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To: maceng2 who wrote (257531)	8/25/2003 4:47:02 PM
From: maceng2	Respond to of 436258

Hello Cycles My Old Friend ======================================================= Note:- I don't how they can make these comparisons. These guys are out of touch I think. I liked this bit... concluding with a moderate increase in capital spending 10 percent, similar to 1987, while a strong rebound .. Geez, yes I was in the semis in 1987. It was quite a year, I can hardly forget it -lol- pb. ======================================================= reed-electronics.com Online Staff -- Electronic News, 8/22/2003 With chip unit volumes forecast to surpass the peak set in 2000, will that trickle down and mean that capital equipment suppliers will see peak to peak growth in the next upturn? Don't hold your breath, suggests market research company IC Insights. IC Insights released the mid-year update to its McClean Report annual forecast earlier this week, and while it sees capital expenditures improving in the second half and taking off in 2004, a return to the peaks of 2000 isn't in the forecast. In fact, it forecasts the next peak in capital expenditures to occur in 2005 at approximately $49 billion, well below the $60.8 billion mark set in 2000. IC Insights sees cap ex dropping then in 2006 to $40.2 billion before climbing again in 2007, the farthest out it forecasts, to $42.2 billion, about the same that it was 11 years earlier in 1996. Furthermore, the analysts at IC Insights don't see extreme cap ex spending cycles abating, as spending closely tracks fluctuations in IC market growth. "After a cyclical slowdown and steep declines in 2001 and 2002, capital spending is forecast to show a 10 percent increase in 2003," IC Insights' updated report states. "When using the $42 billion figure forecast for 2007, the 1994-2007 average annual increase in semiconductor capital spending is only 5 percent (about 7 points less than the 12 percent 1978-2002 average annual increase). "It is interesting to note that the 1994-2007 average annual increase in the semiconductor market is forecast to be only 6 percent, illustrating the still tight correlation between semiconductor market growth and capital spending," the report concludes. Historically, volatility in cap ex is evident in both the good and bad years. For example, in 2000 capital spending increased 86 percent compared to 37 percent growth in the semiconductor market; in 2001, capital spending declined 37 percent while the semiconductor industry registered a 32 percent contraction. In 2002, capital spending dropped 29 percent while the chip market grew 1 percent. In the coming years, at the forecasted peak year of the next boom period for the IC market, 2004, IC Insights predicts cap ex to grow more than twice as fast as the chip market. But it's hardly a new phenomenon. Although the semiconductor industry capital spending compound annual growth rate (CAGR) over the past 20 years was 12 percent, annual spending growth rates are rarely close to this figure, according to IC Insights. 1999 is the only year the two figures were within two percentage points of each other; more often than not the two vary dramatically. IC Insights believes the 2000 -2004 semiconductor industry cap ex pattern is will be similar in shape to the 1984-1988 pattern, each being characterized by a year of steep increases in spending followed by two years of extremely severe spending cutbacks. IC Insights expects 2003 spending to gain momentum in Q3 and Q4, concluding with a moderate increase in capital spending 10 percent, similar to 1987, while a strong rebound will take place in 2004, with spending leaping 23 percent. So Who Is Spending the Dough? Only 25 semiconductor companies will account for 79 percent of worldwide cap ex in 2003, up from 74 percent in 2002, according to IC Insights. Intel and Samsung alone account for 25 percent of cap ex budgeted for this year, followed by TSMC, Sony, Micron, Infineon, STMicro and Toshiba, all of which are slated to spend more than a billion dollars or more in cap ex this year. While the top 25 companies in total have budgeted a 16 percent year over year spending increase in 2003, the remainder of semiconductor companies in total have budgeted an 11 percent decrease for the year, IC Insights said. These smaller companies are likely to continue to scale back their spending as they become increasingly reliant on foundries for their IC production, the market research company suggests.