MANHASSET, N.Y. Global semiconductor manufacturing equipment sales totaled $34.5 billion in 2005, 10.7 percent down from 2004 revenue of $38.6 billion, according to Gartner Inc.
The market research firm attributed the decline to slower manufacturing capacity growth, combined with 65-nanometer initial production.
"The equipment market decline in 2005 was the result of a number of factors, which worked together to slow the demand for new capacity," said Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group. "Production cuts due to excess inventories in the first half of the year and a slowing in demand growth drove utilization rates downward in early 2005, leading the industry into an oversupply condition. However, a better than initially anticipated macroeconomic environment aided end-user demand, allowing for a resolution of the excess inventory situation by mid-2005."
Most of the top 10 vendors experienced revenue declines in line with the overall market performance, with the exception being KLA-Tencor and ASML, which posted revenue gains of 5.6 percent and 1.9 percent, respectively. For complete information, see the table
Geographic-wise, the Asia/Pacific region declined by almost 20 percent after being the fastest-growing region in 2004. The region accounted for more than 50 percent of all spending in 2004, but saw that figure decline to 44.5 percent in 2005, Gartner said.
After healthy growth of 48.4 percent in 2004, Japanese equipment spending remained virtually flat in 2005.
European spending was down 1 percent in 2005. European companies continued to invest outside of Europe, while both Intel and AMD continued their expansions in Ireland and Germany, respectively.
In the Americas region, spending increased more than 9 percent in 2005, as expansions occurred in all manufacturing segments.
Gartner projects the market returning to positive growth in 2006, and has raised its forecast for capital spending to increase by double digits, up from 8.4 percent previously.
"While we are more optimistic for 2006, we remain cautious as we see a rising risk of oversupply in the memory segment if current projections do not come true," Rinnen said. "Memory-capacity related spending remains hot in 2006, but it is also most vulnerable."
This report is available on Gartner's Web site.