Firm Ups Outlook as Equipment Market Heats Up
By Mark LaPedus
The semiconductor equipment market continues to improve in 2012, prompting VLSI Research Inc. to raise its fab tool forecast for the second time in recent weeks.
Citing recent moves by Intel, Samsung and others to raise their respective capital spending this year, VLSI Research now predicts the semiconductor equipment market will reach $49.2 billion in 2012, down 7.1 percent over 2011. And in another positive move, VLSI Research also raised its overall IC forecast from 3.9 percent growth to 4.3 percent in 2012.
Not long ago, the research firm originally projected that the fab tool market would fall by a whopping 20.1 percent in 2012. Then, in February, VLSI Research raised its forecast and predicted the semiconductor equipment market would reach $45.6 billion in 2012, down 9.8 percent over 2011.
“Chip makers are generally optimistic and many of them are seeing positive trends in the market,” according to a new report from VLSI Research. “They expect a healthier business environment in the coming quarters. Foundries are at the forefront and investing aggressively as most of their leading-edge capacity is tapped out. The equipment industry is seeing a nice rebound following a weak Q4.”
There are some troubling signs as well. David Rubenstein, an analyst with Religare Capital Markets, an investment banking firm, sees an uphill battle for fab tool makers in 2012. “We project that capital spending will fall 12 percent year-over-year in 2012,” he said. “We forecast -19 percent FPD capex in 2012 and further declines in 2013.”
One of the problems is the ongoing memory downturn, which is hurting capital spending. “The memory sector remains a drag on the overall activity,” according to VLSI Research. “NAND orders are still soft as the industry burns some excess SDD inventory. DRAM activity remains pretty much frozen.”
Greg Wong, an analyst with Forward Insights, a research firm, sees a rebound in NAND flash. That market is “fairly weak right now due to seasonality. But it should starting improving in the second half with new smartphones, tablets and ultrabook launches,” Wong said.
Total inventories increased nearly 1 percent in February and are projected to jump by another 3 percent in March, according to VLSI Research. Total IC inventories in March will be 7 percent lower than from last year’s levels, according to the firm.
The fab tool vendors are also seeing a mixed picture. At the recent Applied Materials Inc. analyst event, Applied CEO Mike Splinter acknowledged that the company sees a challenging environment.
At the event, Applied guided fiscal 2012 revenues and EPS of $9.1-to-$9.5 billion and $0.85-to-$0.95, respectively, falling short of consensus of $9.6 billion and $0.96. This is “driven primarily by weakness in non-semi segments” like solar and displays, said C.J. Muse, an analyst with Barclays Capital.
“On the positive side, Applied is poised to benefit from several positive trends in semi,” including “increasing process steps in the move to 2Xnm/1Xnm, a move to 3D NAND, sustainability of wafer fab equipment spending, and growing capital intensity in display,” he said.
Tags: Applied, DRAM, Flash, Intel, NAND, Samsung, VLSI Research