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  Date: 10/05/2016

Chip makers to spend less on capital equipment in 2016, according to Gartner

Gartner finds semiconductor chipmakers are not spending in the year 2016 as much as they spend in the year 2015, due to the weaker chip market. The reasons according to Gartner are excess inventory and weak market demand in key chip markets such as personal computer, tablet and mobile in 2016. Gartner forecasts semiconductor capital equipment spending to drop by 2 percent in 2016, to $62.8 billion.

"While the first quarter 2016 forecast has improved from a projected decline of 4.7 percent in the previous quarter's forecast, the 2 percent decline in the market for 2016 is still bleak," said David Christensen, senior research analyst at Gartner. "Excess inventory and weak demand for PCs, tablets, and mobile products continue to plague the semiconductor industry, resulting in a slow growth rate that began in late 2015 and is continuing into 2016."

Table 1
Worldwide Semiconductor Capital Spending and Equipment Spending Forecast, 2015-2018 (Millions of Dollars)

semiconductor equipment  spending

"The slowdown in the devices market has driven semiconductor producers to be conservative with their capital spending plans," said Mr. Christensen. "This year, leading semiconductor manufacturers are responding to anticipated weak demand from semiconductors and preparing for new growth in leading-edge technologies in 2017."

The China's progress in the semiconductor manufacturing in the year 2015 is defined as "aggressive" by Gartner researchers. Supported by the Chinese government, companies based out of China trying their level best to acquire well-established semiconductor companies. Year 2015 is also witnessed lot of consolidation and merger and acquisition (M&A) activity.

Gartner says China's aggressive movement in the semiconductor industry and other factors can affect the competitive landscape of global semiconductor manufacturing in the next few years, as China is now a major market for semiconductor usage and manufacturing.

Gartner sees the market to return to growth in 2017. "Increased demand for 10 nanometer (nm) and 3D NAND process development in memory and logic/foundry will drive overall spending to grow 4.4 percent in 2017." quoted in the release by Gartner.
Author: Srinivasa Reddy N
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