SAN FRANCISCO--Strong demand for leading-edge chips in personal computers has pushed utilization of fab capacity to 95% in the 0.3-micron and below processes, according to analyst Brett Hodess at Banc of America Securities.
Speaking before the investment company's annual investment conference here, Hodess said wafer fab capacity in so tight in leading-edge technologies that semiconductor companies are finally on the verge of building new plants. Capital spending in the semiconductor industry plunged last year after a glut of memories and other ICs flooded the markets.
Most industry analysts are predicting modest growth in fab equipment spending in 1999 after last year's drop of more than 20%. Depending upon the way capital spending was calculated, the chip industry spent about $22 billion to $26 billion on production tools in 1998.
Hodess predicted a 20% increase in capital spending in the year 2000 and 40% in 2001 as chip makers attempt to catch up with semiconductor demand. He told the investment conference that the current conditions are similar to 1993, when severe shortages of memories and other ICs began to drive up average selling prices. Others agree (see more on the chip recovery from SBN Online Magazine).
"We predicted a turnaround in the semiconductor equipment market a year ago at this conference, and it's happening," Hodess told the meeting.