No IC equipment upturn forecast until 2003
By Nicolas Mokhoff,
Jul 19, 2002 (7:32 AM)
SAN JOSE, Calif. — Midway through 2002, semiconductor equipment manufacturers are bracing for a 19 percent annual decline in sales from the $28 billion posted in 2001.
In a midyear survey conducted by Semiconductor Equipment and Materials International and released during Semicon West, held Wednesday through Friday (July 17-19) here, 50 of the SEMI trade group's member companies in the United States, Europe, Asia and Japan said they expect to sell $22.8 billion of new chip-manufacturing, testing and assembly equipment in 2002.
The SEMI Capital Equipment Consensus Forecast paints a brighter picture for next year, indicating that as the capital-equipment upturn strengthens, sales will grow 29 percent, to $29.5 billion, followed by a 23 percent uptick in 2004, to $36.2 billion. Survey respondents see the cyclic market growth contracting slightly in 2005.
"Given the severity of business conditions in the overall economy, and especially the information technology sector, it comes as no surprise that the consensus forecast shows another drop in the worldwide market for capital equipment in 2002," said Stanley Myers, president and chief executive officer of SEMI. "However, the good news is that survey participants are positive about growth prospects for the next two years."
The implication, Myers said, is that "the downturn is bottoming out and that the industry will return to its historically high double-digit growth rates in 2003 and 2004."
The forecast results are based on data collected by SEMI between May and June. The companies polled represent more than 70 percent of the total sales volume for the global semiconductor equipment industry.
The results ring true for Timothy W. Summers, director of equity research in semiconductor equipment and materials
at Investec Inc., a West Conshohocken, Pa., research firm, who believes that the semiconductor equipment industry is at, or close to, the threshold of a multiyear cyclical upturn.
"Our view that the cycle is heading upward is based primarily on economic and industry data, as well as commentary from publicly traded and private semiconductor equipment companies regarding current and future business prospects and trends," said Summers. "Anecdotal evidence suggests that, at worst, the industry has hit bottom. More likely, we believe the industry is transitioning from a severe cyclical downturn to a typical, multiyear upturn."
The U.S. economy appears to have hit bottom and is forecast to rise through the rest of 2002, Summers said. That domestic growth should result in a return to sustainable growth in both the semiconductor and semiconductor capital equipment industries, he said.
According to statistics from the Semiconductor Industry Association, worldwide monthly sales of semiconductors have
been bouncing along at approximately $10 billion for the past eight months. Industry data, however, is improving and downward revenue forecasts by semiconductor manufacturers have become much less frequent. One glaring exception is industry bellwether Intel Corp. The chip industry leader missed Wall Street earnings estimates for the second quarter.
Summers said that in April, industry shipments pushed above $11 billion for the first time since June 2001. After experiencing a ski-slope decline in utilization rates to the lowest recorded levels in industry history, chip companies are now seeing rising utilization rates. Generally speaking, semiconductor demand and utilization rates rise and fall concurrently, so utilization rates can be viewed as a proxy for chip demand, he said.
Just last week ASML, a leading Dutch semiconductor equipment provider, reported back orders 40 percent above those of four months ago, ending 15 months of consecutive decline. And while Intel said last week that it was taking steps to cut back on its R&D expenditures, the microprocessor giant insisted it would not back away from buying new capital equipment for the next generation of 300-mm wafer manufacturing.
According to data from SEMI, quarterly industry bookings for North American-based semiconductor equipment companies (as measured on a three-month moving average) peaked at $2.993 billion in 2000, then declined 76 percent in six months to $721 million. The 10-month period between April 2001 and February 2002 saw orders plateau at the $600 million to $750 million range. In March, however, orders jumped sharply and by May they had climbed to more than $1 billion.
Following the sharp decline in semiconductor industry spending during 2001, Summers of Investec expects further weakness this year before an increase in annual capital spending for 2003. In 2001, Investec said, capital spending declined 29 percent to $44.4 billion, from a record $62.4 billion in 2000. "In 2002, we project a further decline of 24 percent, to $33.6 billion, but capital spending [will] increase 29 percent in 2003," said Summers. "We expect, however, that spending measured on a sequential quarterly basis will rise through 2002 off the fourth-quarter 2001 level."
Summers said that semiconductor equipment companies at this time are not providing specific guidance beyond the second quarter. Generally, though, he described the companies as cautiously optimistic.
"Our analysis suggests a corporate PC upgrade cycle could begin in [the fourth quarter], as businesses replace three-year-old PCs, purchased to facilitate the Y2K changeover, with more-robust PCs capable of handling Windows XP and other power-hungry networking and graphical applications," said Summers.
For 2003, Summers assumes that worldwide semiconductor capital spending will increase 29 percent, but the percentage of capital spent on fabrication equipment will rise modestly and return closer to its historic rate. "Presuming this cycle parallels prior cycles, we believe the cyclical spending peak would likely occur in 2004," he concluded. |
