Watch the Chip Companies' Capex

NEW YORK (TheStreet) -- Technology investors need to pay close attention to semiconductor capital expenditures (capex), because this spending can give indications of not only the state of the semiconductor industry but also the prospects for semiconductor equipment markets.

In any given year, semiconductor manufacturers make capital expenditures for two purposes: technology expansion and capacity expansion. Because of the downturn in the overall economy in 2009, capacity utilization (the ratio of the number of semiconductors to plant capacity) dropped precipitously in the first quarter of this year to 55.6% from 89.7% a year earlier, according to statistics from the Semiconductor Industry Association.

Clearly, semiconductor manufacturers would not be building new plants -- known in the industry as "fabs" -- at a cost of $3 billion each when more than 40% of their plants are idle.

There are only three semiconductor companies that plan more than $1 billion in capex spending in 2009: Intel(INTC Quote), Taiwan Semiconductor Manufacturing(TSM Quote) and Samsung. That's down from the eight companies that actually spent more than $1 billion in 2008. (They also included Micron Technology(MU Quote), SanDisk(SNDK Quote), Hynix, Toshiba(TOSBF.PK Quote) and Infineon(IFNNY.PK Quote)). In 2007, 16 companies spent more than $1 billion on capex.

Comparing Capex Semiconductor Capital Expenditures This Year and Last Capex CY 2008 CY 2009 Intel $4.9 B $4.7 B Samsung Samsung $4.5 B Taiwan Semiconductor $1.8 $2.3 B Toshiba $3.2 B $900 M AMD/GlobalFoundries $900 M $790 M UMC $349 M $500 M SanDisk $1.6 B $500 M Chartered Semiconductor $650 M $500 M

With the improved outlook for the economy and industry, other semiconductor companies have announced increases in capex spending for 2009. United Microelectronics(UMC Quote) will increase capex to $500 million from the $400 million announced earlier this year. That will be an increase from the $349 million the company spent in 2008.

Chartered Semiconductor(CHRT Quote) will increase capex $500 million from the $375 million announced earlier this year, although that is down from $650 million in 2008. Toshiba's capex will be $900 million in 2009, down from $3.2 billion in 2008.