LONDON — The semiconductor equipment market is set to repeat the pattern of the 2000-2002 period by rising 53.3 percent in 2004 compared with 2003 before dropping 9.6 percent in 2005 and 5.0 percent in 2006, according to market research company The Information Network (New Tripoli PA).
The company did not quantify the size of the market in a press release announcing its latest predictions.
"Late 2003 and early 2006 forecasts of hyper growth in the equipment market have lead to excess capacity, excess inventory, layoffs, lower profits, pushouts, and cancellations," said Robert Castellano, president of The Information Network, in a statement. "While the forecasts may have ironically been correct, clearly not all that equipment was needed in 2004, and the overshoot has served to illustrate that the cyclical nature of the semiconductor industry remains despite lessons learned in 2001 and best efforts in inventory control."
Excess chip inventory in now approaching $2 billion, and even foundry giants such as TSMC and UMC are seeing revenues drop for the past two months. Warnings and layoffs abound in the industry, said Castellano.
"What led to the counter-intuitive thinking by semiconductor manufacturers was the fear of the likelihood of allocation of equipment in 2004 for meeting even modest semiconductor growth of only 17 percent, which was forecast by the WSTS in late 2003 and subsequently raised to 27 percent in mid-2004," added Dr. Castellano.
"We had forecast [chip equipment] growth of 32 percent, and it turns out that may all that was needed for 2004. Instead, equipment that should have been bought in 2005 wound up in fabs in 2004. Essentially we combined two years of purchases into one, making this the shortest equipment upturn in history."
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