Gartner raises chip industry outlook, citing capex hikes

February 16, 2006 – Citing recent plans from chipmakers increasing their capital spending budgets in 2006, Gartner Inc. has raised its forecast for 2006 worldwide semiconductor revenues to $257.7 billion, a 9.5% increase from last year.

In December Gartner pegged 2006 semiconductor sales at $252.7 billion, a 7.6% increase. The new forecast suggests that 2007 will see a mild slowdown of about 7% — but still an upward revision of its earlier outlook, which called for 5.1% growth. At that rate vs. 2006, next year’s chip sales would total about $275.7, vs. previously predicted level of $265.6 billion.

Announcements over the past month from chipmakers signaling “significant increases” in capital spending in 2006 — e.g., UMC set its capex budget at $1 billion, 42% more than in 2005, and Toshiba has raised its capex roof three times already to $2.44 billion — suggest overall capital expenditures will increase 10% year-on-year. In December Gartner predicted semiconductor capex would be flat in 2006.

Andrew Norwood, research VP for Gartner Dataquest’s semiconductor research group, noted that semiconductor device supply is becoming more constrained, and downward pressure on device ASPs has eased. “Any lengthening of device lead-times in coming months will be seen as further evidence of a tightening market.”


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