Spending cuts spell trouble for buyers
By Staff -- Purchasing, 5/20/1999
Cutbacks in capital spending in 1998 by semiconductor companies will be felt next year in the form of component shortages, according to analysts and chip makers.Because chip tags have plummeted over the past three years, chip makers have cut back in investment in new equipment and fabs. In 1998, capital investment was cut back severely. Japanese semiconductor companies' capital spending fell 40%, Taiwanese chip makers' spending levels dropped 42%, Korean companies declined 56%, and North American semiconductor companies' capital spending fell 10%, according to IC Insights, a market researcher.
With unit demand rising, the lack of investment means not enough chips will be produced and higher prices are likely next year. More bad news: While many companies are investing more in 1999 than in 1998, capital spending levels are still far below 1996 levels. Chip companies will invest $26.8 billion in 1999, compared to $43 billion in 1996.
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