Semiconductor equipment spending beginning to decline

Semiconductor manufacturing equipment shipments have leveled off after a strong rebound from the 2008-2009 downturn. August 2011 three-month-average shipments based on combined data from SEMI (North American and European companies) and SEAJ (Japanese companies) were $2.9 billion, down from a peak of $3.2 billion in May 2011. Three-month-average bookings have dropped significantly to $2.2 billion in August, down 31% from the peak of $3.3 billion in August 2010. The book-to-bill ratio dropped to 0.78 in August, indicating continuing declines in billings.
SEMI’s September 2011 forecast for semiconductor manufacturing equipment calls for a 23% increase in billings in 2011 followed by a decline of 3% in 2012. One of the largest capital spenders, TSMC, plans to cut spending by 19% in 2012 after a 25% increase in 2011, according to Taiwan press reports. What will be the impact of decreased spending on semiconductor capital equipment on semiconductor capacity and utilization? The latest available data from Semiconductor Industry Capacity Statistics (SICAS) for 1st quarter 2011 showed industry IC capacity utilization of 94.2%, the fifth consecutive quarter with utilization above 90%. Semiconductor shipments are currently sluggish. Recent forecasts for the 2011 market range from a decline of 2% to growth of 5%. Forecasters agree the semiconductor market will pick up to stronger growth in 2012, ranging from 5% to 10%. Our forecast at Semiconductor Intelligence remains at 4% for 2011 and 10% for 2012.

The worldwide economic outlook is very uncertain, causing semiconductor manufacturers to be very cautious. The downward trend in seconductor manufacturing equipment spending will slow down the rate of capacity growth. If the forecasts of improving semiconductor market growth in 2012 hold true, IC capacity utlization should remain above 90% through at least 2011 and probably into at least the first half of 2012. Utilization in the 90% to 95% range is generally healthy for the industry – high enough for semiconductor manufacturers to remain profitable but not high enough to result in significant shortages.