Organization forecasts Taiwan's 2004 chip-equipment procurement to soar 57%

Taipei, Dec. 4, 2003 (CENS)--Taiwanese chip companies will spend a total of US$4.6 billion on equipment next year, 57% more than this year and the highest capital spending on chip equipment by a single economy, according to Semiconductor Equipment and Materials International (SEMI).

In the meantime, total spending on chip equipment worldwide will amount to US$29.6 billion, a 39% gain from this year, SEMI estimated. The organization, which represents world's semiconductor, display, MEMS and related industries, issued the estimate yesterday in Taipei.

SEMI researchers pointed out that Taiwan's spending on chip equipment has begun slumping since 2000, when its spending peaked amid a business boom. The island's 2004 capital spending on the equipment will rebound to the 2000 level. They associated the expected hefty spending with recently sharp contract increases by integrated device manufacturers (IDMs), which build their own-brand chips by themselves.

Nevertheless, they noted that heavyweight IDMs deliver more outsourcing contracts for dedicated packaging and testing services than contracts for built-to-order chips at foundry suppliers. For instance, Texas Instruments (TI), Infineon Technologies, and many Taiwanese IDMs have largely increased contracts to Taiwanese chip assemblers. So, spending by assemblers such as Advanced Semiconductor Engineering (ASE) Inc. and Siliconware Precision Industries Co., Ltd. Has grown at a faster pace than by foundry players Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC) this year. Such a trend will last into 2004, SEMI specialists said.

SEMI specialists pointed out that North American chip industry will spend 24.5% more capital next year than this year on equipment, much lower than the average 40% forecast for European and Asian chip powers, with Taiwan leading the way with a prominent 57%. They attributed Taiwan's considerable spending growth to Taiwanese chipmakers' ambitious plans to expand their 12-inch wafer manufacturing capacities.

Throughout this year, the world chip industry is estimated to spend around U$21.4 billion, up 8.2% from 2002's US$19.8 billion. Competing to equip 12-inch wafer capabilities worldwide is the major reason behind the 2004's stellar spending growth.

SEMI experts analyzed that hefty spending growth will continue into 2005, when the world spending is estimated at US$35 billion. In the following year, the spending is forecast to decline 6.6%, to US$32.7 billion, after two years of expansion.

However, Dan Hutcheson, president and CEO of VLSI Research, is worried that chipmakers would not be able to acquire enough equipment for their expansions next year as equipment suppliers have downsized scales over the past three years to cope with business recession. So, he analyzed that slow supply will keep the expansion boom continuing into 2005. Hutcheson made the statement a few days ago at a forum held in Hsinchu, northern Taiwan.

He analyzed that Taiwanese chipmakers may begin to make bold expansions only when their capacity utilization rates rise to 95%.