Revised Forecast Hurts 2004 Semiconductor Equipment Sales
The SIA forecast that revised semiconductor growth from 19% and 6% growth in 2004 and 2005, respectively, to 29% and 4%, should negatively impact equipment sales for 2004, according to the report, "The Global Market for Equipment and Materials for IC Manufacturing," recently published by The Information Network (New Tripoli, PA), a market research company.
"Negative sentiment from analysts and forecasts of a relatively flat 2005 from the SIA are pointing to eventual pushouts and cancellations of equipment," said Dr. Robert Castellano, president of The Information Network. "Semiconductor manufacturers are already overly cautious from the last severe downturn, and fear, uncertainty and doubt (FUD factor) about growth in late 2004 beyond will affect their decisions to go ahead and purchase more tools they may not need by the time they are delivered."
According to the company, the industry is 9 months into the current equipment upswing, while semiconductor sales have been in an up cycle since January 2002—a period of 28 months. Historically semiconductor and equipment inflections occurred within 3 months of each other.
However, the company believes the industry went through a paradigm shift during the past recession, moving to more aggressive die shrinks and to 300 mm processing to increase production. To avoid massive inventory buildup, semis will not be investing frivolously in equipment, but will instead be closely monitoring real demand. If demand drops, real or perceived, the equipment market boom will be over before it really got a foothold.
"As capacity utilization is the percentage of wafer starts (and we know they've been increasing for 28 months) to capacity, and capacity is showing no growth, it results in increasing capacity utilization," said Castellano. "But why didn't capacity grow when revenues (billings) increased dramatically for the past two quarters? Is capacity utilization really increasing to stratospheric levels as IC manufacturers would lead us to believe at a time they are raising prices?"
Company forecasts from November 2003 called for the front-end equipment market to grow 21% in 2004 and 11.4% in 2005 before dropping 7.9% in 2006, based partly on SIA's forecasts of 19% and 6% growth for 2004 and 2005 and on IC fab capacity.
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