October 4, 2012 - Fab equipment spending continues to soften in 2012, but don't hope for a reprieve until later in 2013, warns one analyst.

Worldwide wafer fab equipment (WFE) spending is projected at $31.4 billion in 2012, a -13.3% decline from 2011, according to Gartner. But counter to some other industry watchers, the firm now thinks there won't be a big rebound in 2013 -- it's now forecasting a -0.8% slip next year to $31.2B, before finding its footing again and bouncing back in 2014 with 15.3% growth to $35.9B.

Earlier this summer Gartner foresaw a -8.9% decline in 2012, followed by 7.4% growth in 2013. Less than a month ago SEMI predicted 2013 could be a "golden year" with nearly 17% growth in fab spending.

"The outlook for semiconductor equipment markets has deteriorated as the macro economy has weakened," stated Bob Johnson, research VP at Gartner. After starting the year strong thanks to sub-30nm production ramps at foundries and other logic manufacturers, demand for new equipment logic production will soften as yields improve, leading to declining shipment volumes for the rest of the year."

Fab utilization rates will erode to the low 80% range by the end of this year, slowly increase to about 87% by the end of 2013. (That's less optimistic than its June outlook which saw mid-80% in mid-2012 and 87% by the end of the year.) Leading-edge capacity will recover slightly better, hitting the high-80% range by year's end and gradually getting into the low-90% range as 2013 progresses.

Increased demand combined with less-than-mature yields at the leading edge had been hoped to consume extra capacity and raise utilization rates. In leading-edge logic that has in fact helped create inventory shortages, Johnson noted, but "not enough to bring total utilization levels up to desired levels. In the memory segment, some suppliers are even cutting production in an attempt to shore up weak market fundamentals."

Memory is expected to be weak through 2012, with strong declines in DRAM investments and a virtually flat NAND market, the firm notes. Foundry spending has been revised downward for both 2012 and 2013; some foundries have improved their 28nm yields, but mainly for SiON technology, as 28nm high-k/metal gate (HKMG) processes are still yielding below normal. Longer-term, Gartner thinks foundries will ratchet up their spending more in future years due to aggressive development of EUV lithography and 450mm wafer processing.