Download 2003

2Q03 Semiconductor Capital
Equipment Update: Still
Positive for 2003
Host:
Speakers:
Klaus-Dieter Rinnen
Richard Gordon
Jim Hines
Jim Walker
SCEM Telebriefing
27 March 2003
Major Forecast Changes Since Year-End





Macroeconomic
Hold to improvement; war factored in; uncertainty still significant
Electronic equipment
 PC unit forecast reduced to 6.6%
Cellular phone forecast still holding
Devices
 Revenue forecast for 2003 cut back from 12% to 9%, with greater
downside than upside
Capital spending and equipment forecasts
 Capital spending — Reduced from 15% to 7%
 Wafer fab equipment — Reduced from 16% to 8%
 Packaging and assembly equipment — Largely holding to prior
forecast
Outsourcing
 Foundry — Now at 23%; tied to device demand
 SATS — Holding at 20% year-over-year growth in 2003
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Forecast Growth Scorecard
Revenue Growth (%)
World GDP
U.S. GDP
Electronic Equipment*
Semiconductor
Capital Spending
Equipment Spending
WFE Equipment
P&A Equipment
Silicon Ship (MSI)
*Production revenue
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
2002
Base
+2.0
+2.5
+0.3
+1
-37
-30
-31
-22
+19
Up
+12
+15
+18
+16
+32
2003
Base Down
+2.4
+2.7
+5
+9
+7
+10
+8
+21
+5
-6
-5
-2
-4
+10
Global GDP Growth Scenarios, 2000-2004
Real GDP Growth (%)
Most Optimistic, P=5%
Quick War (<1 Month)
5
3.8
3.5
3.9
4
2.1
Long War, P=23%
Short War (1 Month)
0.9
1.2
1
Most Likely, P=70%
Short War (1 Month)
1.3
2.0
2
2.4
2.6
3
2000
2001
2002
-1
2003
2004
-0.4
0
Bad War (Regional Conflict)
Most Pessimistic, P=2%
Source: Global Insight (March 2003)
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Global Insight's War Scenarios
Scenario
Probability
Was
Now
Real GDP Growth [%]
2002
2003
2004
Most Optimistic
Regime Collapse/
Quick War
20%
5%
2.0
2.6
3.8
Baseline — Short War
60% 70%
2.0
2.4
3.5
No War/No Resolution
10%
8% 23%
2.0
1.3
2.1
2%
2.0
0.9
-0.4
Long War
0%
Most Pessimistic
Bad War
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
2%
Source: Global Insight (March 2003)
Global Economic Issue Without Much
Progress
 Eurozone and Japanese economies remain weak
 Deflationary threat is present (China, Japan and
possibly Germany)
 Bulging U.S. current account deficit threatens sharp
decline in dollar
 High degree of risk and uncertainty makes economic
outlook volatile; expect continued market volatility
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
1Q03 Semiconductor Market Outlook
 Short term
– Phased recovery continuation depends on PCs in 2003
• Sequential growth weakened in 4Q02, and a continued slowdown in
1H03 means 2003 will likely show only a moderate AGR
• Worries about geopolitical and macroeconomic environment
– War/terrorism uncertainty = lack of confidence
» Will consumer spending remain firm?
» When will corporations invest in capital expenditure?
 Longer term
– Boom year likely in 2004, spilling into 2005
• Semiconductor vendors still cautious about CAPEX in 2003
– Downturn likely delayed until 2006
• Capacity likely to be tight beginning 2H03 through 1H05
• Oversupply forecast for 2H05 onward, assuming CAPEX returns
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Semiconductor Quarterly Sequential Growth:
Stronger Growth Follows Weak 1H03
1Q
2Q
3Q
4Q
AGR
5.7%
5.8%
6.4%
1.7%
0.6%
-1.4%
-4.6%
-5.1%
2.3%
2.1%
-5.2%
7.8%
9.6%
-4.1%
6.2%
5.1%
-1.4%
12.0%
8.9%
-5.8%
6.8%
5.5%
1.4%
14.0%
9.4%
4.3%
8.8%
4.8%
11.0%
4.8%
5.5%
6.2%
36.2%
27.8%
7.3%
2002
Actual (Preliminary)
2003
Best Case
Most Likely Case
Worst Case
2004
Best Case
Most Likely Case
Worst Case
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Worldwide Semiconductor Revenue
Five-Year Forecast
Revenue (Millions of Dollars)
250,000
ASSP
200,000
ASIC
Opto
150,000
Discrete
Analog IC
100,000
Logic
50,000
Micro
Memory
0
2000 2001 2002 2003 2004 2005 2006 2007
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Capital Spending in 2003: Still Positive
 Reasons why
– 2002 capital spending was below 1998
– Leading-edge utilization held at >85% throughout 2002
– Overall utilization improved, holding around 75% in 1H03
– Industry entered 2003 with 14% underinvestment
– Empty shells/unfinished fabs allow fast response to new demand
– As order flow remains slow in 1Q03 and possibly 2Q03, the
question is how much equipment can be shipped in 2003; stepper
lead times are an issue
– Potential semiconductor opportunity loss for 2004 rises if industry
procrastinates
 Who is spending?
– Foundry, 3% — Spending on hold until more signs of life; expect
2H02 lift
– Memory, 20% — Strategic investments and funding of new JVs
drive spending growth
– Japan, 15% — After restructuring, spending is coming alive
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Overall Wafer Fab Utilization
Ratio of Silicon Consumed to Fab Capacity
100%
90%
80%
70%
60%
50%
40%
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Leading Edge
Foundry Fab Utilization
Ratio of Silicon Consumed to Fab Capacity
100%
90%
80%
70%
60%
50%
40%
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Leading Edge
Foundry Market Revenue Forecast
Billions of Dollars
2001-2007 CAGR = 20.9%
30,000
25,000
20,000
15,000
10,000
5,000
0
2001
2002
2003
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
2004
2005
2006
2007
Quarterly WFE Forecast Scenarios
Scenarios
(Probability)
Optimistic
Most Likely
Pessimistic
Billions of Dollars
11
2002
2003
-32%
16% (0.20)
8% (0.50)
-4% (0.30)
10
9
Optimistic
Most Likely
Pessimistic
8
7
6
5
4
3
1Q00
3Q00
1Q01
3Q01
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1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
Total Industry Packaging and Assembly
Factory Utilization
Factory Utilization
100%
90%
80%
70%
60%
50%
40%
30%
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Leading Edge
Utilization for Semiconductor Assembly
and Test Services (SATS)
SATS Utilization
100%
90%
Leading-Edge Utilization
10
8
80%
70%
6
60%
4
50%
40%
30%
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
2
0
Semiconductor Packaging and Test Market
Forecast
Revenue (Billions of Dollars)
50
SATS
40
IDM/OEM
30
20
10
0
1999 2000 2001 2002 2003 2004 2005 2006 2007
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Quarterly Packaging and Assembly
Equipment Forecast Scenarios
Scenarios
(Probability)
Optimistic
Most Likely
Pessimistic
Billions of Dollars
2.0
2002
2003
-22%
32% (0.25)
21% (0.50)
10% (0.25)
Optimistic
Most Likely
1.5
Pessimistic
1.0
0.5
0.0
1Q00
3Q00
1Q01
3Q01
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1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
Long-Term View: Cycles Continue …
Capital Spending and Equipment Forecasts
Capital Spending
Semiconductor Equipment
(Excluding Test)
Billions of Dollars
Billions of Dollars
70
45
40
60
35
50
30
40
25
30
20
15
20
10
10
5
0
0
1999
2001
2003
2005
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
2007
1999
2001
2003
2005
2007
Gartner Dataquest's Index of Semiconductor
Market Leading Indicators, March 2003
Semiconductor Revenue Growth
60%
Actual
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Semiconductor Growth
Indicator
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Forecast
Conclusions
 Economy
 Expect improvement in 2003, albeit back-end loaded
 High market volatility in near term as course of war remains open
 Electronic equipment
 Expect gradually improving macro conditions to spur phased
recovery
 Kick-in of Y2K PC replacement cycle expected; strength
questionable
 Corporate spending returns in 2003; strength dependent on
economy
 Chips
Expect typical, slow 1Q03, with slow demand return in 2Q03
 Expect revenue growth of 9%
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.
Conclusions
 Capital spending and equipment
 Supply-side fundamentals improve because of two years of
spending cuts
 Anticipate overall utilization to reach over 85% trigger level, 2H03
 Leading-edge packaging utilization tight; additional equipment
required
 More optimistic outlook on CAPEX with 7% growth in 2003
 Second down-leg in quarterly WFE revenue for 4Q02 into 2Q03
 "Ready for equipment" fabs afford rapid equipment move-in for
2003, allowing for 8% growth in WFE
 Next fab build cycle slips to 2004; next downcycle is expected in late
2005/early 2006
<Title> | <Date> | Entire contents © 2003 Gartner, Inc. All rights reserved.