March 8, 2010 / 7:14 PM / 7 years ago

Global chip gear spending to leap in 2010 -Gartner

3 Min Read

* 2010 spending expected at roughly $30 billion

* Projected peak at $43 billion in 2012

By Ian Sherr

SAN FRANCISCO, March 8 (Reuters) - Global chip equipment spending should grow by more than three-quarters in 2010, but companies will focus on upgrades and efficiency, keeping investment in capacity shy of pre-recession levels, two industry trackers said.

Investment in chip manufacturing equipment is expected to reach roughly $30 billion this year, up more than 75 percent from a year ago, but still off the peak of about $45 billion seen before 2007, Gartner said on Monday.

Another study released by the SEMI trade group, which comprises the world's leading makers of machines used to make microchips, estimated growth in chip gear spending could hit as much as 88 percent.

"The semiconductor equipment industry will experience a very strong growth spurt in 2010, as we emerge from a very costly recession, and this growth is expected to continue throughout 2012," said Jim Walker, research vice president at Gartner.

"However, we expect this upturn to be one of the first in which the peak revenue in capital equipment does not surpass previous growth cycles, which may well help to mitigate the boom/bust scenario that we have seen in the past."

The renewed focus comes after a costly round of capacity investments spurred by the explosion of personal computers in the 1990s and the dot-coms of the past decade, said Klaus Rinnen, co-author of the Gartner report.

The focus has turned to inventory control and eking more products from existing manufacturing plants, he said.

"It pays back to upgrade," Rinnen said, adding that enhancing existing fabs, or production centers, with better manufacturing processes can cost less than a quarter of the price of a new one.

"Let's get more out of these fabs and let's keep them for longer and upgrade them more rapidly and buy them more smartly so that we can get more out of it for lower cost," he said.

As a result, Gartner said it expects spending to peak in 2012 at roughly $43 billion.

"It doesn't mean we don't build at all, it's just less building," Rinnen added.

The world's top chip equipment makers include Applied Materials (AMAT.O), ASML (ASML.AS) and Tokyo Electron (8035.T). Top chip manufacturers include Intel Corp (INTC.O), TSMC (2330.TW) and privately held GlobalFoundries. (Reporting by Ian Sherr. Editing by Robert MacMillan)

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