Semicon equipment spend to grow 113 p.c. in 2010

BANGALORE, INDIA: Worldwide semiconductor capital equipment spending is projected to surpass $35.4 billion in 2010, a 113.2 percent increase from 2009 spending of $16.6 billion, according to Gartner, Inc.

However, Gartner warned that equipment vendors should prepare for slower growth heading into 2011. Worldwide semiconductor capital equipment spending will grow 6.6 percent in 2011.

“The drive to new technology nodes will drive semiconductor equipment growth in 2010,” said Klaus Rinnen, managing vice president at Gartner. “The demand for 40-nanometer (nm) and 45 nm devices is now ramping up, resulting in heavy foundry-based capital spending.”

He said the investment at the 3x node by Intel, an increase in spending by NAND memory producers, and the transition to the next generation DDR3 DRAM memory are the key investment growth drivers.

“We could see a slight slowing in orders as 2010 ends, and the industry focuses on macroeconomic conditions. We expect capital equipment growth to continue through 2011, but at a reduced rate, as spending responds to slower growth in the semiconductor markets,” Rinnen said.

According to Gartner, following the significant declines in 2009, all segments of the semiconductor capital equipment market will experience exceptionally strong growth in 2010.

The wafer fabrication equipment (WFE) segment will increase 113.3 percent in 2010, followed by 7.2 percent growth in 2011. Strong global demand for semiconductors, along with underinvestment in 2008 and 2009, has led to pent-up demand for equipment, and overall utilization rates will peak in the third quarter of 2010, observed the analyst firm. Then the market will start a slow decline as more capacity comes on line and quarter-on-quarter demand will return to more-normal levels.

After declining 32 per cent in 2009, Gartner predicts that the packaging and assembly equipment (PAE) segment will increase 104.7 per cent in 2010 and grow a nominal 0.7 percent in 2011.

During the forecast period, certain equipment segments will have substantially higher growth. Demand for equipment for advanced processes, such as wafer-level packaging, 3D processes and TSV manufacturing, is expected to grow faster than the overall market. Inspection and process control tools for these advanced packages will also grow above the market rate, Gartner said.

The worldwide automated test equipment (ATE) market will grow by more than 133 per cent in 2010, it added.

“For 2010, the semiconductor equipment industry will experience exceptionally strong growth, as we emerge from a very costly and deep recession,” said Rinnen. “Given this exceptional growth, there is a possibility that the honeymoon could end in 2011, which may help to mitigate the boom/bust scenario typical of previous cycles.”

However, if capacity expansion continues unchecked, a more severe and premature down cycle could occur in 2013, warned the analyst. “How quickly memory producers react as the market softens and average selling prices (ASPs) decline will likely determine if the market can avoid the massive drops of recent years.”