“The fundamentals are good,” said Harvey Frye, president of Tokyo Electron America Inc. (Austin, Texas), the U.S. subsidiary of Japanese semiconductor equipment giant Tokyo Electron Ltd. (TEL). “Aside from a couple of speed bumps, I believe that the fundamentals are good for the next two-to-three years.”

There are indeed some pockets of weakness in the semiconductor industry, but the first part of 2006 has been generally strong in the IC-equipment sector. Advantest, ASML Holding, Canon, Lam Research and other industry bellwethers have separately posted strong results in the first quarter of this year — with positive outlooks as well.

Many analysts believe the momentum will continue in the second period and into the second half. But in the short-to-long term, there are also some troubling warning signs. Visibility remains low for many vendors, especially in the backend of the market.

Intel's recent move to cut capital spending is an issue, while IC inventories are beginning to build in the supply chain. And what’s more, soaring oil prices are a still major concern in the industry, which could dampen consumer confidence.

Still others are bullish about 2006 and beyond. “We as an industry are ready to break out,” said Stephen Newberry, president and chief executive of chip-equipment vendor Lam Research Corp. (Fremont, Calif.), during a presentation at the recent SEMI Strategic Business Conference here.

Newberry estimated that worldwide capital spending will increase by 15-to-16 percent in 2006 over 2005. The wafer-fab equipment market alone is projected to grow by 22 percent in 2006, he said.

Last month, Gartner Inc. and VLSI Research Inc. separately raised their growth forecasts for semiconductor equipment in 2006. Since December, Gartner said the top-20 semiconductor manufacturers have increased capital expenditure budgets by $6.3 billion, about $4 billion of which is attributed to memory manufactures responding to increased demand for DRAM and NAND flash devices. Wireless and other sectors are also strong.

Others believe Gartner and VLSI Research were late to the party. “I would have [raised the forecast] four months earlier if I were them,” said TEL’s Frye in an interview at the SEMI event. “We’re doing quite well across the board.”

Not all are bulls, however. “The backend is a challenge,” said Pieter Vandewalle, marketing director for ICOS Vision Systems NV (Belgium), a supplier of inspection equipment for the backend. “Visibility is very low.”

Most are cautiously optimistic. “We’re seeing more pull-ins than push-outs,” added Geoff Wild, president and chief executive for Nikon Precision Inc. (Belmont, Calif.), the U.S. chip-equipment arm of Japanese lithography giant Nikon Corp. (Tokyo).

By: DocMemory
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