Gartner Dataquest forecasts 2001 semiconductor-market decline

JULY 20--The worldwide semiconductor capital-spending and equipment markets are projected to have revenue declines between 26% and 30%, respectively, according to Dataquest Inc., a unit of Gartner Inc. (Stamford, CT; www.gartner.com).

JULY 20--The worldwide semiconductor capital-spending and equipment markets are projected to have revenue declines between 26% and 30%, respectively, according to Dataquest Inc., a unit of Gartner Inc. (Stamford, CT; www.gartner.com). Worldwide semiconductor capital spending is projected to be $47.3 billion in 2001, a 26% decline from 2000. In comparison, semiconductor capital spending and semiconductor equipment each increased 84% in 2000. Semiconductor-equipment spending is expected to decline 30%, from $39.9 billion in 2000 to $27.9 billion in 2001. "Demand is extremely weak in the equipment market. The excess inventory pit in the industry artificially depresses 2001 prospects, just as it inflated those for 2000," said Klaus Rinnen, chief analyst and director of Gartner Dataquest's semiconductor research.

"In short, there is limited demand for the leading drivers for the chip business The investment focus is clearly shifting. In 2000, semiconductor companies started to adjust the technology mix of their orders from being capacity-focused to more technology-focused, and technology buys will be the theme for at least the next 12 months."

All regions have reacted with cuts in capital spending plans. Gartner Dataquest projects that overall capital spending cuts in Asia/Pacific will be the steepest at -33%, followed by Japan with about -24% spending and the Americas with -22% spending. European regional spending remains least impacted at -17%. Gartner Dataquest projects that the semiconductor industry and the equipment market will start on their respective recoveries in 2002. In 2002, capital-spending restraints will be important to return to profitability. An economic recovery will also be important to stimulate demand.

"Capacity spending is under the industry's control, but the economy is not," Rinnen said. "This is the major difference between this and the most recent down cycle, which was supply-induced. There are also no hot new applications with the size to pull the industry out of the slump by 2002. Application demand needs to get better across the board. This will leave uneasiness in the industry, as there will be no single product to point to. "

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