Capex spending by chip companies picks up in 2004

Capital spending by semiconductor companies is accelerating and will grow a hefty 51% to $44.8 billion, according to a new report by market researcher Gartner Inc. However, capital spending will decline in 2006 and 2007.

Capital equipment spending will grow 63.5% in 2004. "The surge in

The other segments in the industry are all projected to show spending increases of more than 60% in 2004. The increase in capital spending will mean the wafer fab equipment (WFE) market will rise 63.4%, while the packaging and assembly equipment (PAE) market is forecast to grow 63.2%. The automated test equipment (ATE) market will increase 64.2% in 2004.

The combination of cautious investment in 2003, and rising production continues to drive wafer fab use rates upward. Worldwide semiconductor wafer fab use reached 94.3% at the end of the second quarter of 2004, up from 93.2% at the end of the first quarter.

Leading-edge utilization reached 99% by the end of the second quarter, indicating that the most advanced fabs are running flat out.

"These high utilization rates provide ever increasing momentum for growth in the WFE market," says Rinnen. "The industry needs more capacity to continue meeting increased device demand, and the industry is finally reacting to the need with a degree of urgency."

On a regional basis, Asia Pacific will show the heaviest investment accounting for 44% of the capital spending. The Americas region will represent 23% of total spending. Japan will account for 21% percent of spending and Europe and the Middle East will represent 12% of overall spending.

"Economic growth in the U.S. and China continues to be of high importance for accelerating global semiconductor growth," says Rinnen. He says in the U. S. semiconductor growth will depend on the Federal Reserve board's ability to move the economy from recovery to sustainable growth.