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Gartner sees a bumpy road ahead for wafer fab equipment sales |
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Apr 20, 2007 at 11:41 AM |
 Fresh data from Gartner shows that wafer fab equipment spending by chip manufacturers is set for a cycle of ups and downs through 2011 (see chart). The best year shown in a six-year review will not be until 2011 when wafer fab equipment sales will reach $38.9 billion. However, modest growth is expected to return in 2008.
As expected, 2006 proved to be a significant year for equipment buying, which grew by 25.7 percent to $32.6 billion compared to $25.9 billion in 2005.
Although few believed that we would see similar growth levels in 2007, a combination of factors are at play that will result in a slight decline in spending compared to 2006. With unit demand still relatively strong but average selling prices in memory and microprocessors now affecting overall growth for the industry this year, spending at IDMs and foundries is not expected to be strong in the second half of the year.
The result is that Gartner has lowered its wafer fab spending forecast to show a 0.7 percent decline compared with 2006. Though single digit growth had previously been expected by the market research firm, recent cutbacks by IDMs and restrained spending by foundries have taken their toll.
Things may well have worsened were it not for the fact that there was aggressive spending by memory manufacturers in the first quarter, with plans to have the majority of equipment purchases undertaken in the first half of the year. For the year, Gartner projects that 45 percent of all wafer equipment spending will come from memory manufacturers only!
"Annual growth in device sales, anticipated at 6 percent, faces considerable downside risk because memory supply is overabundant, and CPU price competition continues," said Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group. "2007 may still be a decent year for semiconductor equipment manufacturers aligned with memory, but those that serve the rest of the market will face a weaker market than last year."
The equipment sector that is taking the hit is backend assembly and test with a projected decline of 12.2 percent in 2007. There are some indications that orders are bottoming, but Gartner believes that the market will continue to face challenges this year. However, Gartner projects a vibrant PAE market in 2008 with growth of 20.2 percent.
Worldwide semiconductor capital equipment spending is forecast to total $40.6 billion in 2007 - a 3.2 percent decline from 2006 (see table below). The market is expected to rebound in 2008 with spending reaching 46.7 billion, a 14.9 percent increase.
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