Gartner: 2010 stronger, 2011 weaker for chip tools

September 13, 2010 – Six months ago, industry watchers hoped that semiconductor capital spending would jump more than 50% vs. 2009. Now the new expectation is nearly double that — but with the catch that it’s taking some life out of the market for 2011-2012.

Gartner projects worldwide semiconductor capital spending will top $50B this year, up 96% from 2009. Equipment spending overall will be up 122% to nearly $37B, and most equipment categories will top all-time highs, at 120%-144% of their 2009 levels. Leading the charge is strong spending by foundries and logic vendors, plus a technology upgrade for memory makers.

"2010 will likely be the strongest year ever for the semiconductor equipment industry — which will be a nice rebound from the worst year ever," noted Klaus Rinnen, managing VP at Gartner, in a statement.

Worldwide semiconductor capital equipment spending forecast 2009-2014, in US $. (Source: Gartner)

The outlook for 2011 and 2012, though, is a bit softer. Gartner sees spending slowing down to just 10% growth in 2011 (vs. 14% in its June outlook, and nearly 27% in its March forecast). "Companies should prepare their manufacturing plan for a softer 2011, when equipment purchases will focus more on capacity than technology equipment," Rinnen says. Chipmakers will continue to spend up until 2012 as they move from technology buys to capacity purchases, he says, but after that "companies should also prepare business plans for the next equipment downcycle, starting in late 2012, because memory companies will have overinvested, thus generating excess equipment."

Gartner’s new forecast hikes up the previous forecast in June nearly across the board, for the five-year period through 2014.

Changes in Gartner’s forecasted semiconductor capital spending, June 10 vs. Sept. 13. (Source: Gartner)

Descriptions of the new forecast outlook, by equipment segment:

Wafer fab equipment (WFE): Overall utilization rates peaked in 2Q10 at 94%, but will drop back to ~90% as more capacity comes online, and production slows to be more aligned with end-user demand.

Packaging/assembly (PAE): Growing "at a modest single-digit rate" through 2012, with a decline in 2013 due to oversupply (particularly in memory) and a "substantial slowdown" in copper bonding build-out.

Automated test (ATE): Solid growth in 1H10, but more seasonal declines in late 2010 and early 2011. Driven by the transition to DDR3 memory test processes.

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