Gartner weighs in on semiconductors

THE OVERPAID analysts at Gartner have decided that spending on semiconductor equipment will grow by 113 per cent this year, clocking in at somewhere above $35 billion.

However, apparently forgetting that it is better to follow bad news with good as opposed to the other way around, they added that vendors should expect spending to drop again next year.

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

Thanks Klaus, now if you could, please leave us on a high note. But no. "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." Nevermind.

Rinner continues, telling us that following some period of underinvestment firms are now making amends on their 'pent up demand for equipment', but again, taints this hopeful news with a sour note.

"For 2010, the semiconductor equipment industry will experience exceptionally strong growth, as we emerge from a very costly and deep recession," said Mr. 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. 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," he concluded.

We cannot confirm whether Rinnen is available as a speaker for weddings, funerals or bar mitzvhas, however, we can confirm that he is predicting that the wafer fabrication equipment (WFE) segment is due to rise by 113.3 per cent this year, but just 7.2 per cent the year after.

Packaging and assembly will see similar growth this year, 104.7 per cent, but will grow by 0.7 per cent in 2011. Semiconductors used in wafer level packaging and 3D video chips are set to grow faster than the rest of the pack.

The biggest growth will be seen in the automated test equipment (ATE) market, which will grow by more than 133 per cent in 2010, according to Gartner.

We're not really convinced about its forecasts. But then we never have been. For one thing, Gartner never reviews it's earlier prophecies and compares them with what has actually happened. Good work if you can get it. µ