March 14, 2006 – Capacity utilization rates scraped the ceiling in 4Q05 at 99% for leading-edge (0.12-micron and below) processes, noticeably above levels that marked the tipping point in previous cyclical downturns (including early 2000). Still, other factors suggest a similar fate is likely not in store for the semiconductor industry in the near-term, according to analyst firm Advanced Forecasting.
In each of the two prior examples provided — 1Q00 and 2H95 — “each occurred toward the end of an already overheated boom period in which inventories were accumulating and decisions were made to add capacity to an already capacity-overloaded market,” explained Rosa Luis, director of marketing and sales for the Saratoga, CA-based firm. By contrast, IC sales haven’t exceeded underlying demand, and chipmakers are more carefully adding capacity — equipment sales were down slightly in 2005, vs. mid- to high single-digit increases in wafer starts and chip sales, the firm noted.
Still, Luis suggested overheating could still occur, if IC units and revenues increase by double-digits this year, resulting in overcapacity and inventory buildup, “precursors to a recession.” She stated growth rates of 12.3% for IC units and 5.9% for IC sales would be healthier than the historic 30% spikes followed by deep recessions — even though those spikes are “unlikely to occur in this maturing market.”