Chip Foundries Increase Spending On Capital Equipment

As the global market for semiconductor equipment nears the end of a dismal year, spending by chip foundries and some memory companies is accelerating, ushering in a very strong growth spurt, a research firm said Friday.

Worldwide spending on chip equipment will fall 42.6% this year from 2008, Gartner said in its latest forecast. However, semiconductor makers next year will ramp up equipment spending by 45.3%, as chip orders from electronics manufacturers are expected to rise.

"Foundry spending and select spending by a few memory companies drove the growth in the semiconductor equipment segment in the second half of 2009," Gartner researcher Dean Freeman said in a statement. "2010 growth will be driven by technology upgrades for the first half of the year. The quarterly growth may see a slight lull in the third quarter of 2010 before capacity additions, starting in late 2010, ramp up the equipment industry into 2011."

While all segments of the semiconductor equipment market will experience significant declines this year, each of those segments will post strong double-digit growth next year, Gartner predicts. The segments include capital equipment, wafer fab equipment, packaging and assembly equipment, and automated test equipment.

In June, Gartner reported that semiconductor equipment market bottomed out in the second quarter, and predicted the last two quarters would see an improvement, followed by a strong 2010.

Gartner's long-term forecast for overall semiconductor capital spending calls for a 30.2% increase in 2011, a 19.1% rise in 2012, a 14.4% decline in 2013 and a 10.1% in 2014.

The market will experience further consolidation through mergers and acquisitions and as some companies close down, Gartner said. Driving the consolidation are fewer equipment customers as a result of the economic recession.

"While initially this may seem to be a dark time for the equipment segment, as the industry consolidates a much stronger equipment sector will emerge to carry on in the future," Gartner researcher Bob Johnson said.