Thu, Jan 16, 2003 - Page 10 News List

Chipmakers brace for Intel cutbacks

SEMICONDUCTORS Chip-industry analysts say the company's plan to cut its capital expenditure shows it is pessimistic about market performance for this year


Intel Corp announced Tuesday that it would cut spending on new factories and tools by up to 25 percent this year, a move that is expected to hurt Taiwan's chipmakers, analysts said yesterday.

The world's largest maker of computer chips reported that it would cut capital expenditure from US$4.7 billion last year to between US$3.5 billion and US$3.9 billion this year.

"I think this shows that Intel is pessimistic about the market in 2003," said James Huang, (黃建銘), a chip-industry analyst at SinoPac Securities Corp (建華證券). "Capital expenditure is a leading indicator of how a company views market performance."

Huang said that the adjustment would directly affect Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電). The two largest makers of made-to-order chips will announce their capital-expenditure plans at their quarterly investor conferences at the end of this month.

Both TSMC and UMC already cut back on spending last year. In October, TSMC revised down its 2002 forecast for capital expenditure from US$2 billion to US$1.65 billion. In 2001, the company spent US$2 billion. In the same month, UMC lowered its equipment expenditure forecast for last year from US$1.3 billion to around US$800 million. That was the second reduction from an original figure of US$1.6 billion. The company spent US$1.1 billion in 2001.

Huang would not estimate how much TSMC and UMC would adjust their spending plans, but Rick Hsu (徐禕成), an analyst at Nomura International in Taipei, said the figure would drop by a minimum of 10 percent on last year.

"TSMC and UMC look to Intel as an indicator for their own capital expenditure plans," Hsu said yesterday.

Last quarter Intel reported that it would increase capital spending this year by 13 percent compared with last year. The positive forecast from the world's largest purchaser of chipmaking equipment led research firms to predict a rosy year for the industry this year after two years of decline.

As recently as Dec. 19 last year, US-based Dataquest Inc, a unit of Gartner Inc, predicted that worldwide semiconductor capital spending would grow 15 percent this year to US$32 billion, up from US$27.8 billion last year.

"Spending will be driven by a continued need for advanced technology to keep innovation going and manufacturing costs down, and a renewed need for more capacity," Klaus Rinnen, chief analyst and director of Gartner Dataquest's semiconductor manufacturing group, said at the time.

Semiconductor-tool sales tumbled to an estimated US$18.9 billion last year from US$28 billion in 2001, after a 41 percent decline in 2001, according to Semiconductor Equipment and Materials International, a trade group.

The group last month forecast that this year's sales of chipmaking gear worldwide would rise 15 percent to US$21.8 billion. North American chipmakers, accounting for about 30 percent of global demand, would contribute the most to spending this year with a 14 percent increase in purchases, the group said.

Sales in Asia set an all-time record, accounting for 38 percent of revenue.

Asia contributed US$2.7 billion to Intel's sales in the fourth quarter of last year, according to Jason Chen, Intel's Asia Pacific general manager. Intel's Asia-Pacific sales increased 13 percent in the period compared with a year ago, he said.

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