Gartner Says Worldwide Semiconductor Capital Equipment Spending to Increase 15 Percent in 2014

STAMFORD, Conn., July 9, 2014 -- Worldwide semiconductor capital equipment spending is projected to total $38.5 billion in 2014, an increase of 15 percent from 2013 spending of $33.5 billion, according to Gartner, Inc. Capital spending will increase 7.1 percent 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.

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

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 percent of total projected 2014 spending, with the top 10 accounting for 77 percent of the total.

Gartner predicts that 2014 semiconductor capital spending will increase 7.1 percent, followed by 9 percent growth in 2015. The next cyclical decline will be a slight drop of 3.5 percent in 2016, followed by a return to growth in 2017 and 2018 (see Table 1).

Table 1

Worldwide Semiconductor Manufacturing Equipment Spending Forecast, 2013-2018 (Millions of Dollars)

	2013	2014	2015	2016	2017	2018
Semiconductor Capital Spending ($M)	58,009.3	62,151.9	67,683.3	65,309.6	69,087.7	75,048.3
Growth (%)	-1.2	7.1	8.9	-3.5	5.8	8.6
Capital Equipment ($M)	33,452.0	38,481.9	42,714.6	40,252.3	44,146.4	47,775.7
Growth (%)	-11.6	15.0	11.0	-5.8	9.7	8.2
Wafer Fab Equipment ($M)	27,278.1	31,665.1	34,492.0	33,262.0	36,102.8	39,140.4
Growth (%)	-8.0%	16.1%	8.9%	-3.6%	8.5%	8.4%
Wafer-Level Packaging and Assembly Equipment ($M)	1,801.6	1,943.4	2,461.9	2,649.5	2,523.3	2,963.7
Growth (%)	-3.1	7.9	26.7	7.6	-4.8	17.5
Electronic Equipment Production ($M)	1,489,566.6	1,540,430.5	1,593,844.4	1,666,455.9	1,739,601.4	1,813,808.6
Growth (%)	1.5	3.4	3.5	4.6	4.4	4.3
Semiconductor Revenue (excluding Solar) ($M)	314,991.1	336,053.9	352,615.3	360,728.5	373,216.9	389,542.7
Growth (%)	5.0	6.7	4.9	2.3	3.5	4.4

Source: Gartner (July 2014)

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. In memory, a favorable DRAM pricing environment is anticipated to produce strong revenue growth that will stimulate investments in new facilities. Propelled by the success of solid-state drives, NAND Flash is increasing investment in additional capacity.

Overall, the long-term outlook is for continued investment in leading-edge logic as foundries and major integrated device manufacturers (IDMs) move into the FinFET era. In memory, the outlook for NAND Flash is especially strong as it begins to become a major presence in data centers. The result will be steady growth in spending for semiconductor equipment through 2018, with only a minor dip in 2016 as DRAM spending responds to an anticipated oversupply condition.

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 utilization, their size and their technology profile.

More detailed analysis is available in the report "Forecast: Semiconductor Manufacturing Equipment, Worldwide, 2Q14 Update." The report is available on Gartner's website at http://www.gartner.com/document/2791418.

This research is produced by Gartner's Semiconductor Manufacturing program. This research program, which is part of the overall semiconductor research group, provides a comprehensive view of the entire semiconductor industry, from manufacturing to device and application market trends. More information on Gartner's semiconductor research can be found in the Gartner Semiconductor Manufacturing Focus Area.

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