All major segments of capital spending are projected to decline in 2008, according to a new report from Gartner. Worldwide semiconductor equipment spending is forecast to total $40.3 billion in 2008, a 9.9 percent decrease from 2007 spending of $44.8 billion. 

“2007 was marked by continued strong DRAM investments, shrugging off the realities of a market sector in oversupply, slower NAND spending growth, and disappointed hopes of a foundry spending revival,” said Klaus Rinnen, Managing Vice President for Gartner's semiconductor manufacturing group. “As we look to 2008, we expect the long overdue capital spending correction in the DRAM market to push the capital equipment market into contraction. Adding on the downside is another slow year from foundry and generally more cautious spending mood, with concerns about a US economic recession rising.”  

The quarterly picture for 2008 shows a weak first half of the year as DRAM companies slow their capital investments to help get the supply/demand picture under control. In foundry, the drive to the next technology node will pick up steam, and Logic will need to invest to meet demand. Gartner sees this occurring in the second half of 2008, moving the industry into positive growth in 2009.

“On the positive side, NAND flash spending should continue to ramp,” Mr. Rinnen added. “And a firming pricing picture for logic device segments brings manufacturers hope for some upside in capacity spending from this segment.”

The wafer fab equipment segment's revenue will rise 9 percent in 2007 and decline by 10.2 percent in 2008. Despite an increase in NAND flash spending, the sharp decline in DRAM related spending will hit equipment companies hard with a high level of exposure to the memory market. The recovery should begin in the second half of the year as DRAM supply and demand comes into balance.

Caption: Worldwide Semiconductor Capital and Equipment Spending Forecasts (Millions of Dollars)
Source: Gartner (December 2007)