Capital equipment spending to rise 20.6% in 2004

Worldwide semiconductor capital equipment spending will increase 7.8% to $29.7 billion in 2003 and then 20.6% to $35.8 billion in 2004, according to market researcher Gartner.

While capital spending by several large semiconductor companies was slow in the second quarter, wafer fab equipment

While semiconductor inventories are low and semiconductor demand is rising, chip companies are not yet building new fabs even though fab utilization rates are high. For the third quarter, Gartner analysts estimate fab utilization at 86.5% overall and 93% for leading edge (defined as 0.18 micron and below). Those rates are approaching the point where spot shortages typically begin to appear.

The problem is not a lack of space to put new equipment. Empty shell capacity (potential capacity in completed fabs with no equipment) will end the year at 34% of total installed 200mm and 300mm capacity.

"There are 16 fabs scheduled to begin production between July 2003 and June, 2004. Five of these are in the second half of 2003," says Klaus-Dieter Rinnen, managing vice president for Gartner semiconductor manufacturing and design research group. "These include nine 300mm fabs and seven 200mm fabs. However, equipment orders remain at an alarmingly low rate, so we can expect these new fabs to begin production at low levels and ramp slowly until the industry approaches a widespread supply limited condition," he says.

While spending is still slow for wafer fab equipment, packaging and assembly equipment is enjoying its first year of solid growth acceleration since 2000. Because advanced packaging has been growing significantly in the past year and capacity is tightening, the packaging and equipment market is finally returning to positive growth in 2003. This is being led by the continued rapid adoption of the lead frame-based leadless packages.