Global semiconductor equipment spend to plateau in 2011

Firms will focus more on capacity than technology equipment in coming year, with most of dollars spent on NAND memory and foundries, finds new report.
Written by Jamie Yap, Contributor

After a record 131.2 percent leap in 2010 to reach US$38.4 billion, global semiconductor equipment spending is expected to be mostly flat next year, falling by a slight 1 percent, according to a new report released Wednesday.

Klaus Rinnen, managing vice president at Gartner, said in a statement that following a solid rebound from 2009's economic doldrums, companies should prepare for a softer 2011.

The report's findings are in line with Gartner's earlier forecast that worldwide semiconductor revenues will experience sustained but slower growth next year to a tune of US$314 billion.

Rinnen noted that equipment purchases in 2011 will focus more on capacity rather than technology equipment.

The analyst said NAND flash will lead the memory segment in terms of capital spending in 2011, he added. Attributing the high demand to the "phenomenal success" of media tablets, the Gartner analyst said NAND demand will continue strongly for the foreseeable future and require market players to commit continued high levels of investment in order to meet the growing demand.

Foundry spending will also be a major trend in 2011 due to fierce competition between leading chipmakers, TSMC (Taiwan Semiconductor Manufacturing Company), GlobalFoundries and Samsung, as well as a continued shift to "an asset-lite" strategy by many of the world's integrated device manufacturers (IDMs), Rinnen said.

Massive semiconductor growth
According to the Gartner, all segments of semiconductor capital equipment market showed exceptionally strong growth rates this year, clocking between 118 percent and 140 percent.

Spending for automated test equipment (ATE) saw the strongest increase, climbing 140.5 percent from 2009 to US$2.8 billion in 2010. The ATE market had dropped to extremely low levels in 2009, with the memory test segment dipping below US$200 million.

The ATE market was able to recover substantially in 2010 during the first three quarters, but Gartner also estimated that the market will now experience a quarterly decline up to early 2011.

Spending on water fab equipment (WFE) rose to US$29.7 billion this year, a 133 percent jump from 2009, due to strong worldwide semiconductor demand and underinvestment during the bearish times of 2008 and 2009, noted the research house.

However, it predicted that WFE growth will slip by 3.4 percent in 2011 because overall fab (or fabrication plant) utilization had been on the decline recently, with more capacity coming online and slower semiconductor production to align more with end-user demand.

That said, Gartner added that the WFE market will pick up again and return to positive growth in 2012.

In the area of packaging and assembly equipment (PAE), spending grew 118.6 percent over 2009 to hit US$5.9 million in 2010.

The analyst firm also noted that Asia-Pacific's share of PAE purchases will grow from 79 percent in 2010 to 86 percent in 2014. In particular, China will be the largest individual consumer of this segment by 2013, accounting for just over 30 percent of the total market that year.

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