Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.
Capex forecasts 23% up but Big Three spending flat.
Although SEMI forecasts 23% growth in the 2014 semiconductor equipment market, the three biggest spenders aren’t increasing capex significantly, reports Bill Jewell,’s Semiconductor Intelligence.
“Intel’s guidance ranges from a 2% decline to 7% growth, averaging 3% growth. Samsung expects 2014 semiconductor capital spending to be similar to 2013. TSMC’s guidance ranges from a 2% decline to 3% growth, averaging 1% growth. The average expected growth spending by the three companies is 1%.”
The three companies spend 50% of the industry’s capex.
IC Insights’ March forecast was 8.4% growth in semiconductor industry capital spending.
Gartner’s April forecast was 5.5% growth. Gartner forecast semiconductor capital equipment spending would grow 12.2% in 2014, about twice the rate of overall capital spending but about half the growth expected by SEMI.
Jewell expects capex growth of 10% and equipment spending growth of 20%.
The explanation for the mismatch with companies’ forecasts is, said Jewell, that the companies will increase capex as the year unfolds.
There is little chance of an over-spend if you take the ratio of capex to semiconductor market.
“The ratio was 20% in the overcapacity years of 2001 to 2002,” says Jewell, “the ratio dropped below 10% in 2005. Since 2007 the ratio has been in a steady range of 11% to 13%. The ratio in 2014 and 2015 is based on the SEMI equipment forecast (23% growth in 2014 and 2% in 2015) and the WSTS semiconductor market forecast (4.1% in 2014 and 3.4% in 2015). Under these assumptions, the industry will not experience overcapacity in the next few years.”
Assuming 10% growth for semiconductor sales in both 2014 and 2015 and no change in equipment spending in 2014 and 2015, the four-year-average ratio would drop to 10% in 2015, implying under-capacity.
“However we do not believe this will occur,” says Jewell, “we expect companies to increase their equipment purchases in response to solid market growth.”