Worldwide capital spending for semiconductor equipment will drop 22.4% in 2008 because of continued economic uncertainty and weakness in the memory IC market. That will likely mean tighter chip supply next year.

Global semiconductor capital equipment spending will total $49.2 billion in 2008, according to researcher Gartner Inc. Significant oversupply conditions in the DRAM and NAND flash memory segments has led to price declines and profitability pressures for most of the memory chip manufacturers. As a result, many IC makers are cutting back on capital spending for equipment.

"The next six to 12 months will be another period of uncertainty and risks for the semiconductor manufacturing and equipment industries," says Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing group.

All sectors of semiconductor capital equipment market spending are on pace for double-digit declines in 2008. Worldwide wafer fab equipment spending is likely to decline 21.5% in 2008. Lithography continues to be the strongest segment, with only a 12% decline expected. Deposition, etch and implant are the hardest-hit segments, with overall declines in the 25% range. Worldwide packaging and assembly equipment spending is forecast to decrease 15.2% in 2008.

"We are still forecasting a capital spending recovery in 2009, as the oversupply of DRAM capacity is resolved," says Rinnen.