Decline to continue for semi-conductor industry

Last year proved to be the worst on record for the semi-conductor industry, with capital spending in the market decreasing by 29%, but Gartner Group is expecting only marginal improvements in 2002.

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By  Zoe Moleshead Published  January 8, 2002

Last year proved to be the worst on record for the semi-conductor industry, capital spending in the market decreased by 29%, while equipment markets revenue fell by 37%, according to preliminary figures from Gartner Group.

Worldwide semi-conductor capital spending hit a total of $44.4 billion in 2001, but this was 28.9% down on the previous year, while the equipment market revenues dropped from $39.9 billion in 2000 to $25.2 billion in 2001.

"The manufacturing challenges in the industry were readily apparent in 2001," said Klaus Rinnen, chief analyst & director, semiconductor manufacturing group, Gartner Dataquest. "As demand weakened and capacity utilisation decreased, financial considerations became foremost in everyone's mind. Thus capital expenditures took a back seat to everyday production needs."

The doom and gloom also looks set to continue into 2002. Although Gartner Group is predicting a recovery in capital equipment spending during the latter half of the year, the forecast is still a 19% drop in equipment spending for this year.

Spending cuts occurred worldwide, led by Asia/Pacific foundry and DRAM companies, which reduced capital outlay by nearly 47%, Europe followed with a decline of 26% and the US also saw spending fall by 21%.

Cuts are also expected to continue in capital spending this year with Gartner Group suggesting a 24% decrease.

"A macroeconomic recovery and returning electronic equipment demand should finally bring the demand-component of the down cycle under control. However, overcapacity remains excessive and still demands industry attention," added Rinnen. "With demand firming, the semiconductor industry will be afforded increasing visibility, finally being able to plot its course to another up cycle."

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