Published in PC Hardware

Semi industry's capital spending enters two years of doom

by on28 June 2019


Following the cycles

Beancounters at IC Insights have added up some numbers and worked out that the global semiconductor industry's capital spending is forecast to drop in both 2019 and 2020.

Over the past 34 years, there have been six periods when semiconductor industry capital spending declined by double-digits rates for one or two years. When spending fell, a surge of expenditures of at least 45 percent occurred two years later.

The second-year increases in spending after the cutbacks were stronger than the first year, IC Insights continued, after a downturn since most semiconductor producers acted very conservatively coming out of the slowdown and waited until they had logged four to six quarters of good operating results before significantly increasing their capital spending again. This is expected to be the case for 2020 with most semiconductor producers likely to be very conservative with their spending budgets for next year given the weak semiconductor market expected in 2019.

IC Insights said that Micron's attitude toward next year's capital spending outlook would be typical of the industry. Micron recently said that for its fiscal 2020, capex will be "meaningfully lower" than the fiscal 2019 level.

IC Insights said that the streak of strong 45 percent and more than 45 percent  capital spending growth two years after spending cutbacks ended in 2015, with capital spending registering a per cent decline.

Only a four percent  increase occurred in 2016. Although capital spending jumped by 41 percent  in 2017 (four years after the 2012-2013 downturn in spending), IC Insights thinks that the muted cyclical behaviour of the capex growth rates since 2013, as compared to past cycles, is another indication of a maturing semiconductor industry.

Last modified on 28 June 2019
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