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Stamford, CT -- Semiconductor capital equipment growth is slowing, and the trough will push out into the first quarter of 2008, leading to flat growth in 2008, according to the latest forecast by Gartner, Inc. Worldwide semiconductor capital equipment spending is projected to total $43.7 billion in 2007, a 4.1 percent increase from last year. In 2008, the worldwide spending is expected to increase 0.3 percent (see Table 1).

"A competitive investment race among dynamic random-access memory (DRAM) vendors that did not abate — contrary to common sense, despite rampant overcapacity — combined with an accelerated retooling with more cost-effective 300-mm capacity, fuelled a strong first half that is tailing over into the second half of the year," said Dean Freeman, research vice president for Gartner's semiconductor manufacturing group. "The stronger 2007 is borrowing from 2008, and the second-half softening will have ramifications on growth in the coming years."

The increase in worldwide semiconductor capital equipment spending in 2007 (see Table 1) will impact 2008, and Gartner analysts expect 2008 to move from slightly positive for capital expenditure (capex) and wafer fab equipment (WFE) to slightly negative. The outlook for back-end equipment markets remains positive.

Table 1

Worldwide Semiconductor Capital and Equipment Spending Forecasts (Millions of Dollars)

	2005	2006	2007	2008	2009	2010	2011
Semiconductor Capital Spending	47,197.1	56,312.7	57,144.8	54,602.9	59,786.0	54,567.7	58,559.8
Growth (%)	-2.8	19.3	1.5	-4.4	9.5	-8.7	7.3
Capital Equipment	34,141.1	41,950.2	43,673.3	43,796.3	48,057.1	43,079.4	48,539.1
Growth (%)	-10.0	22.9	4.1	0.3	9.7	-10.4	12.7
Wafer Fab Equipment	25,952.3	32,610.1	34,707.1	34,267.4	38,158.9	34,409.5	38,132.6
Growth (%)	-8.5	25.7	6.4	-1.3	11.4	-9.8	10.8
Packaging and Assembly Equipment	4,415.9	5,217.8	5,041.2	5,317.5	5,514.3	4,854.9	5,734.6
Growth (%)	-7.7	18.2	-3.4	5.5	3.7	-12.0	18.1
Automated Test Equipment	3,772.9	4,122.3	3,925.0	4,211.4	4,383.9	3,815.0	4,671.9
Growth (%)	-21.2	9.3	-4.8	7.3	4.1	-13.0	22.5
Other Spending	13,056.0	14,362.5	13,471.5	10,806.7	11,728.9	11,488.3	10,020.7
Growth (%)	23.0	10.0	-6.2	-19.8	8.5	-2.1	-12.8

Source: Gartner (October 2007)

WFE revenue is forecast to grow 6.4 percent in 2007. The 45-nanometer (nm) technology node is beginning to ramp up in 2007 as Intel starts initial production and as foundries make this level of technology available to their customers. However, investments in 65-nm and 90-nm production dominate the spending picture, as does equipment for DRAM and NAND flash, which will account for more than half of the total spending for new equipment. Memory-related spending will continue to dominate equipment demand and define market directions in 2008.

After growing more than 18 percent in 2006, packaging and assembly equipment (PAE) market revenue will decline about 3.5 percent in 2007. On a regional basis, Asia/Pacific will continue to increase its share of PAE consumption. From about 66 percent of PAE shipments in 2006, Asia/Pacific will account for almost 77 percent of all PAE sales early in the next decade.

Automated test equipment (ATE) market growth was slightly less than 10 percent in 2006. In 2007, Gartner analysts expect a modest decline because the ATE market improved throughout the first half of the year. Given relatively strong memory test sales to support double data rate test, and some improvements in system-on-chip (SoC) test sales, Gartner projects revenue for the ATE market to decline 4.8 percent this year. In 2008, a modest recovery with growth of slightly more than 7 percent is expected.

Additional information is available in the Gartner report "Semiconductor Capital Equipment Market Faces Annual Contraction in 2008". The report is available on Gartner's Web site here.

This research is produced by Gartner's Semiconductors 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 Focus Area here.

SOURCE: Gartner, Inc.