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Chip gear spending very strong in '04

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CIOL Bureau
New Update

Daniel Sorid



SAN FRANCISCO: Spending on semiconductor capital equipment will rise 63.5 percent this year, stronger than previously forecast, as demand pushed chip factories close to their production limits, Gartner Inc.



"The industry needs more capacity to continue meeting increased device demand, and the industry is finally reacting to the need with a degree of urgency," said Klaus Rinnen, an analyst with the technology research company.



Gartner, in a quarterly update, raised its 2004 semiconductor capital equipment spending forecast to $37.3 billion, up 63.5 percent from last year. The firm in April forecast 2004 spending of $33.7 billion, up about 48 percent.



Chip gear makers, including Applied Materials and Novellus Systems Inc., are holding a trade show next week in San Francisco to show off the pricey tools that turn circular slices of silicon into the microchips that power computers and other electronics.



The industry's organizing body, Semiconductor Equipment and Materials International, plan to update its own 2004 spending forecast at the event.



Sales of semiconductor capital equipment rose 10 percent last year, according to Gartner, marking a measured recovery from a brutal downturn that led the industry to report large net losses and shed thousands of jobs.



The industry, which historically moves through boom-and-bust cycles of varying extremes, may be able to avoid a painful bust in 2006 and 2007 as the manufacturing capacity of chip makers appears to keep pace with demand for microchips, Rinnen said.



"Equipment orders are slowing," Rinnen said. "It seems the industry is attempting to more closely match its supply and demand ramps to maximize much-needed profits."



Rinnen forecast semiconductor capital equipment spending declines of 18 percent and 21 percent in 2006 and 2007, respectively.



Gartner said total semiconductor capital spending, which includes the cost of buildings and non-equipment expenditures, is expected to rise 50.9 percent this year to $44.8 billion.

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