Christine Lunday
SCOTTSDALE, AZ—Seeing strength in the world-wide electronic systems market and global GDP, IC Insights has raised its semiconductor forecast for the year, and now says worldwide capital spending will reach an all-time high at $50 billion, a 52 percent increase over 1999's $33 billion.
The big question, according to the Scottsdale, AZ, market researcher, is whether the industry will ease off spending in 2001 to thwart another overcapacity crisis.
“What happens next year is key to the duration and severity of the 2002-2003 downturn,” says IC Insights President Bill McClean, the featured speaker at a recent SEMI-sponsored breakfast meeting in Burlington, MA. “In general the [market] cycle still appears to be intact and going along its merry little way. What happens next year is the big issue.”
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IC Insights recently released an update to The McClean Report, 2000 Edition. In his update, McClean says that the market cannot absorb another 50 percent increase in capital spending next year. If capital expenditures continue to escalate, McClean believes the industry will experience a harsh overcapacity situation/downturn in 2002.
Still, glimmers of hope exist. McClean points to Taiwan Semiconductor Manufacturing Co.—considered one of the most aggressive spenders—which has indicated that 2001 spending will drop to $3.6 billion, down from the planned $4.7 billion this year.
“I think the memories of overcapacity are still fresh,” he adds.
In the updated forecast, IC Insights now sees the world IC market growing to $197.2 billion this year, a 32 percent increase over 1999's $149.4 billion.
This marks a 9 percent increase over the 23 percent growth predicted in January.
As a result, the semiconductor equipment market is forecasted to reach the $42.5 billion level this year, a 50 percent year-over-year increase. IC Insights also forecasts double-digit increases for the materials market, which is expected to grow 18 percent to $26.2 billion. Strength throughout the semiconductor food chain is supported by strong worldwide economic growth (IC Insights sees the global GDP rising 4.5 percent this year—a growth level not experienced since the late 1980s). In addition, worldwide electronic system sales are seen up 12 percent this year, and total worldwide capacity utilization—including leading- and lagging-edge capacity—is forecasted to reach at least 92 percent, and perhaps as high as 94 percent.
Tight capacity should help drive a ramp in IC average selling prices in the second half of 2000. McClean believes the surge in the IC market to date has been driven by IC unit volume shipments, with IC ASPs in the first quarter only showing a 1 percent increase over Q1 1999 levels.
“We think the second quarter is going to be the lull before the storm,” McClean says, noting that holiday season demands for cell phones, PCs, and the upcoming release of Sony's PlayStation 2 game console in the US should drive second-half strength.