Capital spending by chipmakers to drop by 15%

Tighter supply of semiconductors is possible next year

By Jim Carbone -- Purchasing, 7/23/2008 10:45:00 AM

Current capital spending plans by semiconductor manufacturers worldwide will fall 15% to $51.7 billion in 2008 from $60.9 billion in 2007, according to researcher IC Insights. Overall, fab capacity utilization is forecast to average over 90% in 2008, up from 89% in 2007. In the first half of 2008, wafer fab utilization stood at 91% worldwide. However, 300mm fab utilization rates were at an extremely high level of 96%. About 85% of all DRAMs and 32/64-bit microprocessors are now fabricated on 300mm diameter wafers.

Capital spending as a percentage of semiconductor sales went from an average of 27% in the late 1990s to 21% in the early years of this decade. IC Insights forecasts that capital spending as a percentage of sales will average only 17-18% between 2008 and 2012.

Considering the strong unit growth rates in memory and logic ICs, there isn’t much wiggle room for additional cuts in capital spending budgets at most chipmakers, according to Bill McClean, president of IC Insights. IC Insights expects 2008 capital spending as a percentage of semiconductor sales to be only 18%, which would be one of the lowest ratios over the past 30 years. This is occurring while integrated circuit unit volume shipments are forecast to increase at a healthy 8% rate in 2008.

Also see: Semiconductor capital equipment spending to drop 9.9%