April 25, 2005 – This year won’t be as bad as previously thought for semiconductor manufacturing equipment investments, but the improved outlook will come at the price of next year’s karma, according to new forecast data from IC Insights Inc.
The Scottsdale, AZ-based firm raised its forecast for 2005 worldwide capital spending on April 20 to a 5% drop from 2004, an improvement vs. earlier predictions of a 10% decline. However, 2006 capital spending is now expected to drop another 7% from this year, instead of a previously projected 1% decline. The firm reasoned that the second year following a high point in spending (as seen in 2004) feels the pinch more so than the one immediately after the peak.
According to IC Insight’s estimates, the elite big spenders are the reason equipment makers have reason for some optimism this year. Representing 85% of capital spending this year (up from 75% in 2002), the top 25 companies are budgeting an overall 2% increase in spending this year — with the top four companies expected to spend at least $2.0 billion each, accounting for more than a third of overall spending. Semiconductor companies outside the top 25, however, are expected to cut spending by 17%, partly due to a shift in strategies to rely more on foundries for IC production.
The big mover in 2005 is expected to be Taiwan’s Winbond, boosting its spending nearly fivefold as it builds its 300mm fab. Last year’s lion SMIC shows the largest spending cutback (46%), after more than tripling its spending in 2004.