In the continuing pattern of the semiconductor industry, the drive for the latest and greatest manufacturing technology will take the industry another step closer to the next dreaded oversupply state.

The latest data from El Segundo, Calif.-based market researcher iSuppli Corp. expects that that new semiconductor capacity coming on line later this year and next year will drive the chip industry from an undersupply state, as it is presently, to an oversupply position in less than two years. This of course helps lead the industry, along with declining chip prices, to nearly flat growth in 2006, the firm said.

This year, capital spending for semiconductors is tracking to grow by 34.8 percent to reach $45.2 billion, a positive change of 2002’s capital spending of $30.8 billion due to the 2001 downturn.  Last year, spending grew moderately to $33.5 billion, and is expected to slow next year, rising 6.2 percent to $48 billion, before falling 8.3 percent to $44 billion in 2006, iSuppli predicted in a recent report.

After that, capital spending will rise again by 9.3 percent in 2007 to reach $48 billion. And while capital spending will rise strongly over the next two years, it won't even come close to the excesses of 2001 when it reached $71.3 billion, iSuppli said. And on an encouraging note, the next slowdown is not expected to be near as severe as 2001’s downturn, when revenue fell about 30 percent, iSuppli said.

Since mid-Q3 2003 when the industry recovery commenced, wafer manufacturing utilization rates ascended from about 78 percent to more than 93 percent, which resulted in two consecutive quarters of record semiconductor unit shipments. And when all the numbers are in, iSuppli expects unit shipments during the first two months of Q2 to reach a new record level.

By: DocMemory
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