Gartner Says Worldwide Semiconductor Capital Spending to Increase by More Than 11 Percent in 2014

Memory Manufacturers Enjoy Strong Pricing Environment, Setting Stage for Renewed Spending Growth

STAMFORD, Conn., October 16, 2014--Worldwide semiconductor capital spending is projected to total $64.5 billion in 2014, an increase of 11.4 percent from 2013 spending of $57.8 billion, according to Gartner, Inc. Capital equipment spending will increase 17.1 percent in 2014, driven by strong memory average selling prices and increased demand for consumer products (see Table 1).

For 2014, Gartner's forecast for semiconductor equipment has been increased slightly from the previous forecast. Longer term, Gartner expects modest growth through the semiconductor cycle, with just a modest pause in the equipment market expected in 2016.

"While capital spending outperformed equipment spending in 2013, the reverse will hold true for 2014," said David Christensen, senior research analyst at Gartner. "Total capital spending will grow 11.4 percent in 2014, compared with 7.1 percent in our prior forecast — a result of Samsung increasing its announced spending plans to $14 billion. Equipment spending will increase 17.1 percent, as manufacturers pull back on new fab construction and concentrate on ramping up new capacity instead."

In recent years, the equipment industry has realized significant consolidation, as major vendors have acquired complementary and competitive companies. As equipment advancements will lead to higher development costs, the trend of industry consolidation should be expected to continue.

Table 1

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

	2013	2014	2015	2016	2017	2018
Semiconductor Capital Spending ($M)	57,840.27	64,459.27	70,142.89	67,245.25	69,636.55	74,258.82
Growth (%)	-1.5	11.4	8.8	-4.1	3.6	6.6
Capital Equipment ($M)	33,452.00	39,157.26	43,601.17	40,420.48	44,218.22	47,400.08
Growth (%)	-11.6	17.1	11.3	-7.3	9.4	7.2
Wafer Fab Equipment ($M)	27,278.07	32,074.60	35,500.57	33,507.82	36,126.71	38,393.06
Growth (%)	-8.0	17.6	10.7	-5.6	7.8	6.3
Wafer-Level Manufacturing Equipment ($M)	28,758.10	33,793.29	37,558.82	35,606.12	38,663.41	41,418.46
Growth (%)	-8.5	17.5	11.1	-5.2	8.6	7.1
Wafer-Level Packaging and Assembly Equipment ($M)	1,480.02	1,718.69	2,058.26	2,098.30	2,536.70	3,025.40
Growth (%)	-17.8	16.1	19.8	1.9	20.9	19.3
Die-Level Packaging and Assembly Equipment ($M)	2,868.68	3,232.37	3,631.03	2,846.72	3,231.03	3,476.59
Growth (%)	-25.8	12.7	12.3	-21.6	13.5	7.6
Automated Test Equipment ($M)	1,825.22	2,131.60	2,411.32	1,967.64	2,323.78	2,505.04
Growth (%)	-27.6	16.8	13.1	-18.4	18.1	7.8

Source: Gartner (October 2014)

Foundries will continue to outspend the logic integrated device manufacturers (IDMs) in 2014. Foundry spending is expected to increase by 4.5 percent in contrast with the 0.3 percent decrease in total logic spending. However, the longer-term outlook for total foundry spending shows a flat profile, as predicted mobility market saturation will dampen the need for new foundry capacity and creates an environment where existing capacity is upgraded to the latest node. The memory capital expenditure (capex) outlook remains strong for 2014 with a 40 percent increase anticipated in the current forecast, compared with a 25 percent increase in the previous quarter's forecast. Memory manufacturers are currently enjoying a strong pricing environment, which sets the stage for renewed spending growth.

The current DRAM undersupply will continue through 2015, moving back into an oversupply in 2016 as new wafer capacity is added to the market. Since the last forecast Samsung Electronics has announced that it will be using one floor of its newly completed S3 fab in Suwon, South Korea, for DRAM production. In late December 2013, SK Hynix announced that it would invest $1.7 billion at its Icheon, South Korea, complex to build a new fab shell and clean room. This leaves a scenario in which both of the South Korean vendors are bringing on new DRAM wafer capacity, pushing bit supply growth to 36 percent in 2016. This combined with the mild demand growth in the same period moves the market into oversupply.

More detailed analysis is available in the reports "Forecast: Semiconductor Manufacturing Equipment, Worldwide, 3Q14 Update" and "Forecast: Semiconductor Capital Spending, Worldwide, 3Q14 Update." The reports are available on Gartner's website at http://www.gartner.com/document/2866522 and http://www.gartner.com/document/2866621.

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 at http://www.gartner.com/technology/core/products/research/markets/semiconductorManufacturing.jsp