Gartner: chip spending to fall 20 percent

Capital spending on semiconductor manufacturing equipment is set to fall by 20 percent this year, according to analysts Gartner.

The analysts say that a weakening US economy and a collapsing dynamic random access memory (DRAM) market will result in worldwide semiconductor capital equipment spending to total $47.5 billion in 2008, a 19.8 per cent decline from 2007.

The semiconductor market is a prime indicator of much of the technology sector since so many products are based on chips, so the news could be taken as an indicator that the promised recession that has begun in the US is perhaps here at last.

But when it comes to microprocessors and other chips, the indicators are more complex than that. While the almost 20 percent drop is expected in capital expenditure this year, in 2009 the market is expected to grow by 7.4 percent and then by 12.5 2010, come down again by -7.2 percent in 2011 and back up again by 8.4 percent in 2012.

Gartner believes the industry has brought the problem on itself. "The expected bursting of the DRAM capital spending bubble has finally happened, as rampant overcapacity in that sector drove unit prices well below cash costs for most manufacturers," said Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing group.

Worldwide wafer fabrication equipment spending is expected to decline 17.4 per cent in 2008, Gartner said. One small chink of light is that the popularity of mobile devices is expected to prompt a small increase in sales of NAND flash memory.