Gartner Says Second Quarter Sales Boost Worldwide Semiconductor Capital Spending to Grow 51 Percent in 2004
STAMFORD, Conn., July 8, 2004 — Capital spending momentum has accelerated as 2004 has progressed, and worldwide semiconductor capital spending is on pace to reach $44.8 billion this year, growing 50.9 percent from 2003, according to Gartner, Inc. Capital equipment spending is forecast to grow 63.5 percent in 2004.
"The surge in new equipment sales in 2004 is a direct result of demand visibility and capacity tightness," said Klaus Rinnen, vice president for Gartner's semiconductor manufacturing and design research group. "However, now that capacity increases are keeping pace with unit demand, equipment orders are slowing. It seems the industry is attempting to more closely match its supply and demand ramps to maximize much-needed profits."
The other segments in the industry are all projected to show spending increases more than 60 percent in 2004. The wafer fab equipment (WFE) market is estimated to rise 63.4 percent, while the packaging and assembly equipment (PAE) market is expected to grow 63.2 percent (see Table 1). The automated test equipment (ATE) market will increase 64.2 percent in 2004.
Table 1
Worldwide Semiconductor Capital and Equipment Spending Forecasts (Millions of Dollars)
2003
2004
2005
2006
2007
2008
Semiconductor Capital Spending
29,661
44,763
50,767
43,058
35,693
39,872
Growth (%)
7.5
50.9
13.4
-15.2
-17.1
11.7
Capital Equipment
22,824
37,317
42,912
35,230
27,806
32,439
Growth (%)
10.3
63.5
15.0
-17.9
-21.1
16.7
Wafer Fab Equipment
16,742
27,364
31,144
25,848
20,598
23,176
Growth (%)
3.5
63.4
13.8
-17.0
-20.3
12.5
Packaging and Assembly Equipment
3,060
4,994
5,114
3,602
2,949
3,988
Growth (%)
30.5
63.2
2.4
-29.6
-18.1
35.2
Automated Test Equipment
3,021
4,960
6,655
5,780
4,260
5,275
Growth (%)
39.4
64.2
34.2
-13.1
-26.3
23.8
Source: Gartner Dataquest (July 2004)
The combination of cautious investment in 2003, and rising production continues to drive use rates upward. Worldwide semiconductor wafer fab use reached 94.3 percent at the end of the second quarter of 2004, up from 93.2 percent at the end of the first quarter. Leading-edge utilization reached 99 percent by the end of the second quarter, indicating that the most advanced fabs are running flat out.
"These high utilization rates provide ever-increasing momentum for growth in the WFE market," Rinnen. "The industry needs more capacity to continue meeting increased device demand, and the industry is finally reacting to the need with a degree of urgency."
On a regional basis, Asia/Pacific will show the heaviest investment with almost 44 percent of the market, followed by the Americas region with 23 percent of total spending. Japan will account for 21 percent of spending, and Europe and the Middle East will represent 12 percent of overall spending.
"Economic growth in the United States and China continues to be of high importance for accelerating global semiconductor growth," Rinnen said. "In the United States, much will depend on the Federal Reserve Board's ability to move the economy from recovery to sustainable growth. In China, virtually everything will turn on the ability of the central leadership to downshift the economy without stalling it."
Gartner's long term view of the industry shows a cyclical decline starting in the fourth quarter of 2005, as the industry repeats its historical over- and underinvestment pattern. The current acceleration of spending has increased the industry's risk. Long-term financial commitments for new wafer fabs have risen.
Gartner analysts will provide more detailed analysis on the state of the industry during Gartner Dataquest's Semicon West Forum 2004 on July 14 at the Four Seasons Hotel in San Francisco. Analysts will examine the long-term trends that will shape the semiconductor and semiconductor equipment industries. They will also discuss how the geographical manufacturing changes influence the industry. Additional information on this event is available on Gartner's Web site at www.gartner.com/2_events/local_briefings/asset_89807_176.jsp.
Gartner will also host Gartner Dataquest's Semicon West 2004 Breakfast Briefing for the Packaging, Test and EMS Industry on July 16 at Gartner's facility in San Jose. This briefing will examine the outlook for the packaging, assembly, test and EMS industries. Analysts will also discuss if the transition to newer packaging schemes and growth in outsourcing is enough to propel packaging and testing to a new level. More information on this event is available at www.gartner.com/2_events/local_briefings/asset_89808_176.jsp.
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