STAMFORD, Conn.,-Gartner Inc. predicted the next down cycle in the semiconductor capital equipment market will take place in the second half of this year, with sales dropping by 12 percent. Gartner analysts said segments of semiconductor capital equipment sales are projected to decline this year, and sales are expected to total $33.1 billion.
“While the first quarter of 2005 marked the peak of the last upcycle, declining orders over the past few months and quarters paint a picture of slower sales for the rest of the year,” said Klaus Rinnen, research vice president for Gartner’s semiconductor manufacturing and design research group. “Last year, equipment sales surged to correct for serious under investment in the face of strong semiconductor demand. Production capacity has now exceeded demand, and equipment manufacturers are settling down to shipment levels commensurate with longer-term growth trends for the industry. Therefore, we expect this to be a mild downturn.”
Gartner analysts expect the semiconductor equipment industry to respond to the slower growth period with lower shipment rates required for slowing capacity expansion. “Overall, it appears semiconductor manufacturers are maintaining their investment discipline and investing carefully, and in some cases strategically, to gain market advantage,” said Rinnen. “We expect customers to spend cautiously, releasing orders late and hesitantly, until a strong demand trend can be established.”
Also projected to decline this year is wafer fab equipment spending by 9.6 percent. Gartner analysts said this market is not expected to experience positive growth until sometime in 2007. Although use rates dropped quickly in the fourth quarter of 2004 and the first quarter of 2005, Gartner analysts said wafer fab equipment shipments remained relatively strong.
“This will result in new capacity coming on-line during the middle of 2005 and will dampen the need for significant additional new capacity purchases until next year,” said Rinnen. “By the second half of 2006, increased semiconductor demand will lead to climbing utilization rates and drive a sustained capacity expansion through 2007 and 2008.”
Gartner analysts said the packaging and assembly equipment market has performed better than expected and is forecast to contract 16.5 percent in 2005. Gartner’s April projection was for a 23.5-percent decline.
“The P&A market will experience more positive conditions throughout the second half of 2005 as utilization rates tighten and move above the 85-percent mark,” Rinnen said. “The improved situation in late 2005 will help drive the market into positive growth for 2006.”
For the short term, Gartner analysts expect the automated test equipment market to decline by 21 percent this year. What had appeared to be a mild spending decline through 2005 has turned into a major spending contraction, according to Gartner analysts. However, Gartner analysts said the drop in spending means the ATE market is poised for an earlier recovery than was previously expected. In 2006, Gartner analysts expect the ATE market to grow by 25 percent, which will begin the next industry growth cycle.
