NEW YORK (
) -- I pointed out last week that
in order for the equipment manufacturers to exhibit any real recovery, something that has eluded the sector as a whole since 2001.
Within the past month, many experts have announced extraordinary gains to be made in the semiconductor equipment market in 2010. In recent weeks, trade group SEMI and market research firm Gartner/Dataquest have issued forecasts calling for the chip-equipment market to grow in excess of 50% in 2010, following a decrease of nearly 50% in 2009. iSuppli last week called for 46% growth.
Part of the basis for these forecasts certainly must have come from announcements of large planned increases in capital expenditures, particularly among the memory manufacturers.
I noted that according to IC Insights, the $1 billion capex spenders include the following firms in 2010:
, a partnership that includes
Advanced Micro Devices
($1.1 billion) and
It is important to realize that capex is dynamic. Some companies will alter plans and spend less or more depending on conditions. Some will spend all their money in a short amount of time rather than spreading it evenly throughout the calendar year.
I also noted in a previous article that these
: How will the equipment market grow 50+% in 2010 with no new fabs and no new capacity additions when it dropped nearly 50% in 2009 with no new fabs and no new capacity additions? This leads to a follow-up question: Will technology purchases alone sustain 50% growth?
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
"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
( 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.
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.