NEW YORK ( TheStreet) -- Two Taiwan chipmakers have raised their capital expenditures in a further sign of a recovery of the chip market.

Taiwan's United Microelectronics ( UMC) reported Wednesday that it's increasing its capital expeditures for 2009 to $500 million from less than $400 million.

In addition Taiwan Semiconductor Manufacturing ( TSMC)revised upward its 2009 capital expenditures budget to $2.3 billion from an estimated $1.9 billion.

The moves are in line with what we had forecast for the two companies in a TheStreet.com column Tuesday when we said that Singapore-based foundry Chartered Semiconductor had raised its 2009 capital budget forecast by a third on growing demand.

In its latest earnings report UMC reported a 109 percent in revenue quarter over quarter. It said wafer shipments increased 134 percent sequentially to 898 thousand in the second quarter, compared to 384 thousand 8-inch equivalent wafers shipped in the first quarter. Overall utilization rate for the quarter was 79 percent, compared to 30 percent in the previous quarter and 85 percent a year ago.

For TSMC, the world's largest foundry, second-quarter revenues were up 88% sequentially. TSMC recorded wafer shipments of 1.97 million 8-inch equivalent units in the second quarter, up 121% from 892,000 units in the first.

As we pointed out in a recent column, the chip market recovery had begun, but tightened purse strings was keeping the semiconductor equipment market from exhibiting comparable up and down cycles characteristic of the semiconductor market.

We said that "In January 1995, 11.4% of revenue generated by semiconductor manufacturers was spent on new processing equipment. Forward to May 2009 and only 3.8% of semiconductor revenue was spent on equipment."

As shown in the chart below, up until 2001, the semiconductor equipment and the semiconductor markets moved in tandem, exhibiting a peak and a valley every three years. After 2001, the situation changed as the semiconductor market continued strong growth until late 2008 while the equipment market was essentially flat until mid-2008.

Semiconductor Equipment Billings and Semiconductor Revenues
Jan 1995 to Jan 2009
Source

For 2009, we forecast that the semiconductor equipment market will drop 46% compared to a 26% drop in the semiconductor market. Most importantly, the semiconductor equipment market will continue to grow through 2012, increasing 20% in 2010 and 49% in 2011.

-- Written by Robert Castellano in New Tripoli, Pa.
Robert N. Castellano, Ph.D, is President of The Information Network, a leading consulting and market-research firm for the semiconductor, LCD, HDD and solar industries. Castellano is internationally recognized as one of the leading experts in these areas. He has nearly 25 years of expertise as an industry analyst. Castellano has provided insight on emerging technologies to many business and technical publications, including Business 2.0, BusinessWeek, The Economist, Forbes, Investor's Business Daily, Los Angeles Times Magazine, The New York Times, USA Today and The Wall Street Journal. He is a frequent speaker at conferences and corporate events. He has over 10 years' experience in the field of wafer fabrication at AT&T Bell Laboratories and Stanford University before founding The Information Network in 1985. He has been editor of the peer-reviewed Journal of Active and Passive Electronic Devices since 1985. He is author of the book "Technology Trends in VLSI Manufacturing," published by Gordon and Breach. His book "Solar Cell Processing" was published in 2009 by Old City Publishing. He received his Ph.D. in solid state chemistry from Oxford University.

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