SAN FRANCISCONeedham and Co. has lowered its forecast for 2009 worldwide semiconductor capital expenditures, saying it now believes capex will be down 16.1 percent next year. The firm previously predicted a 2.5 percent year-to-year decline.
In a research note circulated Tuesday (Sept. 30), Needham analyst Y. Edwin Mok forecast that capital spending would decline an additional 2.9 percent in 2010. Needham lowered estimates for several leading capital equipment stocks, including Applied Materials Inc., Lam Research Corp. and Novellus Systems Inc.
Needham believes that any expected fourth quarter recovery in equipment will be muted, and that 2009 and will be another challenging gear for chip equipment companies, Mok wrote. Continued weakness in the memory sector will result in sizable push-outs or scale-backs of several key projects, he said.
Mok said Needham expects foundries and integrated device manufacturers (IDMs) will be more cautious with their capital spending as the general weakness in the economy has begun to affect the chip supply chain. A recovery in 2010 is not guaranteed, Mok wrote, blaming what he sees as prolonged spending contraction in the memory sector. Continued consolidation in the memory sector will also continue to negatively impact capex, he wrote.
Earlier this month, Bill McClean, president of IC Insights Inc., said long-term trends including reduced IC capital spending would lead to stabilizing average selling prices for semiconductors. McClean cut his chip revenue forecast for 2008 to $244.3 billion from $250.3 billion. IC Insights estimates total worldwide chip industry capital expenditures for 2008 to be about $50 billion.
Needham downgraded equipment suppliers Semitool Inc., Ultra Clean Holdings Inc. and Varian Semiconductor Equipment Associates Inc. to "hold" from "buy." In addition to cutting estimates for Applied, Lam and Novellus, the firm cut estimates for Semitool, Ultra Clean, Varian, Aviza Technology Inc. and Mattson Technology Inc.