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Chip gear market to grow 8% in '06, says Gartner

Posted: 23 Dec 2005 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? Gartner?

The worldwide semiconductor capital equipment market is poised to grow by 8.4 percent in 2006, with spending totaling $36.4 billion, according to a forecast issued this week (Dec. 21) by Gartner Inc. The firm is forecasting stronger growth in 2007 and 2008, followed by two consecutive years of double digit decline in 2009 and 2010.

Capital equipment spending declined 10.6 percent in 2005, Gartner said, as orders weakened in the first half of the year. By the second half of the year, the market experienced a turnaround in orders, especially in the back-end segments, according to Gartner.

Gartner's 2006 capital equipment growth forecast stands in direct contract to that of fellow market analyst firm the Information Network, which last week issued a forecast calling for the capital equipment market to contract by 3 percent in 2006.

"The industry has managed to respond well to inventory fluctuations, slightly excessive capacity levels and rapidly changing market parameters," said Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group, in a statement. "The industry appears to have a reasonable balance between production levels and capacity and end-user demand."

Rinnen said Gartner expects spending to rise in the first half of 2006, then flatten during the second half of the year before starting a sustainable recovery in 2008. Gartner's forecast calls for 13.9 percent capital equipment growth in 2007 and 27.3 percent growth in 2008. But the firm is currently expecting the market to decline by 12.9 percent in 2009 and another 15.6 percent in 2010.

Gartner's forecast calls for the strongest growth to come in the automated test equipment (ATE) segment, which is forecasted to grow by 29 percent after declining by 21 percent in 2005. Many key ATE supplier saw revenue drop significantly during the first half of 2005, Gartner said, but ATE spending picked up in the second half of the year.

"The current increase in ATE sales is primarily being driven by increasing capacity requirements for memory and SOC testers," Rinnen said.

Gartner forecast that wafer fab equipment spending would grow 3.3 percent in 2006, after declining 8.8 percent in 2005. Worldwide semiconductor wafer fab utilization rates in 2005 remained in a fairly narrow range of between 85 percent and 90 percent, and Gartner analysts expect this to continue, on a slightly upward trend, through 2007 when total utilization rates will break into the 90 percent range, the firm said.

"We expect to see capacity and wafer fab equipment market growth dictated by increased device demand, and the increasingly costly transitions to new technology nodes," Rinnen said. "With equipment costs increasing an estimated 10 percent for each new technology node, manufacturers will manage investments in new technology very carefully."

Gartner said the packaging and assembly equipment market segment would decline 11.1 percent in 2005, slightly better than Gartner's October forecast of a 14.9 percent decline. The first half of 2005 was relatively slow for the packaging/assembly market, Gartner said, but more positive conditions developed late in the second quarter as industry utilization rates began to tighten and move back near the 85 percent mark.

- Dylan McGrath
EE Times

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