Gartner Says Worldwide Semiconductor Capital Equipment Spending to Experience Double-Digit Growth in 2004
STAMFORD, Conn., December 19, 2003 — A strong acceleration in billings and bookings at the end of 2003, will help drive worldwide semiconductor capital spending and capital equipment spending to strong growth in 2004 according to a quarterly forecast by Gartner, Inc.
Worldwide semiconductor capital spending is projected to grow 28 percent in 2004 to $37 billion, up from $28.9 billion in 2003 (see Table 1). Worldwide capital equipment spending is expected to total $29.5 billion, a 36 percent increase from 2003 revenue of $21.7 billion. The worldwide capital equipment market includes wafer fab equipment, packaging and assembly equipment and automated test equipment.
"The outlook for 2004 is bright," said Klaus-Dieter Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group. "The return of a corporate investment cycle, a PC upgrade cycle that is gaining steam, a broad-based recovery in end-user applications, low inventories and tight manufacturing capacity all are converging to provide for strong growth in all equipment segments."
Table 1
Worldwide Semiconductor Capital and Equipment Spending Estimates
(Millions of U.S. Dollars)
2002
2003
2004
Semiconductor Capital Spending
27,393
28,943
37,109
Growth (%)
-38.5
5.7
27.9
Capital Equipment (Including Test)
20,715
21,742
29,544
Growth (%)
-29.0
5.0
35.9
Wafer Fab Equipment
16,203
16,464
22,071
Growth (%)
-31.5
1.6
34.1
Packaging and Assembly Equipment
2,344
2,922
4,023
Growth (%)
-21.6
24.7
37.7
Automated Test Equipment
2,168
2,356
3,450
Growth (%)
-14.9
8.7
46.4
Source: Gartner Dataquest (December 2003)
Although semiconductor demand continues to increase, inventory levels remain at healthy levels and average selling prices (ASPs) are stabilizing, capital spending remains stalled at 2002 levels as device manufacturers remained cautious in 2003.
The combination of cautious investment and rising production has driven utilization rates upwards across the board. Gartner analysts estimate that 2003 will end with worldwide utilization about 90 percent and leading edge utilization in excess of 95 percent. "These trends should continue through 2004 and well into 2005 as manufacturers finally begin to invest heavily in response to increased end market demand and improved profitability," Rinnen said."
High utilization levels will drive the growth in the wafer fab equipment (WFE) market in 2004. The WFE market is projected to grow 34.1 percent in 2004 to $22 billion, up from $16.4 billion in 2003. The industry needs more capacity if it is going to continue to meet increased device demand. However, running a fab at high utilization rates leads to high margins and profits, something the industry has been in short supply of for the past few years. As a result, semiconductor manufacturers are playing a risky game — maximizing profitability, while assuming they can wait until the last minute to commit resources for new capacity.
"For 2004, global capital spending is expected to increase by 28 percent, however, the big question is will the orders for new equipment be released fast and early enough to avoid shortages on the device market," Rinnen said. "While we have seen encouraging increases in the order rate for new equipment in the past few months, it is still too early to tell. There is still the question as to whether the equipment industry can respond fast enough to the anticipated demand for new equipment. However, it has proven time and time again that it can rapidly ramp its shipment rate in response to an explosion of orders, and we expect it will do so again, provided the explosion occurs."
Additional information is available in the Gartner Dataquest Alert 1Q04 Update: Bright Outlook for Semiconductor Capital Equipment. This Alert examines current market conditions, as well as the new drivers and inhibitors for the industry going into 2004. This Alert can be purchased on Gartner's Web site.
About Gartner:
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