Semiconductor manufacturing set to rebound in 2010?

According to iSuppli, global spending on semiconductor manufacturing equipment is expected to rise by 46.8% in 2010 compared in 2009, bringing an end to three consecutive years of decline. Len Jelinek, director and chief analyst for semiconductor manufacturing at iSuppli, sais: "After suffering through one of the most significant declines in manufacturing in the history of the chip making business in the first quarter of 2009, semiconductor makers were rewarded with three subsequent quarters of improved factory utilisation. As a result of conservative management of capacity, most companies ended 2009 with manufacturing levels approaching those of the pre-downturn levels of the third quarter of 2008. With semiconductor revenue set to rise in 2010 due to the arrival of innovative new products and low inventory levels throughout the supply chain, the outlook for chip manufacturing is optimistic." The analyst cites the uncertainty of global economics as the reason semiconductor companies managed their operations conservatively. The report says that amid plunging semiconductor sales and major economic uncertainty, global semiconductor manufacturing capacity began dropping in the fourth quarter of 2008, declining to 71%, down 18.1% from 87% in the third quarter. Utilisation fell again in the first quarter of 2009, decreasing to 48%, down 44.9% from the fourth quarter of 2008. However, says iSuppli, with chip makers having cut capacity to adjust to changing market conditions, utilisation rebounded smartly in the second quarter, increasing to 69%, up 44.9% sequentially. Utilisation in the third rose another 15.9% in the third quarter to reach 80% and held steady at that rate in the fourth quarter. Jelinek added: "Because of the rise in utilisation and signs of market recovery, semiconductor manufacturers late in the fourth quarter finally became willing to make decisions that would result in expanding their capacity. These decisions will require new equipment purchases, spurring rising sales of semiconductor manufacturing equipment." iSuppli anticipates that yhe largest year on year increase in capital spending in 2010 will be for the manufacturing of memory products. The company forecasts that spending in support of memory manufacturing will increase by 65.5% in 2010. Jelinek concluded: "Manufacturers will find 2010 to be a year of recovery and expansion. However, this does not mean it will be a year without significant challenges. Profitable growth will dominate discussions for most semiconductor companies. Ultimately, the global economic recovery will determine the degree of success for most semiconductor manufacturers."