Gartner Says Worldwide Semiconductor Capital Equipment Spending Suffers Setback in Second Quarter, But Growth Will Return in 2003
STAMFORD, CONN., October 9, 2003 — Low second quarter sales and slow order momentum have dimmed the growth prospects for semiconductor capital equipment in 2003, according to the quarterly forecast by Gartner, Inc. (NYSE: IT and ITB). Gartner analysts said the industry's fundamentals remain poised for long-term growth, however, growth in 2003 will not be as strong as originally forecast.
Worldwide semiconductor capital spending is forecast to total $29.7 billion in 2003, a 7.9 percent increase from 2002 (see Table 1). While quarterly capital spending momentum by several semiconductor vendors was slow in the second quarter, recent improvements in wafer fab equipment bookings are encouraging for second half 2003 spending and sales. Wafer fab equipment sales are projected to grow 1.1 percent in 2003, while packaging and assembly equipment is on pace for 19.8 percent growth.
However, with semiconductor device inventories low, end-user application demand gaining, and manufacturing use tightening because of conservative spending, Gartner analysts said semiconductor device sales still will likely exceed expectations in 2003 and should see strong growth in 2004.
"Ultra-conservatism is holding back spending on new equipment, at least for the wafer fab. As harsh as it might sound for capital equipment vendors, the cautious investment behavior might actually be for the better of the industry," says Klaus-Dieter Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group. "After a dramatic drop in second quarter sales, wafer fab equipment is finally picking up steam in the second half of the year, but it is more of a deliberate investment increase than an industry wide surge."
Table 1
Worldwide Semiconductor Capital and Equipment Spending Estimates
(Millions of U.S. Dollars)
2002
2003
2004
Semiconductor Capital Spending
27,576
29,748
35,879
Growth (%)
-38.1
7.9
20.6
Capital Equipment (Excluding Test)
18,547
19,183
24,532
Growth (%)
-30.4
3.4
27.9
Wafer Fab Equipment
16,203
16,374
20,763
Growth (%)
-31.5
1.1
26.8
Packaging and Assembly Equipment
2,344
2,809
3,769
Growth (%)
-21.6
19.8
34.2
Source: Gartner Dataquest (October 2003)
For the third quarter, Gartner analysts estimate fab utilization at 86.5 percent overall and 93 percent for leading edge (defined as 0.18 micron and below). However, semiconductor manufacturers are being extremely cautious, and are not buying equipment yet. Meanwhile, fab utilization rates are approaching the point where spot shortages typically begin to appear in the industry. But the problem is not a lack of space to put new equipment. Empty shell capacity (potential capacity in completed fabs with no equipment) will end the year at 34 percent of total installed 200mm and 300mm capacity.
"There are 16 fabs scheduled to begin production between July, 2003 and June, 2004. Five of these are in the second half of 2003, nine in 2004," Rinnen said. "These include nine 300mm fabs, and seven 200mm fabs. However, equipment orders remain at an alarmingly low rate, so we can expect these new fabs to begin production at low levels and ramp slowly until the industry approaches a widespread supply limited condition."
While spending is still slow for wafer fab equipment, packaging and assembly equipment is enjoying its first year of solid growth acceleration since 2000, driven by the strong device unit ramp and the transition to newer, more advanced packaging schemes. Because advanced packaging has been growing significantly in the past year and capacity is tightening, the packaging and equipment market is finally returning to positive growth in 2003. This is being led by the continued rapid adoption of the lead frame-based leadless packages.
"These quad flatpack, no leads (QFN), small outline, no leads (SON) and bumpless chip carrier (BCC) variations of CSPs are experiencing the fastest ramp-up rate of any package since the beginning of the surface mount era in 1985," said Jim Walker, research vice president for Gartner's Worldwide Semiconductor Manufacturing group. "Wireless and portable products are adopting these as replacements for the larger, more mature small outline integrated circuit (SOIC) and lower lead count quad flat package (QFP) family of packages."
Additional information is available in the Gartner Dataquest Alert 4Q03 Update: Positive Outlook for Semiconductor Capital Equipment. This Alert examines how second quarter results have impacted the long-term growth projections for the industry. This Alert can be purchased on Gartner's Web site.
About Gartner:
Gartner, Inc. is the leading provider of
research and analysis on the global information technology industry. Gartner serves more
than 10,000 clients, including chief information officers and other senior IT executives
in corporations and government agencies, as well as technology companies and the
investment community. The Company focuses on delivering objective, in-depth analysis
and actionable advice to enable clients to make more informed business and technology
decisions. The Company's businesses consist of Gartner Intelligence, research and
events for IT professionals; Gartner Executive Programs, membership programs and peer
networking services; and Gartner Consulting, customized engagements with a specific
emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in
Stamford, Connecticut, and has 3,700 associates, including more than 1,000 research
analysts and consultants, in more than 75 locations worldwide. For more information,
visit www.gartner.com.
