Global semiconductor capital equipment spending to rise 15% in 2014

The global semiconductor capital equipment spending is projected to total $38.5 billion in 2014, a 15 per cent increase from 2013 spending of $33.5 billion. Capital spending will rise 7.1 per cent in 2014 as the industry begins to recover from the recent economic downturn and total spending will follow a generally increasing pattern in all sectors through 2018, according to a study by global research and analyst firm Gartner.

"While capital spending outperformed wafer fab equipment (WFE) spending in 2013 but that is not true for 2014. Total capital spending will grow by 7.1 per cent, while WFE will increase 16 per cent as manufacturers pull back on new fab construction and concentrate on ramping new capacity instead,'' said Bob Johnson, research vice president at Gartner.

''Momentum from exceptionally strong fourth-quarter 2013 sales was carried forward through the first quarter, then is expected to bounce around a flat trend line through the remainder of 2014. In the longer-term profile, growth continues through 2015, dips slightly in 2016 and increases through 2018,'' Johnson added.

Logic spending remains the key driver of capital spending throughout the forecast period, but due to the anticipated softening of mobile markets it will grow less than memory. Memory will provide most of the growth in capital spending through 2018, with NAND Flash being the primary impetus.

Capital spending is highly concentrated among a handful of companies. The top three companies (Intel, TSMC and Samsung) continue to account for more than half of total spending. Spending by the top five semiconductor manufacturers is nearly 63 per cent of total projected 2014 spending, with the top 10 accounting for 77 per cent of the total.

Semiconductors
Gartner predicts that 2014 semiconductor capital spending will rise 7.1 per cent, followed by 9 per cent growth in 2015. The next cyclical decline will be a slight drop of 3.5 per cent in 2016, followed by a return to growth in 2017 and 2018.

The positive outlook for capital spending in 2014 is a result of strong demand across most semiconductor segments. Strong anticipated sales in the smartphone and ultramobile product areas are stimulating investment in the more advanced logic facilities.

The capital spending forecast estimates total capital spending from all forms of semiconductor manufacturers, including foundries and back-end assembly and test services companies. This is based on the industry's requirements for new and upgraded facilities to meet the forecast demand for semiconductor production. Capital spending represents the total amount spent by the industry for equipment and new facilities.

The WFE forecast estimates market revenue based on future global sales of the equipment needed to produce the wafers on which semiconductor devices are fabricated. WFE demand is a function of the number of fabs in operation, capacity utilisation, their size and their technology profile.