Gartner: Fab equipment still getting softer, next upcycle starts in 2014

December 20, 2012 - Global spending on wafer fab equipment (WFE) is now on pace to finish 2012 with a -17% annual decline, and 2013 now looks like it’ll only be slightly better at a -10% dropoff, before the next cyclical spending upturn begins in 2014, according to an updated forecast from Gartner.

The firm now sees 2012 WFE investments coming in at about $29.9B, a -17.4% decline from 2011. That compares with an earlier projection of a -13% decline made in October, which was itself a downward revision (-9% in June, -11% in March). Those numbers are slightly steeper, but the trend is similar, to SEMI’s recent projections which also predict a rebound coming in 2014.

The environment has softened significantly in just the past few weeks, Gartner says, as the macroeconomic suffering takes a toll on consumer spending, which trickles down to overall capital spending (equipment plus facilities services, etc.) — which Gartner now sees declining -10.7% in 2012 vs. its -9.3% forecast in the third quarter. That will be followed by another -14.7% decline in 2013, as semiconductor manufacturers deal with excess capacity and a slow macroeconomy.

"Although a period of inventory correction that led to lowered production levels in the first half of 2012 appears to be over, inventories remain at critical levels," Johnson warned. "High inventories, combined with overall market weakness, will continue to depress utilization rates into the first half of 2013."

The year started off strong for wafer fab equipment spending as chipmakers ramped sub-30nm production and needed new tools to prop up yields, but as yields improve that equipment demand is softening, explains Bob Johnson, research VP at Gartner. Overall yields will touch bottom below 80% by the end of 2012 and slowly creep up to around 85% by the end of 2013, Gartner says; leading-edge utilization will be a bit higher as always, moving from mid-80% up to the low-90% range over the same period.

There’s hope on the horizon, though. Memory and logic spending should realign in 2014 with "substantial increases" in investments, followed by a flat to slightly positive 2015. look for a new WFE growth cycle starting in 2014, and lasting through 2016.

Here’s how Gartner sees things shaping out near-term, by technology investment:

Memory: Continuing to be weak through 2013, with maintenance-level investments for DRAM and a slightly down NAND market until supply and demand are in balance.

Foundry: Spending will increase 7.4% in 2013, as both IDMs and semiconductor assembly/test services (SATS) companies absorb spending declines.

Logic: The only positive driver for capital investments in 2012 increasing just 3%, Gartner notes, thanks to the aforementioned sub-30nm ramp. Smartphones and media tablets won’t be enough to bring up utilization levels to where chipmakers need them, though, Johnson notes.

Projected global spending on semiconductor manufacturing equipment, in US $M. (Source: Gartner)

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