Mixed Signals

By Mark LaPedus
Based on the various forecasts for semiconductor equipment, the mood is mixed at this week’s Semicon West trade show in San Francisco.

In its mid-year forecast, for example, SEMI predicts that the semiconductor equipment market will reach $36.3 billion in 2013, down 1.7% over 2012. But the business is expected to rebound and reach $43.98 billion in 2014, a 21.2 percent increase over 2013, said Dan Tracy, an analyst at SEMI.

Fab equipment spending is driven by foundry and NAND flash. Key drivers for equipment spending are NAND flash fab investments by Samsung in China and Toshiba/SanDisk in Japan. Meanwhile, the foundries continue to ramp up 28nm processes. “They are beginning to add 20nm capacity,” Tracy said.

Others have a slightly different outlook. The semiconductor equipment market is projected to fall 7.4% in 2013, but it will grow 27.1% in 2014, according to VLSI Research. The forecast for semiconductor growth is up 10% in 2013 and 8.3% growth in 2014, according to VLSI Research.

In a research note, Weston Twigg, an analyst with Pacific Crest Securities, said the outlook is somber in the short term. “As we head into Q3, equipment demand appears underwhelming; we expect cautious preliminary Q3 views to be provided at Semicon West,” Twigg said. “Memory spending is improving, but remains low; watch for gradual improvement through early 2014.”

Even the foundry business is weak for fab tool vendors right now. “Foundry demand will likely remain softer for two to three more months before ramping later this year to support 20nm ramps on the way to 14/16nm finFET. Intel spending should pick up steadily in the 2H as it ramps 14nm,” he said.

“Despite mixed demand signals in the near term, we expect foundry spending to heat up by Q4. We believe TSMC will aggressively ramp its 20nm process later this year as it prepares for Apple’s business. TSMC has begun ordering longer lead time litho tools,” he added. “We also believe Qualcomm is pressuring TSMC with the threat of moving to Samsung or GlobalFoundries if TSMC is not prepared with its 16nm finFET process, which should drive a race to finFET between the three foundries, likely driving a spending inflection starting late this year.”

Brighter days

Long term, meanwhile, the outlook is brighter. “Continued strong demand by consumers for smart phones and tablet computers is driving chip manufacturers to expand capacity for memory, logic and wireless devices,” said Denny McGuirk, president and CEO of SEMI. “To meet the pent-up demand for capacity, particularly for leading-edge devices, we expect capital spending to increase throughout the remainder of this year and continue through 2014—to post one of the highest rates of global investment for semiconductor manufacturing ever.”

Front-end wafer processing equipment will grow 24 percent in 2014 to $35.59 billion, up from $28.70 billion in 2013, according to SEMI.  Test equipment and assembly and packaging equipment will also experience growth next year, rising to $3.18 billion (+6 percent) and $2.9 billion (+14 percent), respectively, according to SEMI.

Growth is forecasted in China (82 percent), Europe (79 percent), South Korea (31 percent), Japan (32 percent), North America (9 percent), and Taiwan (2 percent), they said. Taiwan will continue to be the world’s largest spender with $10.62 billion estimated for 2014, followed by North America at $8.75 billion and Korea with $8.74 billion.