.2% increase. The federal government is expected to spend $75.5 billion, a 4.7% rise over 2001, universities and non-profits will carry out $15.4 billion in R&D this year, about 3% more than they did in 2001.