SMA (Strategic Marketing Associates ) has cut its capital spending forecast for 2007 by 50 percent.The firm previously forecast capital spending this year to increase by 10 percent to almost $60 billion; however, it is now forecasting only five percent growth and warning that growth could dip to zero.

SMA President George Burns explained in a statement, ¡°Japanese companies came in with spending plans much lower than we had anticipated. But what is really worrisome is the exceptionally slow start in both chip sales and equipment sales as reported by the SIA and SEMI.¡±

Further, SMA expects Japanese companies will cut spending this year.

In addition to lower than seasonally normal chip and equipment sales, pricing pressure may force DRAM and flash manufacturers to ease their spending plans, important because DRAM and flash spending this year will account for more than 50 percent of all capital spending. 

¡°The last time this group¡¯s share of capital spending was this high was in 1995, when they accounted for 56 percent of all spending. The result was over-capacity and three years of declining capital budgets,¡± Burns added.

Interestingly, DRAM and flash companies are breaking all records in adding new capacity: last year flash and DRAM companies brought seven fabs online with a capacity of 610,000 200-mm equivalent wafers a month, which was an increase in total memory wafer capacity of 26 percent, while this year they are planning to bring nine fabs online with a capacity of 915,000 wafers, an increase of 29 percent.

¡°I¡¯m warning our subscribers to keep their seat belt fastened. With continued pricing pressure and eroding profitability, companies will be tempted to hit the brakes and delay their expansion plans,¡± Burns concluded.

By: DocMemory
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