Analyst: Capex growth slow but steady

July 30, 2007 – Capital expenditures should increase a slight 5% in 2007 and maybe a little better than that in 2008, as memory prices that hit rock-bottom in 1H07 show signs of a turnaround due to increased demand, notes Strategic Marketing Associates.

Capex will keep seeing positive growth mainly because of a record level of new fabs coming online in 2008, noted the firm’s president George Burns in a statement, adding that capital spending cutbacks by a handful of chipmakers (e.g. Micron and Qimonda) are “more than offset” by capex increases elsewhere in the sector (e.g. ProMOS and Powerchip, and foundries including TSMC and UMC).

Spending by memory firms is taking up more than half (55%) of all capex, and concerns about memory spending have arisen due to plummeting ASPs and evaporating profits. But Burns cites reports from flash producers that 25% of all flash in the current quarter is booked for Apple’s iPhone, so “flash pricing is going through the roof,” he said.

SMA projects 5% growth in capex in 2007, to more than $57 billion, and another 6%-10% in 2008 to a new record surpassing the $61 billion set in 2001. “Next year will be a record setting year for new fabs coming online,” Burns said, and “they’re going to need a lot of equipment.”


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