Chip capital spending to drop 24% in 2002, says new Dataquest forecast

PEBBLE BEACH, Calif. -- Still faced with glut of chip capacity worldwide, semiconductor manufacturers are expected to cut their total capital spending budgets for plants and production equipment by about 24% in 2002 from $44.4 billion in 2001, said Dataquest Inc. today.

Spending on chip production systems will recover in the second half of 2002, but for the entire year, semiconductor capital equipment revenues will end up 19% below $25.2 billion in 2001, according to a new forecast released by Dataquest at the annual Industry Strategy Symposium here today.

"A macroeconomic recovery and returning electronic equipment demand should finally bring the 'demand-component' of the down cycle under control," said Klaus Rinnen, chief analyst and director of Dataquest's semiconductor manufacturing group. "However, overcapacity remains excessive and still demands industry attention," added Rinnen, who spoke at a press conference at the executive summit, which is sponsored by the Semiconductor Equipment and Materials International (SEMI) trade group.

Rinnen estimated that worldwide chip capacity utilization is now running at about 60%, and it would improve to around 80% by the end of next year.

Dataquest estimated that total semiconductor capital spending dropped by 28.9% to $44.4 billion in 2001 from the previous year. Worldwide spending on semiconductor equipment--excluding test systems--fell 28.9% from 2000, Rinnen said.

Capital spending cuts occurred in all regions during 2001, according to the San Jose-based research firm. Foundries and DRAM suppliers made the deepest cuts, causing Asia Pacific-based chip makers to reduce their capital spending by nearly 47% in 2001, Dataquest said. Taiwan's chip manufacturers cut capital spending by more than 50% in the 2001 downturn, according to the research firm's new estimates.

U.S. and European chip companies reduced their capex spending by 21% and 26%, respectively, while Japanese semiconductor manufacturers lowered expenditures by about 18% last year, according to Dataquest.