Worldwide semi equipment spending to drop 20% in '08

DRAM and other memories
"The expected bursting of the DRAM capital spending bubble has finally happened, as rampant overcapacity in that sector drove unit prices well below cash costs for most manufacturers," said Klaus Rinnen, managing VP for Gartner's semiconductor manufacturing group. "Since our last update in late December, reported DRAM spending plans have declined to the point where we are now projecting a drop of almost 47 percent in DRAM spending and 29 percent in total memory in 2008."

"The memory market peaked last year by spending over 57 percent of total revenue for capital expansion, a level which cannot be supported by the anticipated lackluster revenue growth. We expect this to drop significantly to the low 40 percent range for this year and 2009," Rinnen said.

In the equipment market, all segments are expected to decline in 2008. "Selected technology buys will occur as logic manufacturers begin to install 45nm process capability and foundries continue to ramp 65nm production, but these investments will occur at a measured rate," Rinnen said. "We do not expect many IDMs to increase investments, and in most cases their spending will actually decline. Overall capital spending on logic will decline by 7.6 percent."

Worldwide wafer fab equipment spending is expected to decline 17.4 percent in 2008. Despite a small increase in NAND flash, the sharp decline in DRAM-related spending will hit hard at companies with a high level of exposure to the memory market. The recovery should begin in 2H 08 as DRAM supply and demand come into balance.

Other equipment markets
After declining 3.7 percent in 2007, the worldwide packaging and assembly equipment market is expected to fall an additional 18.1 percent in 2008. Recent data suggests the industry may have hit the bottom in Q1 08. Gartner analysts said it is still to be determined whether the market will begin a recovery in the Q2 08, or if industry drivers remain weak, resulting in a delayed order picture until late 2008 or early 2009.

The worldwide automated test equipment market declined 14 percent in 2007, and analysts expect a similar decline of approximately 13 percent in 2008, as test providers remain cautious with capital budgets. Gartner analysts expect improved market conditions beginning in the middle quarters this year. Increased orders for memory testers should occur by late Q2 08 and early Q3 08 as test capacity requirements increase for newer DDR memory generations (see table).