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Semiconductor capital spending for 2009 hangs in the balance

15 September 2008 | By Mark Osborne | Editor's Blog

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The latest round of capital spending and production cuts from the likes of Elpida, Hynix and Powerchip Semiconductor are a concern to Gartner and suppliers alike as they may impact the potential for a fourth quarter recovering in tool spending that should see a better capital spending environment develop in 2009.

SEMI recently claimed that capital spending could grow by as much as 20 percent next year as high utilisation rates and an improving supply/demand environment will bring back the chip manufacturers cheque books to the equipment purchasing table.

Now Gartner has become more cautious over near and mid-term spending behaviour of the major chip manufacturers, casting doubt over the strength of a recovery in spending, especially in the important memory market sector.

In Gartner’s weekly newsletter to clients, the market research firm believes that these latest spending and production cuts could result in a push-out of the expected recovery in late 2008, pushing that recovery into 2009 and slowing that rate of recovery for next year. Indeed, Gartner is considering one scenario that puts the recovery as far away as the second-half of 2009 that is ‘now becoming the most likely.’

As expected, Gartner has thrown cold water over the recent memory production cutbacks as a catalyst for an improving supply/demand memory market as the cuts are estimated to be in the region of only 2.3 percent of DRAM memory production.

Gartner noted that it still looks likely that there will be no DRAM shortages seen in the fourth quarter. Pricing continues to decline and looks like reaching manufacturing cost levels shortly. With the spot market making no meaningful positive response to the latest cuts, the general perception would seem to indicate that a lot more needs to be done on the supply side before price rises would take hold.

The slowing global economic growth may also start to impact the semiconductor industry, something that it has been rather immune to, so far in 2008. Warning signs would also seem to be surfacing over softening demand at the major foundries, which are struggling to raise wafer ASPs while keeping utilisation rates high and capital spending low.

Gartner also noted that should the cuts have a positive impact on prices then memory manufacturers could accelerate expansion plans scheduled for late next year.

With provisional capital spending plans for 2009, expected to be set in the next several months, a recovery in spending hangs in the balance.

DRAM prices continue to fall in Gartner tracking

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Reader comments

Only 2007 was good year. The rest bad as always. 2008 bad. 2009 also will be bad. 2010 maybe after 3rd will be better. EUV expensive. Lasers, troughtput ? smile How many fabs will be in 2010 ? New AMD in NY ? smile New Intel in China ? smile New Samsung 16, 17, 18, 19, 20 ? smile
By NanoSemi on 19 October 2008

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