SCOTTSDALE, Ariz.--The semiconductor equipment industry is facing another round of consolidation--and bankruptcies--amid a sudden and unexpected plunge in IC capital spending, according to a report from Semico Research Corp. here this week.
In an e-mail newsletter called Semico Spin, Semico indicated the semiconductor equipment industry fell 42% in terms of revenue in 2001 over 2000, and was down 33% in 2002.
After a two-year and severe downturn, the slumping fab-tool industry is already off to a bad start in 2003. "Given the recent headlines from Applied Materials Inc. and several others, it does not appear to be getting better in the short term," according to the Semico Spin. "Some major foundries like Taiwan Semiconductor Manufacturing Co. Ltd. and other companies also recently announced that their capex would be significantly decreased in 2003 over previous forecasts," according to the Scottsdale-based research firm.
The report was referring to a pair of ominous events in the industry. Last Friday, Applied Materials stunned the industry by saying it expects its orders for the first fiscal quarter to be about 35% below the fourth quarter level (see Jan. 31 story ).
Also last week, TSMC said its capital spending will be in the range of $1.0-to-$1.5 billion in 2003, down from about $1.65 billion in 2002 (see Jan. 27 story ).
A plunge in semiconductor capital spending is a troublesome sign, which impacts the worldwide fab-tool industry. And the forecasts do not look promising in both the short or long term.
"If one were to calculate a 21% CAGR to get back to 2000 levels in terms of capital spending, it would take about 5 years to about 2008---assuming there is no downturn, and Semico is predicting another downturn again in 2005," according to Semico Spin. "Of course, if we go to war with Iraq, all bets are off entirely, and none of us has any control over that dark event," according to the Scottsdale-based research firm.
"Semico predicts that before its all over, we will see more equipment company consolidations, downsizing, acquisitions, with some even going bankrupt. The sad reality for this struggling segment is that in the end, only the strong and profitable will survive in a very tough and competitive global market," according to Semico Spin.
