Semiconductor capital equipment spending to drop 20%

Falling equipment demand by memory IC manufacturers is driving the decline

By James Carbone -- Purchasing, 4/18/2008 9:44:00 AM

A weakening U.S. economy and a collapsing DRAM market will result in worldwide semiconductor capital equipment spending dropping 19.8% to $47.5 billion, according to researcher Gartner Inc.

“The expected bursting of the DRAM capital spending bubble has finally happened, as rampant overcapacity in that sector drove unit prices well below cash costs for most manufacturers,” says Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing group. He says since December, reported DRAM capital spending plans have declined steeply. “We are now projecting a drop of almost 47% DRAM spending and 29% percent in total memory in 2008,” says Rinnen.

He adds capital spending on logic will decline 7.6% in 2008. “Selected technology buys will occur as logic manufacturers begin to install 45-nm process capability and foundries continue to ramp 65-nm production, but these investments will occur at a measured rate,” he says.

Worldwide wafer fab equipment spending is expected to decline 17.4% in 2008. Despite a small increase in NAND flash, the sharp decline in DRAM-related spending will hit hard at equipment companies serving the memory market.

After declining 3.7% in 2007, the worldwide packaging and assembly equipment market is expected to fall an additional 18.1% in 2008. Recent data suggests the industry may have hit the bottom in the first quarter of 2008.

The worldwide automated test equipment market declined 14% in 2007, and analysts expect a similar decline of approximately 13% in 2008, as test providers remain cautious with capital budgets.

Also see: Semiconductor capital spending to drop 9.9%