Gartner: Capex outlook improving, if memory holds up

April 7, 2006 – Worldwide semiconductor equipment spending will return to double-digit growth in 2006, but concerns linger about a possible oversupply in the memory segment, according to preliminary market data from Gartner Dataquest.

The firm, which originally had pegged 8.4% growth for equipment sales, now expects “double-digit growth” in 2006, after seeing capex expansions from various chipmakers already this year. Still, despite the new optimism, ” we remain cautious as we see a rising risk of oversupply in the memory segment if current projections do not come true,” said Klaus Rinnen, managing VP for Gartner’s semiconductor manufacturing and design research group. “Memory-capacity related spending remains hot in 2006, but it is also most vulnerable.”

Gartner also issued its final tally for 2005 equipment sales. Slower growth due to inventory management, and efforts to ramp up initial production of 65nm-process semiconductor manufacturing, contributed to a 10% decline in sales of worldwide semiconductor manufacturing equipment in 2005, to $34.5 billion.

“The equipment market decline in 2005 was the result of a number of factors, which worked together to slow the demand for new capacity,” Rinnen stated. The industry did manage to rebound from an oversupply condition created in 1H05, thanks to a robust macroeconomic environment which spurred end-user demand by mid-year, he noted.

Most of the top vendors roughly following the downward trend — except KLA-Tencor and ASML, which rose 5.6% and 1.9%, respectively. Strength in the lithography segment, driven by 90nm and 65nm tool purchases, helped European and Japanese vendors gain share against North American companies.

By region, the Asia-Pacific, which was the fastest-growing region in 2004, declined nearly 20% in 2005, falling below 50% of overall capital equipment spending. Japanese equipment spending also sunk heavily, down from 28% in 2004 to virtually flat in 2005. European spending was down 1%, as investments from big international chipmakers including Intel and AMD (in Ireland and Germany, respectively) nearly offset a trend of European companies investing outside of the region. The Americas region saw spending increase more than 9%, with expansions in all manufacturing segments.

Worldwide semiconductor manufacturing equipment vendor revenue estimates for 2005 (US $M)

Company 2005 revenues (% change vs. 2004) 2005 market share 2004 market share

Applied Materials 4738.5 (-24.9) 13.7 16.3
Tokyo Electron* 3851.7 (-4.7) 11.2 10.5
ASML 2732.6 (1.9) 7.9 7.0
Advantest 2089.3 (-5.6) 6.1 5.7
KLA-Tencor 1654.9 (5.6) 4.8 4.1
Nikon 1507.8 (-0.9) 4.4 3.9
Lam Research 1147.0 (-0.7) 3.3 3.0
Novellus Systems 1130.1 (-5.7) 3.3 3.1
Dainippon Screen 991.5 (-5.7) 2.9 2.7
Hitachi High-Technologies 837.5 (-18.1) 2.4 2.6
Others 13,793.7 (-12.9) 40.0 41.0
TOTAL 34,474.6 (-10.7) 100.0 100.0

* Due to changed accounting rules in 2005, TEL market share reports based on new acceptance-based revenue recognition, vs. shipment-based rules.

Data includes revenue from acquisitions in 2005 for the entire year. 2004 data is before acquisitions. Growth is organic as well as through acquisitions.

Source: Gartner Dataquest


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