Mike Splinter, chief executive of Applied Materials Inc, the world's largest maker of machines used to manufacture computer chips, said orders will improve when chipmakers in Taiwan and Singapore step up their plant spending.
"Capital spending is kind of a mixed bag," Splinter told analysts and investors at an Applied conference in San Francisco on Tuesday. "Foundry spending is currently relatively weak."
Companies that make chips for other companies, so-called foundries such as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), United Microelectronics Corp (UMC, 聯電) and Chartered Semiconductor Manufacturing Ltd (特許), aren't getting enough orders to give them the confidence they need to expand output, he said.
"When utilization goes up, spending will go up," Splinter said.
Sales in the equipment industry will drop 12.1 percent this year to US$32.6 billion, trade group Semiconductor Equipment & Materials International (SEMI) announced yesterday, citing its survey of industry executives.
Sales in Taiwan, home of TSMC and UMC, will drop 20.7 percent to US$6.15 billion, the survey said.
Splinter said memory-chip makers are still ordering new equipment, sticking to aggressive budgets.
The two biggest memory-chip makers, South Korea's Samsung Electronics Co and Hynix Semiconductor Inc, will buy more new machines than last year, with sales growing 21.6 percent to US$5.61 billion, the survey said.
The mid-year SEMI forecast published in the Business Times predicted the global chip equipment sector will grow 8.1 percent next year and 10.1 percent in 2007.
"A large amount of new manufacturing capacity is coming on line this year, following a year of very strong capital investment," SEMI president and chief executive Stanley Myers said in a statement.
Demand from China, Taiwan, South Korea and Japan is expected to trigger a turnaround in the chip equipment manufacturing sector by next year after a series of false starts, said the industry body, whose members make up 85 percent of chip manufacturers worldwide.
The chip-equipment market grew 67.2 percent to US$37.1 billion worldwide last year mainly from strong growth in China, the SEMI report said. It is expected to shrink to US$32.6 billion this year.
The forecast for the next three years is robust growth, 8.1 percent next year, 10.1 percent in 2007 and 14 percent in 2008.
The strongest growth next year is expected to come from China at 30.7 percent, followed by Taiwan with 14.7 percent and Japan at 10.3 percent.
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