Semiconductor industry capital spending to increase 10% in 2006
Mar 17, 2006
2006 spending to be second highest on record! IC Insights has raised its 2006/2005 worldwide semiconductor industry capital spending forecast to +10%, up from its January 2006 released forecast of +4%. Figure 1 shows that total semiconductor industry capital spending is now forecast to be $50.4 billion in 2006, second only to the $60.3 billion spent in 2000. 
Figure 1
In 2004, semiconductor capital spending increased 53% and represented the peak market growth year in the current industry cycle. Although 2006 semiconductor industry capital spending is expected to increase only 10%, it would still be the highest growth rate in the second year after the cyclical peak year in any previous industry cycle! In 2005, semiconductor capital spending represented only 20.2% of semiconductor sales of $227.5 billion. Using IC Insights' forecast for an 8% increase in the 2006 worldwide semiconductor market, to $246.7 billion, and its forecast for a 10% increase in capital spending, to $50.4 billion, capital spending as a percent of semiconductor sales is expected to rise to only 20.4% in 2006. In contrast, capital spending as a percent of semiconductor sales reached 32% in 1995 and 30% in 2000, two periods of severe overcapacity build-ups. IC Insights believes that, in total, the IC industry will not build an excessive amount of capacity in 2006. However, overcapacity in individual IC product segments, like flash memory, is still a potential problem. With significant spending by new competitors (e.g., the Intel/Micron joint venture - IM Flash) coupled with aggressive spending by existing players (e.g., Samsung and Toshiba/SanDisk), the flash memory segment appears to be at risk for overshooting its capacity requirements in late 2006 or early 2007. www.icinsights.com
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