We've heard that the recovery is here before, but this time around New Tripoli, Pa.-based market research house The Information Network (TIN) says it's for real.

Robert N. Castellano, president of TIN, said that based on good Q1 results, the semiconductor equipment market has begun its much anticipated  recovery.

"It looks like in the U.S. all these issues are behind us now and the six month indicators are up," he said. "We're seeing strong sequential growth and strong quarter to year growth at a time when we went through the war. The war jitters are over with; the high oil prices that people were talking about are now dropping down; and people are starting to see now that the sky didn't fall in and consumer confidence is up to a seven month high. Primarily in the U.S., a lot of those issues that started in the beginning of the year may be over with."

Equipment orders bottomed out in the December 2002 quarter, and with that the under investment in technology in 2001 and 2002 has reverse itself and will return to normalized levels in 2003, TIN reported. On that, the firm expects sequential growth in Q1 of 6 percent and year-over-year growth of 10 percent 11 percent.

Castellano noted that the research house originally forecasted 15.5 percent growth for Q1. That was lowered to 7.3 percent when the war with Iraq broke out. Now, with quarterly numbers like ASML's 78% sales increase is coming in, Castellano said that should bring up the curve. The final number will be heavily influenced by big players like Applied Materials Inc., which is currently in a quite period and is slated to release results on May 13.

Renewed spending will be driven by smaller geometries, new materials and an increase in wafer size to 300mm, Castellano said, estimating that the capital spending ratio of device manufacturers will move back above 20 percent of semiconductor sales. 

"What companies now are already expecting with capital expenditures on the order of about 6 percent, but that's a moving target," he said. "The semiconductors companies have an outlook and many times, unfortunately, they are so tied in with what the stock market is doing and stock options and everything, they don't want to make big investments that will hurt the stock and hurt profits. But what people say with semiconductor companies is that the beginning of the year [capex statement] is very different than what they actually do."

Demand for 200mm equipment to upgrade existing fabs of top tier customers and foundries to 0.13-micron and copper, combined with some renewed strength in Taiwan should be the drivers of the improved order trend, TIN added.

Meanwhile, Castellano said that every country's outlook isn't as rosy as the U.S'. The analysts noted Japan's ongoing technology recession, economic weakness and bank issues in Germany, and low consumer confidence in the U.K.

"Whether that growth will be flat or in that 7 to 15 percent range really is going to depend also on what's happening globally," Castellano said. "What's happening with SARS for example, and how that's affecting the economy. If people are hiding out in their houses, they aren't buying and that's affecting consumer confidence [in Asia]."

By: DocMemory
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