Optimism spreads to IC-equipment industry
By Mark LaPedus
Silicon Strategies
12/11/2003, 11:10 AM ET
SANTA CLARA, Calif.--The sudden optimism in the IC industry is beginning to spread into the semiconductor equipment business after a long and painful slump in the arena, according to analysts and executives during the annual SEMI dinner and awards ceremony here on Wednesday (December 11, 2003).
Growing IC demand, coupled by a renewed interest in capital spending, is being welcomed by the semiconductor equipment industry. In fact, chip makers are slowly increasing their fab-tool capacity buys after a period of order delays. And some tools, especially cutting-edge lithography gear, are sold out until the third quarter of next year.
The current sentiments in the industry were best expressed by James Morgan, chairman of chip-equipment giant Applied Materials Inc. "We're ready for the upturn," Morgan declared.
"Semiconductor companies have under-invested for a long time," he said. "We're now seeing demand all over. Clearly, we're seeing expansion in China. And Japan is coming back," he said in an interview with Silicon Strategies at the SEMI awards event, which was sponsored by the Semiconductor Equipment and Materials International (SEMI) trade group of San Jose.
In fact, growing demand for ICs has prompted one investment banking firm to raise its worldwide semiconductor capital spending forecast for both 2003 and 2004.
Speaking at the annual SEMI event, Jay Deahna, an analyst with J.P. Morgan Chase & Co. of New York, said that semiconductor capital spending will increase 4 percent in 2003, up from his previous forecast of flat to down 5 percent this year. At the same time, J.P. Morgan also increased its forecast for IC growth in 2003, from 17 percent in its previous prediction, to 18 percent right now, Deahna said.
Worldwide capital spending is expected to jump 35 percent in 2004, up from its previous prediction of up 25 percent, he said. In other words, capital spending is projected to hit $47 billion in 2004, up from $45 billion in its original forecast.
"The good times are here for the next few years," he said during the SEMI event (see December 11 story).
Mixed signals?
On the other hand, it could be a topsy-turvy time in the industry next year. Fab-tool bookings are expected to increase 15 percent sequentially going into the first half of 2004, he said. "Sequential bookings will subside in the second quarter of 2004," he said.
But still, there is a huge demand for some fab tools. For example, lead times for lithography tools are extending in the marketplace, especially for ASML Holding NV of the Netherlands, according to the analyst from J.P. Morgan.
Average lead times for lithography gear have extended from six weeks in recent times, to nine weeks right now, he said. "ASML is booked until the third quarter of next year," he said. Lead times for tools are expected to extend to 12 weeks in the spring of 2004, he said group (see December 11 story).
"We've seen an improvement in the market," said Geoff Wild, chief executive of Nikon Corp.'s U.S. subsidiary, Nikon Precision Inc., based in Belmont, Calif. "We're seeing more pull-ins than push-outs."
Geographically, it's a mixed bag for lithography vendors, Wild said. "Japan is strong," he said. "The U.S. is weak."
In general, however, demand for all front-end tools are strong in the marketplace, said G. Dan Hutcheson, president of market research firm VLSI Research Inc. in Santa Clara. The ongoing order uptick recently prompted VLSI Research to raise its chip-equipment forecast for 2003 and 2004. But the research firm did not change its worldwide semiconductor forecast despite an upswing in the book-to-bill ratio group (see November 19 story).
IC-equipment providers are beginning to see strong bookings from chip makers, amid growing fab-utilization rates. In fact, worldwide capacity utilization hit 98 percent in November, Hutcheson said.
And chip demand is exploding. "There's huge business out there," he said. "It looks like 2000 all over again."
The key drivers
What are the key drivers in the marketplace? "There's a lot of new applications out there," said Applied's Morgan. "You have wireless, HDTV and other segments."
The flat-panel display business is also exploding, added Michael Ciesinski, president and chief executive of the U.S. Display Consortium in San Jose.
For example, spending at Japan's Sony Corp. will be supplemented by expenditures of more than $1 billion for seventh-generation flat-panel display capacity in its LCD joint venture with Korea's Samsung Electronics Co. Ltd., said Kevin Vassily, an analyst with Susquehanna Financial Group.
Indeed, Japan is especially hot for fab-tool providers, Vassily said. Sony's semiconductor division anticipates spending $1.7 billion in its fiscal year 2004. "While this budget benefits several Japanese firms disproportionately, KLA-Tencor, Applied Materials, and Novellus Systems would be the primary beneficiaries among U.S. firms," he said.
Vassily said that he expected Toshiba Corp. could spend approximately 70 percent of a planned $1.6 billion FY04 budget in the April to September time period, suggesting that orders to support this spending plan will be placed by April. "Lam Research has increased its' penetration at Toshiba, and would likely be an identifiable beneficiary of the firm's increased capital expenditures during 2004," he added. |
