After recording double digit growth in 1999, semiconductor capital spending may shoot up at least 25% in 2000 to approximately $36.8 billion, buoyed by a positive pricing and economic environment and improved guidance from chip makers, research firm Lehman Brothers said today.
Citing the results of a recent survey conducted at leading chip makers, including Intel Corp., Advanced Micro Devices Inc., and Motorola Inc., Lehman analyst Edward White said United States and Asian semiconductor companies are devoting more resources to their capital equipment needs. As a result, White jacked up his previous semiconductor capital spending estimates for both 1999 and 2000.
White raised his 1999 global semiconductor capital spending to $29.4 billion, up 24% from 1998, compared with his previous estimate of $28.5 billion, up about 22% from the previous year. Capital spending in the industry for 2000 was similarly raised to $36.8 billion, from a previous estimate of $34.9 billion.
"In general, higher capacity utilization rates and increasing demand for leading edge capacity-0.18 micron-are fueling growth," White said. "Our semiconductor analyst, Jim Barlage, estimates 22% growth for the chip sector in 2000, up from an estimated 16% in 1999. This is driven by healthy end market demand in the PC, telecom, datacom, and consumer electronics markets."
Analysts said the leading semiconductor equipment manufacturers, including Applied Materials Inc., Asyst Technologies, Inc., KLA-Tencor Corp. and PRI Automation Inc., will see higher revenue and earnings growth this year because of the increased capital spending within the industry.
However, this bright picture could be tainted by any negative development that derails the expansion of the global economy or the electronics industry or any manufacturing problems within the industry.
"We have not seen signs [of these]," White said. "Based on our current 1999 estimate, all geographic regions, except for Taiwan, remain below their prior peak levels in terms of capital spending. The biggest opportunity for additional upside to our 2000 estimate will come from Japan and the U.S."