December 7, 2010 – As 2010 shapes up to be a record year for semiconductor equipment capex, so the following two years will be a fall back to Earth with low single-digit overall growth — though the group’s numbers indicate some clear market winners and losers.
In its semiannual market forecast, SEMI now sees an eye-popping 136% record surge in 2010 (following a -46% decline in 2009), up from a projected 104% in its July forecast issued at SEMICON West. But where SEMI once saw 9% growth in 2011 equipment sales, now it sees less than half that (4%), and only another 4% in 2012. SEMI president/CEO Stanley T. Myers in a statement expressed cautious optimism about the industry’s growth prospects, despite the pervasiveness of chips in everyday products.
2010 surging
Biggest increases in 2010 expectations since July are in the backend sector: both test and assembly/packaging are seen with about $600M more spending vs. the July update, about 22% more in terms of dollars; both segments are now at 155% growth (vs. 108%-109% in the July forecast). Wafer processing, still the overwhelming majority of spending, will see the biggest boost in terms of dollars ($3.65B), about 15% more than expected. Total chip tool spending is seen at $37.54B (vs. $32.5B in July), which is right around the same as 2004 levels, SEMI noted.
(Just a reminder, for perspective: backend spending is seen as a leading indicator of market cyclicality; generally speaking test/assembly/packaging are the first to go up when the market’s in an upturn.)
All regions are seeing higher growth than earlier predicted; five of the seven regions are seen doubling their spending in 2010 (and a sixth, Japan, will be at 98% growth). Most generous updates go to China (from 138% to 248% growth), with three other regions adding about 40 percentage points to their growth rates (Korea 188% -> 231%, ROW 109% -> 151%, Europe 98% -> 141%). Strictly in terms of dollars, Taiwan is still on top with just shy of $10B in spending, about 16% higher than No.2 South Korea (it was a 13% difference in the July outlook) and 88% more than North America (a 108% gap in July). SEMI tacked on over $1B in 2010 spending each for Korea and China, and at least three-quarters of a billion dollars for Taiwan and North America.
2011-2012 stalling
As usually happens, though, the higher numbers for 2010 come at the expense of the next year. SEMI now sees just 4% semiconductor sales growth in 2011, instead of the 9% it predicted back in July. Biggest hits come in the backend: test -5% (vs. 7% in the July forecast) and assembly/packaging (-17% vs. -5%), collectively losing $340M in sales next year.
Two regions, North America ($6B, 13% vs. 8%) and Europe ($2.9B, 25% vs. 9%), have more positive visibility into 2010 spending than six months ago. But Taiwan ($9.0B, -10% vs. 1%) and Korea ($8.28B, -4% vs. 8%) are actually seen spending less than in 2010, and other regions had their outlooks decreased (Japan $4.9B, 11% vs. 15%; RPW $4.08B, 13% vs. 26%; China $3.77B, 15% vs. 18%).
Mixed bag for 2012
Looking out to 2012, chip spending trends diverge significantly by SEMI’s calculations. Total chip tool spending will be flat at 4%, but spending on wafer processing tools will drop to just 2% growth to $30.8B. Meanwhile, though, backend will recover: 9% for test to $4.08B, and 11% for assembly/packaging to $3.31. And the "other" category will see the best growth of all:13% to $2.3B.
The major chip purchasing regions will be in the low single-digit growth (Taiwan 2% to $9.17B, Korea 5% to $8.72B, Japan 1% to $4.94B), while North America will decrease -3% to $5.81B. ROW, China, and Europe will crack (barely) double-digit growth at 10%-11%.
Two interesting points: ROW spent about $800M less than Japan in 2009 and 2010, but that gap will narrow to just $420M by 2012. And together China and ROW made up about 15% of global chip spending in 2009; next year they’ll move up to 20% — a collective increase of nearly $5.5B spending.