Semiconductor industry sees green shoots

The outlook for the semiconductor equipment industry is beginning to improve, as it appears capital equipment spending has bottomed out in the second quarter of 2009, says Gartner Inc.

Analysts predict a gradual improvement on a quarter-by-quarter basis throughout the rest of the year and into 2010.

Worldwide semiconductor capital spending is on pace to total $24.3 billion in 2009, a 44.8 percent decline from 2008 spending of $44 billion.

“The impact of the economic crisis has hit the semiconductor equipment industry hard, but signs of life are returning,” said Klaus Rinnen, managing vice president at Gartner. “Undoubtedly it will be a long, slow road to complete recovery, but we are seeing the first indications of increased foundry activity to replenish inventories depleted by the cutbacks of the past few quarters.”

For 2009, the worldwide automated test equipment (ATE) market is forecast to decline 32 percent. While the test market has waded through a difficult period since 2007, it appears that a bottom is forming in the second quarter of 2009. The ATE market now sits at very low market levels, with some test segments very likely realizing substantial capacity reductions.

Rinnen said that overall, the industry has responded as it should when faced with one of the worst downturns in its history — by eliminating all unnecessary spending, cutting purchases to inventories and not doing anything dramatic. He recommended that for the next few quarters, equipment suppliers focus on quarter-to-quarter growth and let the annual numbers fall where they may.

“Over the past few years, we have seen the semiconductor and electronics industries implement impressive movements in their ability to control and manage inventories,” said Rinnen. “It appears the industry has learned a painful lesson and can implement improvements on its ability to manage capital investments and capacity and thus bring a return to profitability to all segments.”