Gartner: Upcoming Lull In Demand For Chip Equipment

The lull in demand for semiconductor equipment has arrived, according to a report released today by Gartner Research. Gartner predicts worldwide semiconductor capital equipment spending will total $43 billion in 2007, a 2.7 percent increase from 2006. That pales in comparison to the 23 percent increase from 2005 to 2006. Declining dynamic RAM (DRAM) spending budgets, residual semiconductor inventories and strong capacity investments are contributing to the slowdown, according to Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing group. In 2008, Gartner predicts DRAM spending will decline from this year’s peak. Instead, equipment market growth will originate from NAND, logic, and foundry, which will drive a second year of slow, single-digit growth, according to the research firm. However, analysts predict strong DRAM unit demand in 2008, which should mitigate concerns of overcapacity and provide potential for growth next year. Wafer fab equipment (WFE) revenue is on pace to grow 5 percent in 2007, a significant slowdown from 2006 revenue growth of 25.7 percent. The 45-nm technology node will begin to ramp up in 2007, but investments in 65-nm and 90-nm production dominate the spending picture, according to Gartner. Memory is expanding again as part of the spending, reaching more than 54 percent of total WFE. However, memory spending will likely slow in the second half of the year as budgets are exhausted, which will lead to a decline in WFE demand for the rest of the year, the report said. Given stronger-than-expected memory test sales to support DDR test, Gartner projects revenue for the automated test equipment (ATE) market to decline less than 5 percent this year. In 2008, a modest recovery with growth of a little over 10 percent is expected.