Oct. 8, 2008 – Semiconductor capital equipment spending had been expected to be lousy through 2008 and into early 2009, but consensus as recently as July was that overall next year would be the beginning of the upswing. No longer — Gartner now expects 2008 capex to slide even further (-25%), and will drop another 13% in 2009, thanks to a full-on collapse in memory investments and economic pressures on consumer spending habits.
“The excess spending of 2006 and 2007 has hit home, and the equipment industry will continue to feel the pinch well into 2009,” writes Dean Freeman in a research note. Memory oversupplies have persisted, and now an economic crisis is spreading to major economies in North America, Europe, and Asia which will impact consumer electronic consumption, which in turn affects foundry and IDM spending, he said.
Gartner now projects total global semiconductor capital spending to slip to $47.1B this year, and fall to $41.1B in 2009. Look for a pickup in 2010 (16.7% to $47.9B) and a bigger surge in 2011 (23.1% to $59.0B), followed by another downturn in 2012 (-10.5% to $52.8B).
Litho remains the strongest segment in wafer-fab equipment (WFE) spending, with “only” a -15% decline in 2008 vs. the sector’s -26.1%, due to increased adoption of 193nm immersion technologies, particularly from memory firms who need them for smaller geometries even if capacity slows. Factory automation (-13% software, -23% hardware) also will outperform the market, Gartner predicts; new fabs will still be built even if they won’t be ramped aggressively, but material-handling systems still need to be in place before any quick ramp in the future is attempted. Deposition, etch, and implant (all around -30%) are the hardest-hit segments; these won’t require the same significant upgrades at leading-edge nodes as litho tools, so shipments will largely depend on capacity additions and not process improvements.
Packaging and assembly (PAE) is seen dropping 18%, more than expected. Automated test equipment (ATE) spending will fall nearly 27% thanks largely to softness in memory testers (though there will also be burgeoning competition in this area as well); though analog and RF test will outperform the rest of the market for the next year.
Among the report’s highlights:
– Memory spending will be down 36% this year (DRAM -44%, NAND flash -23%) and nearly 17% in 2009 (DRAM -14%, NAND -22%), as excess capacity is absorbed and offline capacity is brought back into use. 300mm production rates are being lowered and some 200mm capacity is being taken offline, but “inventories of die banks need to be worked down until memory prices firm,” Gartner writes. Expect “a no-growth mode until 2010.”
– Foundry spending will continue to be slow (-29% in 2008, -15% in 2009) as fabless customers remain conservative in moving to next-gen tech nodes, and in some cases will skip a node to amortize design and mask costs.
– Logic spending in 2008 is impacted by the ongoing “fab-lite” movement, e.g. Sony, STMicroelectronics, and TI. Look for overall declines in this sector of -16% in 2008 and -9.4% in 2009.
– Compounding memory oversupplies, overall industry capital intensity (spending as a % of sales) used to be ~20%, but now has drifted down to ~15% “from this point on,” Gartner analysts note, and this “reset will have a significant impact on semiconductor equipment companies’ future profitability.”
– Assembly and test services (SATS) firms will be comparatively strong vs. the rest of the industry, slipping only ~11% this year due to higher unit volumes, despite soft memory revenues and a shift in mix toward higher-priced packaging types.
– Back-end utilization rates in 3Q were ≤75%, with leading-edge utilization rates “only a couple of points higher.” Memory and display-driver utilization sunk to 60%-65%, and wafer-bumping (notably gold) down to ≤60%. “Packaging manufacturers continue to effectively manage their capex while maximizing their production output. The result will continue to be an extremely cautious capital spending forecast,” Gartner writes.