Reaching growth of more than 50% will result in nearly $20 billion in wafer fab equipment purchases for technology improvements, $7 billion more than in 2009 for a net zero growth in new fabs built.
Since I've been in the business of analyzing the semiconductor equipment market since 1983, I value statements made by respected executives in leading equipment companies, because after all they're supposed to eat, sleep, and drink their business while keeping their ears to the ground and their fingers on the pulse.
Below are quotes from Steve Newberry, president and CEO of Lam Research (LRCX):
"As we look to the broader industry trends for 2010, we expect the recent strength in customer demand for new systems to continue, at least in respect to the first half of the year. We estimate that in 2009, there was wafer fabrication equipment spending of approximately $13 billion, and we expect at this moment in time that the market for equipment purchases in 2010 will be somewhere in the range of $20 billion to $22 billion, likely up 55% to 70% over 2009."Newberry's forecast of 55% to 70% may have been influenced by the forecasts from the aforementioned experts. But the real guts and glory come from the statement a little further in Lam Research's earnings conference call: "OK. Well, no disrespect intended, but what I would say, whenever I talk about what is going to happen, it's not what is going to happen, it's always predicated with based on what the customers are telling us today, based on what they are planning in terms of orders and shipments, this is what it looks like. And clearly, with the lead times as short as they are, I wouldn't believe anything anybody says because nobody knows. All you're really getting from me or from anybody else is what the current snapshot in time is, in terms of what the customers are saying they want to do, and what they're currently doing in this quarter. "And so relative to what's actually going to happen in the second half of 2010, I don't know. I just know that if you take the current level of our shipment output on a systems basis, if we continue to ship at that rate, then the industry would have to spend about $28 billion in wafer fab equipment. And I think that that's less likely to be what they do. And so, therefore, when I look at what they're telling me they're planning on doing, they're telling me they're planning on taking less shipments in the second half than they are planning to take in the first half. Whether that's actually how it plays out, I don't know." Wow. An industry expert, a president and CEO of leading equipment company, and he doesn't know. And his statement, " I wouldn't believe anything anybody says because nobody knows" is the master stroke that sums up the industry. So, if he doesn't know, and doesn't think anyone else does, what's the point of advertising forecasts that can be inferred as wrong? Take a look at Qualcomm (QCOM) and Motorola (MOT), with their forecasts for growth in the cell phone sector. I bet they don't believe the forecast either. -- Written by Robert Castellano in New Tripoli, Pa. At the time of publication, Castellano had no positions in the stocks mentioned.
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