Semiconductor Equipment Industry Bottoms Out

The downturn in semiconductor equipment spending bottomed out in the second quarter, an indication that semiconductor sales are improving, a market research firm said Monday.

A gradual improvement in global equipment sales on a quarter-by-quarter basis is expected throughout the rest of the year and into 2010, Gartner said. Nevertheless, capital spending for the full year will drop 44.8% from 2008 to $24.3 billion.

In 2010, however, sales are forecast to reach $29.4 billion, a 20.9% increase from this year, the researcher said.

"The impact of the economic crisis has hit the semiconductor equipment industry hard, but signs of life are returning," Klaus Rinnen, managing VP at Gartner, said in a statement. "Undoubtedly, it will be a long, slow road to complete recovery, but we are seeing the first indications of increased foundry activity to replenish inventories depleted by the cutbacks of the past few quarters."

Faced with the worst economic downturn ever, semiconductor makers have eliminated all unnecessary spending, cutting equipment purchases to match inventory levels, which have been high during the downturn.

"Over the past few years, we have seen the semiconductor and electronics industries implement impressive movements in their ability to control and manage inventories," Rinnen said. "It appears the industry has learned a painful lesson and can implement improvements on its ability to manage capital investments and capacity and thus bring a return to profitability to all segments."

In the first quarter, global sales of semiconductors fell nearly 30% as sales of PCs, electronics, and corporate information technology remained weak, according to the Semiconductor Industry Association. However, there was a positive note in the decline. March saw a 3.3% increase in sales from February.

The small sequential increase was an indication that demand for semiconductors had stabilized somewhat, albeit at a substantially lower level than in 2008, SIA president George Scalise said.

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