2002: the road to recovery

Gartner Dataquest analysts believe 2002 will be the transition year to recovery, with the most likely scenario of a sustainable recovery for the semiconductor device and capital equipment industries occurring in the second half of this year.

Demand is extremely weak in the equipment market, but Gartner Dataquest forecasts an acceleration in capital equipment spending driven by a tightening of leading-edge capacity in the second half of this year. Still, it will not be enough to contain the decline in equipment spending, as the market is forecast to decline 19% in 2002.

Capital spending cuts occurred in all regions during 2001. Asia/Pacific companies cut deepest at nearly 47% decline, with Taiwan cutting deepest by over 50 percent. As overcapacity remains rampant in 2002, capital spending restraints will continue with further cuts of about 24% this year. There is a glimmer of hope that foundry providers might cut some spending loose before year-end, providing an upside to spending.

"A macroeconomic recovery and returning electronic equipment demand should finally bring the demand-component of the down cycle under control. However, overcapacity remains excessive and still demands industry attention," said Klaus Rinnen, chief analyst and director of Gartner Dataquest's semiconductor manufacturing group. "With demand firming, the semiconductor industry will be afforded increasing visibility, finally being able to plot its course to another up cycle."