Gartner Says Worldwide Semiconductor Capital Equipment Spending is Strong in 2006, But Manufacturers Should Prepare for Softening Demand in 2007

STAMFORD, Conn., July 10, 2006 —

Driven by significant investments in the memory sectors, worldwide semiconductor capital equipment spending is on pace to increase 24.8 percent in 2006, but the market should prepare for slower sales in 2007, according to the latest estimates by Gartner, Inc.

“Dynamic random-access memory (DRAM) is hot, and combined with strategic investment in NAND flash capacity, accounts for more than 44 percent of all anticipated equipment spending,” said Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group. “This is way out of proportion to their relative revenue, which accounts for about 22 percent of the total semiconductor market. This seems like a sure-fire road to potential overcapacity and future reductions in expenditure, which is the primary reason we counsel caution to equipment manufacturers.”

Worldwide semiconductor capital equipment spending is projected to reach $42.3 billion in 2006, but the market is projected to decline 4.5 percent in 2007 to $40.4 billion (see Table 1). Gartner analysts said spending cuts will occur in response to a slowing of device production growth. The equipment market decline will start in the second quarter of 2007, and will be relatively short, with the market returning to positive growth in 2008.

Table 1
Worldwide Semiconductor Capital and Equipment Spending Forecasts (Millions of Dollars)

	2005	2006	2007	2008	2009	2010	2011
Semiconductor Capital Spending	47,395.1	55,279.8	53,474.2	64,304.2	61,275.6	60,194.0	69,773.8
Growth (%)	-2.2	16.6	-3.3	20.3	-4.7	-1.8	15.9
Capital Equipment	33,936.7	42,348.3	40,444.6	50,343.1	45,559.2	46,774.7	55,596.7
Growth (%)	-10.5	24.8	-4.5	24.5	-9.5	2.7	18.9
Wafer Fab Equipment	25,967.1	32,563.5	31,142.4	38,422.4	35,640.2	35,792.2	42,475.1
Growth (%)	-8.4	25.4	-4.4	23.4	-7.2	0.4	18.7
Packaging and Assembly Equipment	4,196.5	4,929.8	4,507.2	5,690.7	4,949.0	5,347.5	5,916.6
Growth (%)	-12.3	17.5	-8.6	26.3	-13	8.1	10.6
Automated Test Equipment	3,773.1	4,855.0	4,795.0	6,230.0	4,970.0	5,635.0	7,205.0
Growth (%)	-21.2	28.7	-1.2	29.9	-20.2	13.4	27.9
Other Spending	13,458.4	12,931.6	13,029.6	13,961.1	15,716.4	13,419.3	14,177.2
Growth (%)	27.5	-3.9	0.8	7.1	12.6	-14.6	5.6

Source: Gartner Dataquest (July 2006)

Worldwide wafer fab equipment spending is projected to reach $32.6 billion in 2006, a 25.4 percent increase from 2005. On a quarterly basis, the market will reach a high point in the first quarter of 2007, and then it will decline throughout 2007 as the industry slows its rate of expansion to digest the new capacity recently coming online. Almost 80 percent of the new capacity coming on line in 2006 and 2007 is for 300 millimeter (mm), as all segments are increasing capacity in anticipation of continuing growth in semiconductor demand.

The packaging and assembly equipment (PAE) market is forecast to surpass $4.9 billion in 2006, a 17.5 percent increase from last year. Asia/Pacific will continue increasing its dominance for PAE consumption. Rising from about 70 percent of PAE shipments in 2006, Asia/Pacific will account for nearly 80 percent of all PAE sales in 2011. China is expected to be the largest individual consumer of PAE by 2009, accounting for just under one-quarter of the total market and surpassing Taiwan in that year.

The ATE market appears to be on the way to solid growth for 2006 with worldwide spending growing 28.7 percent. Gartner analysts expect growth coming from all regions and most markets, with memory and system-on-chip (SoC) testers fueling the market’s increase.

Additional information is available in the Gartner report “Semiconductor Capital Equipment Demand Hot in 2006 but Will Cool in 2007." The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=493228.

This research is produced by Gartner Dataquest's Semiconductors Manufacturing and Design program. This research program, which is part of the overall semiconductor research group, provides a comprehensive view of the entire semiconductor industry, from manufacturing and design to device and application market trends. More information on Gartner's semiconductor research can be found in the Gartner Semiconductor Focus Area at http://www.gartner.com/it/products/research/asset_129175_2395.jsp.

 

Contact:


Christy Pettey
Gartner
+1 408 468 8312
christy.pettey@gartner.com


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