2005 is poised to be the third best year in the history of the chip equipment market – but the industry nevertheless isn't feeling extremely bullish here at the mid-way point of the year.

Kicking off the 35th annual Semicon West tradeshow here, Semiconductor Equipment and Materials International (SEMI) released results of its updated member consensus forecast. Members of the consortium suggest that market growth will decline 12 percent this year; back in December the consensus forecast had pegged the drop to be around 5 percent.

But SEMI suggested the industry has hit the bottom and things are beginning to improve. "No one likes a downturn, but it is a mild one," said Stan Myers, president and CEO of SEMI. His remarks came during a press conference this afternoon here.

"The degree to which the adjustment is occurring is relatively modest," agreed Stephen Newberry, president and CEO at tool vendor Lam Research Corp. Newberry's remarks came during a panel discussion during the press conference.

Myers noted that if the 2005 equipment and materials market comes in at the forecast $63 billion. That would make only 2004, at $65 billion, and the eponymous 2000, when the market hit $75 billion, better years than this year.

Furthermore, he noted that capital spending in Korea has remained strong in the first half of this year, driven by Hynix and Samsung, even as spending in China has cooled. China, incidentally, accounted for 7 percent of capital spending in 2004; this year, it will likely only account for about 3 percent.

SEMI's index of worldwide wafer area shipments has been continually improving since bottoming out early this las t year, Myers observed; it last peaked in the spring of 2004, 12 percent above the peak of 2000. He also pointed out that while equipment orders have been lower year over year this spring, order bookings have stabilized well above the levels of the previous two years.

As for the consensus forecast, SEMI members – some 2,000 companies – predict that the market for wafer process equipment, test, assembly and packaging and other segments, will total some $32.63 billion, compared to $37.11 million in 2004. The members forecast a return to growth in 2006, when the total will hit $35.28 billion, and in 2007 when it hits $38.86 billion.

Semiconductor and packaging related materials, however, will fare much better, according to the consensus forecast. The materials market, unlike that of equipment, is directly correlated to unit volumes in the chip industry.

According to the SEMI consensus forecast, the market for materials will hit $30.12 billion this year, compared to $28.08 in 2004. It will continue grow, hitting $32.01 in 2006 and $34.76 in 2007.

But some in the equipment industry think their might be more improvement in market conditions in the latter half of the year than some people think. Ken Shroeder, CEO of metrology giant KLA-Tencor, suggested during the panel discussion that just in the past few weeks, capacity utilization has begun creeping up at the major chip foundries. It could prompt them to pull in capacity orders for 90nm process equipment, in order to boost available capacity, he said.

"It could affect the forecast; we'll just have to wait and see," Shroeder said.

Tien Wu, president of backend services giant ASE's Americans and European operations, also expressed some optimism. "In the backend we're seeing some tightening of capacity," Wu said. Although he suggested that 2005 will be a flattish year for assembly and test, 2006 would see the market grow.

"We're actually pretty optimistic for 2006 and 2007," Wu said.

By: DocMemory
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