Gartner Says Worldwide Semiconductor Capital Equipment Sales Begin A Downward Cycle In 2005
STAMFORD, CONN April 7, 2005 — After experiencing 64 percent growth in 2004, worldwide semiconductor capital equipment sales are projected to decline 11.6 percent in 2005, according to Gartner, Inc.
"Although 2005 clearly begins the next downcycle, we do not expect a repeat of past cycles," said Klaus Rinnen, research vice president for Gartner's semiconductor manufacturing and design research group. "Rather than having the sharp annual contractions of the past, this cycle will be milder. The equipment industry overshot slightly in its capacity ramp-up during 2004's strong growth, and it is now pausing until higher levels of semiconductor growth return in 2007."
Among the three equipment segments, the wafer fab equipment market is projected to experienced the strongest decline with worldwide spending totalling $24.8 billion in 2005, a 12.2 percent decline from 2004 (see Table 1). The automated test equipment market is the only segment that will show positive spending in 2005, with an increase of 3.1 percent.
Worldwide semiconductor wafer fab utilization rates peaked in the second quarter of 2004 at 94.3 percent. Overall utilization rates in 2005 will bottom in the first quarter at 84 percent, and continue to oscillate at about 85 percent until the second half of 2006, when increasing semiconductor demand will push utilization rates into the high 80s percentage range. Because leading-edge utilization is a crucial factor for new equipment purchases, the drop in utilization is commensurate with a quarterly decline in wafer fab equipment sales.
"Compared with prior cycles, the swings in utilization rates are relatively mild because manufacturers managed capacity increases carefully and acted quickly to slow new equipment purchases in response to slowdowns in production rates," Mr. Rinnen said.
The packaging and assembly equipment (PAE) market grew 45.9 percent in 2004, but the PAE market has seen soft business conditions since the middle of 2004 as capacity utilization peaked. While these weak conditions persist, Gartner analysts said this condition will be short lived.
"Based on the positive signals from semiconductor assembly and test services (SATS) providers concerning the first quarter of 2005, we expect these positive conditions to become more visible in PAE segments wit orders reappearing in the second half of the year," Mr. Rinnen said.
Automated test equipment (ATE) sales in 2004 grew 58.5 percent with sales reaching $4.8 billion. This segment had strong sales last year for radio frequency and microwave, system-on-a-chip, and memory tester segments. Demand for additional testing capacity for wireless devices, memory devices (especially flash), and liquid crystal display (LCD) drivers fuelled excellent growth in those segments. These segments are expected to be the bright spots in the ATE market in 2005 as well. However, by the second half of 2005, quarterly growth for the entire ATE market will begin to fall, resulting in overall market growth of 3.1 percent.
Additional information is available in the Gartner Dataquest report "Strategic Investments Soften Semiconductor Capital Equipment Sales Correction in 2005." This document is available on Gartner's Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=476469.
This research is produced by Gartner Dataquest's Semiconductors Manufacturing and Design program. This research program, which is part of the overall semiconductor research group, provides a comprehensive view of the entire semiconductor industry, from manufacturing and design to device and application market trends. To subscribe to this service, please contact Pia Rieppo at 408-468-8710 or at pia.rieppo@gartner.com. More information on Gartner's semiconductor research can be found in the Gartner Semiconductor Focus Area at http://www.gartner.com/semiconductors.
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