Gartner predicts semi equipment spending to rebound in 2008

By Ann Steffora Mutschler, Senior Editor -- 4/20/2007

Good news for the semiconductor manufacturing equipment market today: combined with SEMI’s positive March book-to-bill numbers, market researchers at Gartner Inc. predict the industry will rise 14.9 percent in 2008 to $46.7 billion.

While the capital equipment industry will experience a slower sales environment for electronic products in the first half of the year, residual semiconductor inventories in Q1 and strong 2006 capacity investments, especially in memory, are causing only a modest contraction in worldwide capital equipment spending this year, the firm notes.

Gartner forecasts worldwide semiconductor capital equipment spending to reach $40.6 billion this year, a 3.2 percent decline from 2006.

Klaus Rinnen, managing VP for Gartner's semiconductor manufacturing and design research group said in a statement, “Annual growth in device sales, anticipated at 6 percent, faces considerable downside risk because memory supply is overabundant, and CPU price competition continues. 2007 may still be a decent year for semiconductor equipment manufacturers aligned with memory, but those that serve the rest of the market will face a weaker market than last year.”

Wafer fab equipment (WFE) revenue is expected to decline a mere 0.7 percent this year as the 45-nm technology node ramps and Intel and foundries begin initial production.

As a percentage of spending, Gartner expects memory to remain strong and account for more than 45 percent of WFE. Memory spending is expected to slow in the second half of the year, while logic integrated device manufacturer (IDM) and foundry spending should accelerate into next year to provide some balance and ramp up the industry into 2008.

After growing more than 18 percent in 2006, packaging and assembly equipment (PAE) market revenue is projected to decline 12.2 percent in 2007. The order picture for PAE peaked in about mid-2006 as semiconductor assembly and test services (SATS) providers took a more cautious look at market conditions. There are some indications that orders are bottoming, but the market will continue to face challenges this year, thus, Gartner projects a vibrant PAE market in 2008 with growth of 20.2 percent.

Similar to the PAE portion of the back-end manufacturing supply chain, the ATE segment experienced a healthy growth surge during the first half of the year. However, that growth stagnated with sequential quarterly revenue declines since mid-2006. The market has now substantially weakened, and ATE sales will be slow for most of 2007; the ATE market is expected to decline 11.2 percent in 2007, the firm concluded.

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