By Mark LaPedus
The semiconductor sector is cooling down after a recent surge in demand, but the cyclical nature of the business is not the real problem for fab tool makers.

Bill McClean, president of IC Insights, said the IC industry is quickly evolving into the “haves” and “have nots.” In other words, only a few chip makers have deep pockets and can afford to spend money on fabs, while most simply don’t have the funds.

In fact, only six of the 35 major semiconductor makers are projected to boost their capital expenditures in 2012, according to the firm. Most of the remaining companies are “running for the doors” and reducing their capital spending in 2012 and perhaps beyond, McClean said.

And that ominous trend is expected to continue for the foreseeable future. IC Insights’ latest survey and ranking of the major semiconductor capital spenders shows that only Intel, Samsung, Hynix, TSMC, UMC and Rohm are expected to spend more in 2012 than they did in 2011.

The six major companies that plan to increase semiconductor capital spending this year are expected to collectively spend about $5.2 billion more in 2012 than in 2011. In contrast, the total of the remaining capital spending outlays are forecast to decline by about $7.5 billion this year, according to IC Insights.

Total semiconductor industry capital expenditures are now forecast to decline only 3% this year, as compared to the previous expectations of an 8% decline, according to IC Insights.

Besides the capital spending trends, the cyclical nature of the IC business has reared its ugly head again. The IC industry was sluggish in early 2012, but it began to heat up in the second quarter.

Now, amid worrisome signs on the economic front and lackluster demand, the mood has suddenly changed for the worst. Applied Materials, AMD, Intel, TSMC and others have cut their respective outlooks for the industry.

“Our view that the industry has been slowing since early June was confirmed at Semicon West as several companies cut their outlook for the current quarter and the year due to order push outs from foundries and memory suppliers,” said G. Dan Hutcheson, president of VLSI Research.

“While the mood at Semicon turned cautious, the current slowdown was viewed by many executives as seasonal and temporary, much like it has been in the last two years,” he said. “In fact, it felt like 2011 all over again. Last year at Semicon, Applied Materials slashed capex by $1.0 billion, citing weakness in foundries and DRAM. This year, it was foundries and NAND that triggered the downgrades.”

VLSI Research recently released its upbeat outlook for 2013. The semiconductor equipment market is expected to reach $56 billion in 2013, up 10.1% from 2012. VLSI Research also raised its fab tool forecast in 2012, from minus 7.2% to minus 4%.

In addition, VLSI Research said the worldwide IC market is projected to hit $283.4 billion in 2013, up 9.7% from 2012. The firm also lowered its IC outlook in 2012, from 4% growth down to 2.3%.

Providing another viewpoint, SEMI projects semiconductor equipment sales will reach $42.4 billion in 2012. The forecast indicates that following a 9% market increase in 2011, the equipment market will contract by 2.6% in 2012. Dan Tracy, an analyst with SEMI, sees 10.2% growth in semiconductor equipment sales in 2013.

Bob Johnson, an analyst with Gartner, said the IC market would grow 4% in 2012 and 8.6% percent in 2013. But worldwide capex would fall by 3.6% in 2012, Johnson said. “The 2012 growth forecast assumes a stable economy and the end of inventory reduction,” he said.

In contrast, Jim Feldhan, president of Semico, sees 8.8% growth for ICs in 2012 and 15% growth in 2013. The forecast reflects the booming mobile sector and other factors, he said.

IC Insights’ McClean said the IC market will grow 2% to 3% in 2012 and 5% to 6% in 2013. The relatively low forecast reflects the stagnant world economy, uncertainly in Europe and other factors, he said.

Tags: AMD, Applied Materials, Hynix, IC Insights, Intel, Rohm, Samsung, Semico Research, TSMC, UMC, VLSI Research

This entry was posted on Monday, July 23rd, 2012 at 4:05 pm and is filed under Industry Research. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.