Market researcher IC Insights has raised its 2005 worldwide semiconductor industry capital spending forecast, projecting that capex will be down 5 percent this year.

The Scottsdale, Ariz.-based market research firm had originally projected earlier this year that 2005 capex would be down 10 percent. While it raised its expected capex for this year, it suggested that 2006 capex would be down 7 percent year over year, compared to its original forecast of down just 1 percent.

In its forecast update, IC Insights observed that chip equipment suppliers often bear the brunt of the industry's cycles, even more so than chipmakers; semiconductor industry capital expenditures rarely exhibit a so-called soft landing. Moreover, because of the momentum in cap spending and capacity that is typically carried over from the peak spending year, in the current case 2004, spending in the second year after the peak, 2006 is usually weaker than the first year after the peak.

The top 25 capital spenders in 2005 represent 85 percent of worldwide semiconductor capital spending in 2005, up from 75 percent three years earlier in 2002, IC Insights noted. Each of the top four companies are expected to spend at least $2 billion in 2005 and, in total, account for over one-third, or 35 percent, of worldwide semiconductor capital spending outlays, according to the market research firm.

Samsung and Intel, both of which seem to be spending counter-cyclically, together are forecast to represent 25 percent of worldwide semiconductor capital spending in 2005.

While the top 25 companies are budgeting a 2 percent increase in 2005/2004 spending, the remainder of chip companies collectively will cut spending by 17 percent, IC Insights said. IC Insights believes that these smaller companies are likely to continue to increase their spending at a lesser rate, or decrease their spending at a faster rate, than the top 25 companies as they become increasingly reliant on foundries for their IC production. 

The company that has budgeted the largest 2005 capital spending percentage increase among the top 25 is Taiwan's Winbond. The company raised its 2005 capital spending budget five times that of its 2004 spending level as the construction of its 300mm fab gets underway. At the other extreme, Chinese foundry SMIC, the top 25 capital spender that registered the highest spending rate increase in 2004 306 percent, has planned the largest budget cut for 2005, reducing spending 46 percent.

By: DocMemory
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