December 6, 2012 - Semiconductor equipment demand is persistently sluggish as the industry takes a break from a "multiyear expansion period" to digest recent investments and wrestle with a broader economic slowdown. But make no mistake: leading-edge technology investments are still happening, and growth will return in the typical cyclical pattern, predicts SEMI in its updated year-end forecast, issued this week at SEMICON Japan.

Sales of semiconductor manufacturing equipment overall is now seen declining -12.2% in 2012 to $38.22B, after a 9% increase in 2011 to $43.53B and a 151% spike in 2010 to $39.92B, according to SEMI's updated numbers. SEMI's midyear forecast released at SEMICON West called for a -2.6% in overall equipment sales to $42.38B, followed by a 10.2% growth rebound in 2013. A significant downgrade had been expected, as after a strong early part of the year monthly data trends in semiconductor equipment demand have continued to turn sour.

"Sales of semiconductor manufacturing equipment in 2012 reflect significant investments over the prior two years, normal patterns of industry cyclicality and a slowdown in the broader economy," stated SEMI president/CEO Denny McGuirk. "What's more important is that technology investments at the advanced nodes and in leading-edge packaging remain important drivers, and when market confidence returns, we expect capacity investments to increase."

Forecast by region. (Source: SEMI)

By region, only two areas will see any growth in 2012: Taiwan (12.7% to $9.60B) and South Korea (10.7% to $9.59B). Both will leapfrog the North American market, which is seen sliding -14% to $7.95B. Biggest declines will be in the smaller regions: Rest-of-World (-38% to $2.12B), Europe (-36% to $2.68B), and Japan (-36% to $3.72B). Among the drivers in Korea's market are obviously numerous investments by Samsung (Lines 16, S1-A, and S1-C, and technology upgrades to other lines) and Hynix (upgrades to M10 and M11+M4, and the ramp of M12), noted Lara Chamness from SEMI Industry Research and Statistics. In Taiwan, TSMC is pouring resources into Fab 12, Fab 14, and Fab 15. "Other smaller device manufacturers are making non-trivial investments in the region," she added.

By equipment type, 2012 is being weighted down by the wafer processing segment, by far the largest segment, at nearly a -15% dropoff from 2011. The backend categories will decline but only about -5%, while the "other" category (facilities, mask reticles, other tools) will actually grow about 6%.

The picture brightens somewhat in 2013 with a deceleration of decline, -2.1% to $37.42B. By region there will be slight to moderate growth in China, Taiwan, and Japan, but offset by a -10% dropoff in Korean investments, SEMI predicts. By technology, the tables will turn: wafer processing will actually sneak into the black (0.3%), but backend categories will weigh down the overall picture.

Return to true growth will finally arrive in 2014, with 12.4% growth to $42.08B. All regions, and for all equipment types, will enjoy increased sales generally in the low-teens, predicts SEMI.

Forecast by equipment type. (Source: SEMI)