JUNE 10– SANTA CRUZ, Calif.–A survey of semiconductor companies’ capital spending plans by Strategic Marketing Associates points to an increase of $3.6 billion this year, up 13 percent from a year ago.
In 2002, worldwide capital spending totaled $28 billion. For the equipment and fab building industries, the last two years have been the worst ever.
From its high point of $61 billion in 2000 to its low in 2002, capital spending declined by 55 percent or $33 billion in the two-year period.
–No Turnaround Yet In U.S. Spending–
Although worldwide spending will rise, spending by U.S. companies will continue to decline, according to the survey.
This year and last, U.S. chip companies cut spending by nearly $8 billion. This represents 70 percent of all cutbacks industry wide during this period. As a result, U.S. companies’ share of worldwide capital spending has fallen to 30 percent, its lowest level since 1992.
In contrast, Asia Pacific companies increased their spending by $3.4 billion this year and will outspend every other regional group.
Their share of the industry’s capital spending will account for more than 40 percent of all capital spending. Japan and Europe round out the remainder of the spending with 20 percent and 10 percent respectively.
“We’re bullish on chip capital spending this year if the economy doesn’t sputter or stall, ” comments George Burns, president of Strategic Marketing Associates, a market research firm specializing in fab information.
“Last year the ratio of capital spending to chip sales was the lowest it has been in 20 years. This suggests the industry has cut spending too much, is under-invested and therefore needs to increase spending to support projected increases in sales and the move to advanced technologies.”
The survey concludes that while some companies are still cutting spending this year, increased spending will outweigh the cuts. For example, Intel is cutting spending, but DRAM companies are increasing their spending, as are many integrated device manufacturers (IDMs).
Additionally, the top three foundries, TSMC, UMC and Chartered are also cutting spending, but this is balanced by the increase in spending by the “challenger” foundries (those not in the top three). And, it is expected that Japanese companies will also increase spending this year by as much as 25 percent.
–Customer Base Shifts–
As equipment vendors and fab builders have weathered the downturn, their customer base has changed significantly. A diverse group of IDMs, which formerly accounted for most of their business, has shrunk permanently and U.S. companies have lost their supremacy as the biggest market for capital goods. The survey suggests that, because many IDMs have committed to outsourcing, equipment vendors and fab builders will find that revenue streams from these IDMs will not flow as fully as they did in the past. The biggest spenders and builders will be in Asia Pacific as most of the foundries are now located there.